Institutions Flashcards
(7 cards)
What paper shows clearly the impact of institutions on one country?
- Acemoglu and Robinson (2012) - why nations fail
- takes Korea as a natural experiment
- After WW2 exogenous shock they were divided
- North had communist institutions
- South was more capitalist
- Today South Korea has 10x the income of South Korea
What are institutions?
What are the two types?
Institutions are the rules of the game (1990)
- humanly devised
- set constraints
- shape incentives
Formal - Codified in law
informal - social norms
What paper speaks about how it is difficult to set up colonies institutions
Acemoglu and Robinson (2012)
- Argue the Spaniards had trouble colonising the hunter gatherers in Buenos Aireas.
- While in Paraguay they were able to enslave the Guarani people
/ also had a more hierarchy
As a result, they were able to set up extractive institutions in Paraguay.
Also speak about Virginia company
- tried to force settlers to work
- they failed
so they had to give settlers 50 ares of land and early inclusive institutions.
What paper gives a case study on the persistence of institutions?
- Dell (2010) uses the mita boundary to run a RDD on how those in the mita boundary were impacted.
- Those in Mita boundary had to send 1/7 of people to work in the silver mines
- it was abolished in 1812 but persistent 200 years later
- the results of the RDD:
- those in the mita boundary today have 25% less consumption and higher child stunting rates.
- persistent impact on property rights
- negative impact on public goods
- residents of mita today are likely to work in subsistence farming.
What is the paper that works out the causal impact of institution on income per capita.
- AJR (2001)
- Research question:
Why are some countries rich and others poor, through the lens of institutions - main argument:
Institutions especially protection of property rights are the key factor . - Institutions may be endogenous
- Empirical approach:
Use IV of settler mortality, to isolate causality - Specific approach
- Firstly, institutions today are regressed on settler mortality. (Settler mortality used as IV)
- Second stage, income per capita regressed on predicted institutions.
Captures causal effect of institutions on income
Results:
- Settler mortality - institutions, higher settler mortality led to extractive institutions
- Better institutions impact income
2SLS coefficient of institutions 0.9
Institutions can account for 3/4 of income variation today.
What are the Caveats for AJR (2012)
- Some countries like Britain had inclusive institutions at home and extractive ones in colonies Sachs (2013)
- They understate the role of geography as it was important (Diamond)
Geog gave enabled the institutions to work better - When you look within countries human capital matters more (Shleifer et a 2012) - not statistically significant
- Are institutions completely exogenous or do culture matter?
Why can we not just look at institutions?
We must account for culture which is underlying
