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Institutions and social frictions, associated with inequalities, political conflicts, corruption, and cultural polarization, have emerged as central topics of economic research. This course takes stock of existing work and moves on to draw the outline of the current research frontier. How do we interpret recent trends in inequality, including in low- and middle-income countries? How do changes in inequality interact with changes in the political landscape? How do understudied informal institutions, such as identities and customs, interact with formal institutions? How do media shape political accountability? And, how do social frictions shape violent conflict?

The program approaches these questions by drawing on formal theory and rigorous empirical research in two core modules. “Inequality and development” presents global and regional trends in inequality based on the work of the World Inequality Lab at PSE. “Models of Cultural Dynamics and Social Identity” highlights how informal instutions interact with economic and social frictions. In addition, three shorter modules investigate how political cleavages, political institutions, corruption, and media interact with economic frictions. 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.

Structure

  • Theme I: Global Inequality (instructors: Ignacio Flores and Thomas Piketty)
  • Theme II: Models of Cultural Dynamics and Social Identity (instructor: Thierry Verdier)
  • Theme III: Inequality and Political Cleavages (instructor: Clara Martinez-Toledano)
  • Theme IV: Corruption and Institutions (instructor: Ekatarina Zhuravskaya)
  • Theme V: Political Institutions and Development (instructor: Oliver Vanden Eynde)

Research lab
We will organize daily research lab sessions. 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 your proposal over the course of the week. At the end of the program, you will have the opportunity to present your project to our faculty.

Global Inequality - Ignacio Flores and Thomas Piketty

Overview
Inequality, a critical issue at the forefront of global economic research and policy, commands attention in both developed and developing countries. This course seeks to unravel the complexities of the topic, addressing pivotal questions: “Inequality of what? Among whom? What are the drivers of Inequality? What can we learn from History? Should we focus on poverty more than inequality? What percentage of wealth is inherited?” Through a blend of foundational concepts and modern methodologies, students will engage in dissecting complex, contradictory data sets like household surveys, administrative data, and national accounts. Central to our inquiry is the World Inequality Database, a key tool for understanding and shaping contemporary research. This course not only reviews existing literature but also paves the way for future exploration, probing into uncharted territories of inequality research.

The core materials of this module will be taught by Ignacio Flores (4.5h), and Thomas Piketty will give a 1.5h lecture focusing on recent research.

Structure

  • General introduction
  • Fundamentals of inequality
  • Global and regional perspectives
  • Making Sense of Contradictory Information
  • The World Inequality Database
  • Historical Insights
  • What can be done?

Selected key references

  • Atkinson, A. B. (1970). On the measurement of inequality. Journal of economic theory, 2(3), 244-263.
  • Atkinson, A. B. (2015). Inequality: What can be done? Harvard University Press.
  • Atkinson, A. and F. Bourguignon, (2000), “Introduction, Handbook of income distribution”, volume 1, North-Holland.
  • Alvaredo, F., Atkinson, A. B., Piketty, T., & Saez, E. (2013). The top 1 percent in international and historical perspective. Journal of Economic perspectives, 27(3), 3-20.
  • Blanchet, T., Fournier, J., & Piketty, T. (2022). Generalized Pareto curves: theory and applications. Review of Income and Wealth, 68(1), 263-288.
  • Blanchet, T., Flores, I., & Morgan, M. (2022). The weight of the rich: improving surveys using tax data. The Journal of Economic Inequality, 20(1), 119-150.
  • Chancel, L. and Piketty, T. (2015). “Carbon and Inequality: from Kyoto to Paris. Trends in the Global Inequality of Carbon Emissions (1998–2013) and Prospects for an Equitable Adpatation Fund,” PSE working paper.
  • Chancel, L., Piketty, T., Saez, E., & Zucman, G. (Eds.). (2022). World inequality report 2022. Harvard University Press.
  • Chetty, R., Hendren, N., Kline, P., & Saez, E. (2014). Where is the land of opportunity? The geography of intergenerational mobility in the United States. The Quarterly Journal of Economics, 129(4), 1553-1623.
  • Corak, M. (2013). Income inequality, equality of opportunity, and intergenerational mobility. Journal of Economic Perspectives, 27(3), 79-102.
  • Deaton, A. (2005). Measuring poverty in a growing world (or measuring growth in a poor world). Review of Economics and statistics, 87(1), 1-19.
  • Milanovic, B. (2016). Global inequality: A new approach for the age of globalization. Harvard University Press.
  • Piketty, T. (2014). Capital in the Twenty-First Century, Harvard University Press, chap. 13.
  • Piketty, T., & Saez, E. (2003). Income inequality in the United States, 1913–1998. The Quarterly journal of economics, 118(1), 1-41.
  • Piketty, T., & Zucman, G. (2014). Capital is back: Wealth-income ratios in rich countries 1700–2010. The Quarterly journal of economics, 129(3), 1255-1310.

Identity, Social Change and Institutional Dynamics in Development - Thierry Verdier

Overview
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.

Structure
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,” The 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.

Political Cleavages and Social Inequalities - Clara Martinez-Toledano

Overview
Income and wealth inequalities have increased substantially in many regions of the world since the 1980s. This evolution came after a relatively egalitarian period from 1950 to 1980, accompanied by inclusive growth and the expansion of welfare states. Yet, this reversal has not led to wide-spread demands for redistribution or the revival of class conflicts. The past decades have seen instead the rise of various forms of identity-based politics, embodied by the Brexit vote and the success of xenophobic parties in Europe, Donald Trump in the United States, Jair Bolsonaro in Brazil, and Narendra Modi in India. What explains this remarkable transformation? Why have so many democracies left growing inequalities un-checked and shifted to debates over immigration, national identity, and integration? This part of the course will review recent contributions to our understanding of these important issues by studying the interplay between social inequalities and the long-run evolution of political cleavages in the western and non-western world.

Structure

1. Democracy and the Politics of Inequality
2. Conceptual Framework and Data Sources
3. Depoliticizing Class: Income, Education, and Multi-elite Party Systems
4. Ethnoreligious and Sociocultural Cleavages
5. Spatial Identities, Regional Cleavages, and Separatism
6. Generational Cleavages
7. Gender Cleavages
8. Toward a Typology of Socioeconomic Cleavage Structures

Selected key references

  • Lipset, S. M., & Rokkan, S. (1967). Cleavage structures, party systems, and voter alignments: an introduction.
  • McCarty, N., & Pontusson, H. J. (2011). The political economy of inequality and redistribution. The Oxford handbook of economic inequality, 665-692.
  • Gethin, A., Martínez-Toledano, C., & Piketty, T. (Eds.). (2021). Political Cleavages and Social Inequalities: A Study of Fifty Democracies, 1948–2020. Harvard University Press.
  • Gethin, A., Martínez-Toledano, C., & Piketty, T. (2022). Brahmin left versus merchant right: Changing political cleavages in 21 Western Democracies, 1948–2020. The Quarterly Journal of Economics, 137(1), 1-48.

Corruption and institutions - Katia Zhuravskaya

Overview
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.

Structure
1. Corruption: Measuring corruption, it’s effects and determinants
2. Media and accountability
3. 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”, The Quarterly Journal of Economics, vol. 123(2), pages 703-745.
  • Durante R. and E. Zhuravskaya, (2017). “Attack When the World is Not Watching? International Media and the Israeli-Palestinian Conflict,” Journal of Political Economy.
  • Shleifer, A. and R. W. Vishny (1993). “Corruption”, The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 599-617.

Political Institutions and Development - Oliver Vanden Eynde

Overview
This module studies the role of political institutions in shaping economic development and inequality. First of all, the course takes a macro perspective, and reviews the two-way causal relationship between democratic institutions and economic growth. Then, the course zooms in on particular political institutions and how they affect economic development and inequality. As hybrid political regimes are on the rise, understanding the precise mechanisms through which political institutions affect economic development is particularly important.

Structure
1. Does democracy cause growth?
2. Does growth cause democracy?
3. Mechanisms through which political institutions affect development and inequality.

Selected key references

  • Acemoglu, Daron And James A. Robinson, 2001, “A theory of political transitions”, American Economic Review.
  • Acemoglu, Daron, Suresh Naidu, Pascual Restrepo, and James A. Robinson, 2019, “Democracy Does Cause Growth”, Journal of Political Economy.
  • Burgess, Robin, Remi Jedwab, Edward Miguel, and Ameet Morjaria. “The value of democracy: evidence from road building in Kenya.” The American Economic Review, 105, no. 6 (2015): 1817-1851.
  • Dal Bo, Pedro, Andrew Foster, Louis Putterman (2010) “Institutions and Behavior: Experimental Evidence on the Effects of Democracy”, American Economic Review, 100(5), 2205-2229.
  • Kudamatsu, Masayuki (2012). “Has Democratization Reduced Infant Mortality in sub-Saharan Africa? Evidence from Micro Data”, Journal of the European Economic Association, 10(6).
  • Papaioannou, Elias and Siourounis, Gregorios. 2008. “Democratisation and Growth”, The Economic Journal, 118 (532): 1520-1551.

Contents – Inequality and Institutions