Instructor : Oleksandr Shepotylo
Office: KSE, Yakira 13, Room 326
E-mail:
Minterm V ( May 5, 2009 – June 19, 2009)
Exams from June 8, 2009 – June 12, 2009
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Development economics:
Comparative institutional economics approach
Reading list and syllabus
How do we account for the persistence of poverty in the
midst of plenty? If we knew the sources of plenty, why
don’t poor countries simply adopt policies that make
for plenty? . . . We must create incentives for people to
invest in more efficient technology, increase their skills,
and organize efficient markets. Such incentives are
embodied in institutions.
—Douglass C. North, 2000
The leading theme of well known “Wealth of Nations” by Adam Smith is – as can be deduced from the title – the long-run forces that determine the growth of the wealth of the nations. In fact, many economists before and after A. Smith speculated about the major ingredients of the economic prosperity. In this particular course we take the stand that differences in institutions – humanly devised constraints that shape economic and political interactions – account for the major part of variations in the long-run economic development. Therefore, systematic study of the origin and development of institutions is the essential part of the study of economic development. We also discuss alternative views on economic development that emphasize the role of natural causes (resource endowment, geographical location, and climate) or the role of investments in infrastructure (i.e. roads and communications) and compare how they perform against the institutional approach.
This course is primarily the reading course. The reading list provided in this syllabus indicates the required papers (marked with *), and additional papers that are related to the particular topic but not covered during the lectures. I expect you to attend the lectures and read the required papers to get a good grade.
Availability of the papers on the internet: I will provide copies of the papers marked with *. Most of additional papers are available on the internet through www.jstor.org and www.nber.org. You can also look up research papers using scholar.google.com. Please contact me if you need a particular paper from the reading list which is not available for free.
Outline of the course and the reading list
0. Introduction (1 lecture)
How economics come to the recognition of the role of institutions in economic development
*Douglas C. North “Institutions,” The Journal of Economic Perspectives, Vol. 5, No. 1 (Winter, 1991), pp. 97-112
1. Economic Growth and Convergence (3 lectures)
Discuss growth models and test their predictions using cross-country data. Look at contribution of various factors to the differences in income per capita.
*Mankiw, N., Romer, D., and D. Weil, (1992), “A Contribution to the Empirics of Economic Growth,” The Quarterly Journal of Economics, Vol. 107, No. 2, pp. 407-437.
*Hall, Robert and Jones, Charles. “Why Do Some Countries Produce So Much More Output Per Worker Than Others?” The Quarterly Journal of Economics 114, no. 1 (1999): 83-116.
2. Institutions, geography, natural resources (3 lectures)
a. Data sources
D. Kaufmann, A. Kraay,and M. Mastruzzi , “Governance Matters VI: Governance Indicators for 1996-2006”July 2007 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=999979
Beck, Thorsten, George Clarke, Alberto Groff, Philip Keefer and Patrick Walsh, (2001), "New tools in comparative political economy: The Database of Political Institutions," 15:1, 165-176 (September), World Bank Economic Review.
b. Cross-country studies
Impact of geography, natural resources, culture, and institutions on long run economic growth.
*Acemoglu, D., S. Johnson and J. A. Robinson, (2002), “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution,” Quarterly Journal of Economics v117, n4, 1231-94.
Mauro, Paulo, (1995), “Corruption and Growth,” Quarterly Journal of Economics, 110:3, pp. 681-712.
Dani Rodrik, Arvind Subramanian, and Francesco Trebbi “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development”, Journal of Economic Growth, vol. 9, no.2, June 2004
Mehlum, Halvor, Moene, Karl and Ragnar Torvik, (2006), “The institutions and resource curse,” The Economic Journal, 116 (January), 1–20.
3. Three fundamental institutions: property, decentralization and contract (3 lectures)
This section discusses three cornerstone institutions of the capitalist economy: property, decentralization, and contracts. We develop theoretical models that explain why structure of property rights and contracts influences structure of markets and firms.
a. Property
Coase, Ronald H., 1960, “The Problem of Social cost,” Journal of Law and Economics, 3, 1-44.
*Shleifer, Andrei, and Vishny, Robert W., "Politicians and Firms" Quarterly Journal Of Economics, November 1994.
b. Decentralization
Wallace E. Oates. " An Essay on Fiscal Federalism," Journal of Economic Literature, September 1999.
Alesina, Alberto and Roberto Perotti. 2004. "European Union: A Politically Incorrect View." Journal of Economic Perspectives, 18:4, 27-48.
c. Contract
*Greif, Avner. “Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition” American Economic Review v83, n3 (June 1993): 525-48.
4. Political systems (2 lectures)
*Acemoglu and Robinson "Persistence Of Power, Elites And Institutions", NBER Working Paper 12108 http://www.nber.org/papers/w12108
North, Douglass C. and Barry R. Weingast (1989) “Constitutions and Commitment: Evolution of Institutions Governing Public Choice in Seventeenth Century England, Journal of Economic History, 49, 803-832.
6. Policies and development (1 lecture)
Acemoglu, Daron, Johnson, Simon, "Unbundling Institutions", Journal of Political Economy, October 2005, v. 113, iss. 5, pp. 949-95.
*Rodrik D., “Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s Economic Growth in the 1990’s: Learning from a Decade of Reform,” Journal of Economic Literature, December 2006, n4, 973-987
Exams:
We will have the final exams based on the material covered during the lectures. The exam questions will be non-technical questions that will require deep knowledge of the discussed literature on a specific topic and the ability to critically analyze it.
Term paper
As part of the grade, each student should write a term paper. The topic of the term paper should be related to the one of the sections of the reading list. Pick a paper form the reading list, read it critically, and answer the following questions:
· What is the research question of the paper?
· Does the author answer the question and convince you that his view is correct?
· What are the strong points of the paper?
· What did you not like in the paper? Can you suggest how to improve it?
· Suggest extensions for future research in this area
The paper should be 8-10 pages long with one-and-a-half space intervals. There are several stages in writing the paper with the following important deadlines:
Grading:
Term paper: 50%
Exam 50%
Course Attendance:
You are expected to attend classes regularly. I will take attendance for the class on a regular basis. It is the policy of the EERC that students who miss 50% of the lectures receive the failing grade.
Finally…
This syllabus is not meant to be exhaustive. It is just a set of guidelines to give you an idea of how we would like the course to proceed, and address some commonly asked questions. Any changes in this syllabus, if made, will be announced in class reasonably in advance.