Institutions and social frictions (associated with inequalities, political conflicts, corruption, and cultural polarization) have emerged as central themes in development economics. This course takes stock of existing research and moves on to draw the outline of the current research frontier. How do institutions shape the development process? How do understudied informal institutions, such as identities and customs, interact with formal institutions? How do we interpret recent trends in inequality within low- and middle-income countries?
The program approaches these questions by drawing on formal theory and rigorous empirical research in two core modules: “Inequality and development” and “Models of Cultural Dynamics and Social Identity”. In addition, two shorter modules develop empirical applications of the core course themes. These modules cover the role of civil conflict, corruption, and media in economic development. The objective of the program is to equip you with the background and tools you need as a researcher to contribute to this dynamic field.
- Theme I: Inequality and Development, François Bourguignon
- Theme II: Models of Cultural Dynamics and Social Identity: Applications to Conflicts and Governance in Development, Thierry Verdier
- Theme III: Corruption and institutions, Ekatarina Zhuravskaya
- Theme IV: Conflict and Development, Oliver Vanden Eynde
We will organize daily research lab sessions. They might take place remotely if there are a great number of participants. In these sessions, you will work on a research proposal in a small group of students with shared interests. We will provide feedback and guidance to help you develop this proposal over the course of the week. At the end of the programme, you will have the opportunity to present your project to our faculty.
Esther Duflo, Professor at the MIT and visitor at the PSE for the year 2020-2021, will give a plenary lecture on “Development strategies for the post COVID era”, on site and online, Thursday the 17th of June, from 6 pm to 7 pm.
Inequality and Development - François Bourguignon
nequality has become a hot topic in politics, economic research and policy. This is true both in developed and in developing countries. This is also true at the global level, as shown by the emphasis on the fight against global poverty in the Sustainable Development Goals, which succeeded the Millenium Development goals. This concern for inequality may obey various motivations: social justice, political stability and economic efficiency. The ambition of this course is to review what economists have to say on these various aspects of inequality by addressing the following set of questions. Is it true that inequality is rising everywhere? Is too much inequality detrimental to economic development? What kind of inequality? Through which channels? How much is ’too much’? Which instruments and which policies can reduce inequality? What is the political economy of these policies and possible tradeoffs behind them?
The recent literature on inequality is voluminous, even when dealing with the relationship between inequality and development. This course intends to provide a general view of that literature. It focuses more on the deep lessons to be learnt from it in terms of knowledge and policy implication than on purely technical aspects of it. On this basis, it identifies key areas of future research.
- General Introduction
- Trends in inequality in the world
- The macroeconomics of inequality and development
- Inequality and development, the role of institutions
- The microeconomics of income distribution dynamics
- Policies for reducing inequality and their effectiveness
Selected key references
- Acemoglu, Daron, Simon Johnson and James A. Robinson (2001), The Colonial Origins of Comparative Development: An Empirical Investigation, American Economic Review, 91, 1369-1401.
- Acemoglu, Daron, Davide Ticchi and Andrea Vindigni (2011), Emergence and Persistence of Inefficient States, Journal of European Economic Association, 9(2), 177-208
- Acemoglu D. and J. Robinson (2016), Paths to Inclusive Political Institutions, https://economics.mit.edu/files/11338
- Atkinson, A. and F. Bourguignon (2000), Introduction, Handbook of income distribution, volume 1, North-Holland
- Bourguignon F. (2004), The poverty-inequality-growth triangle, Working Paper Nr 125, Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India.
- Bourguignon, F. and Busolo (2013), M. The Impact of Macroeconomic Policies on Poverty and Income Distribution in Dixon, P.B. and Jorgenson, D.W. (Eds.), Handbook of Computable General Equilibrium Modeling, Elsevier.
- Bourguignon, F. (2015), Revisiting the Debate on Inequality and Economic Development, Revue d’Economie Politique, 125(5), p. 633-663
- Bourguignon, F. and T. Verdier (2000), Oligarchy, democracy, inequality and growth, Journal of Development Economics, 2000, vol. 62, issue 2, 285-313
- Ehrhart, C. (2009), The effects of inequality on growth: a survey of the theoretical and empirical literature, ECINEQ WP 2009 – 107
- Fiszbein, A. and N. Schady (2009), Conditional Cash Transfers: Reducing Present and Future Poverty, A World Bank Policy Research Report, https://bit.ly/2UCunhG
- Kanbur, R. (2015), Globalization and Inequality, in Atkinson, A. and Bourguignon F. (eds), Handbook of Income Distribution, Volume 2b, Chapter 20, Elsevier
- Lakner, C and Milanovic, B. (2015), Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession, World Bank Economic Review
- Lustig, N. and Lopez Calva, L-F. (2010), Declining Inequality in Latin America: A Decade of Progress?, Brookings Institution, Washington, DC
- Ostry J., Berg A. and Tsangarides C. , Redistribution, inequality and growth, IMF Staff Discussion Note, SDN 14/02, IMF, Washington
- Paes de Barros R., Ferreira F., Molinas J., and Saavedra J. , Measuring Inequality of Opportunities in Latin America and the Caribbean, Washington, DC: World Bank
- Ravallion, M. and Chen, S. (2011), Weakly Relative Poverty, The Review of Economics and Statistics, November 2011, Vol. 93, No. 4, Pages 1251-1261
Models of Cultural Dynamics and Social Identity: Applications to Conflicts and Governance in Development - Thierry Verdier
Cultural dimensions, ethnic identity and social norms are increasingly recognized as important evolving factors in economic development. They are also acknowledged to contribute and interact with the political economy of development policy and conflicts. This part takes stock of existing economic research on identity formation and cultural change, and their connections to conflicts and governance and institutional issues. We present recent theoretical advances on these issues, and their applications to specific development contexts. This course offers theoretical foundations for the more applied modules on corruption, institutions, and civil conflict.
1. Models of Identity formation and cultural evolution
a. Applications to growth and market integration
2. Cultural Polarization, Ethnic Identity and Conflicts in Development
a. Ethnic Identity and Violence in Development
3. Co-evolution of Culture and Institutions
a. Civic culture and corruption
b. Culture of violence and Property Rights
Selected key references
- Becker G. (1996): Accounting for Taste, Harvard University Press, Cambridge USA.
Akerlof, G and R. Kranton 2000, “Economics and Identity,” Quarterly Journal of Economics, 115, 715-753.
- Akerlof, G.A. and R. Kranton (2010): Identity Economics: How Identities Shape Our Work, Wages, and Well-Being, Princeton, Princeton University Press, USA
- Mc Elreath R. and R. Boyd (2007): Mathematical Models of Social Evolution: A Guide for the Perplexed, The University of Chicago Press, USA.
- Bisin, A. and T. Verdier (2011),“The Economics of Cultural Transmission and Socialization” in the “Handbook of Social Economics”, J. Benhabib, A. Bisin and M. Jackson (eds), North Holland
- Boyd, R. and P. Richerson, 1985, Culture and the Evolutionary Process, Chicago, University of Chicago Press
Corruption and Institutions - Ekaterina Zhuravskaya
Over the past decade the economic literature on corruption has seen a remarkable revival related to economists’ ability to measure corruption and to identify its effects and causes. This part of the program will review important recent contributions to our understanding of corruption in developing countries, focusing on measuring and quantifying corruption, identifying its efficiency consequences and its determinants. We will pay special attention to media as determinant of corruption and accountability.
- Corruption: Measuring corruption, it’s effects and determinants
- Media and accountability
- Background theory for both parts of the course
Selected key references
- Olken, B., and R. Pande (2012) “Corruption in Developing Countries,” Annual Review of Economics, 4, pp. 479-505.
- Mironov, M., and E. Zhuravskaya (2016) “Corruption in Procurement and the Political Cycle in Tunneling: Evidence from Financial Transactions Data,” American Economic Journal: Economic Policy, vol. 8(2), pages 287-321.
- Ferraz, C., and F. Finan, (2008). “Exposing Corrupt Politicians: The Effects of Brazil’s Publicly Released Audits on Electoral Outcomes,” Quarterly Journal of Economics, vol. 123(2), pages 703-745.
- Durante R. and E. Zhuravskaya, (2016). “Attack When the World is Not Watching? International Media and the Israeli-Palestinian Conflict,” Journal of Political Economy, forthcoming.
- Shleifer, A. and R. W. Vishny (1993). “Corruption,” Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 599-617.
Conflict and Development - Oliver Vanden Eynde
Many of the world’s poorest countries are suffering from or recovering from civil wars. Development policies need to be adapted to these environments, and they often aim directly at reducing or preventing conflict. However, the study of conflict had received relatively little attention in development economics until recently. This short, three-hour lecture offers a concise introduction to the fast-growing literature on conflict and economic development. The focus of this course is on empirical work, and it complements the course of Thierry Verdier - which covers some of the most influential theories of conflict. We discuss key empirical findings and ongoing debates, emphasizing how research on this topic can inform policy approaches to conflict.
1. The consequences of war
a. Human development
b. Cooperation in post-conflict settings
2. Causes of war
a. Ethnicity, inequality, and polarization
b. Economic shocks
3. Information and civilian participation in war
4. Political institutions and civil war
5. Interventions in conflict zones
a. Development interventions
b. Military interventions
Selected key references
- Bauer, M., C. Blattman, J. Chytilová, J. Henrich, E. Miguel, T. Mitts. (2016) “Can War Foster Cooperation?” Journal of Economic Perspectives.
- Dube, O. and J. F. Vargas. (2013). “Commodity Price Shocks and Civil Conflict: Evidence from Colombia.” Review of Economic Studies.
- Vanden Eynde, O. (2017). “Targets of Violence: Evidence from India’s Naxalite Conflict.” Economic Journal.
- Condra, Luke N., James D. Long, Andrew C. Shaver, Austin L. Wright, (2017). “The Logic of Insurgent Electoral Violence”, American Economic Review.
- Vanden Eynde, O., and Shapiro, J.N. (2020). “Fiscal Incentives for Conflict – Evidence from India’s Red Corridor”, Mimeo
Contents - Development