Publications by Author: Acemoglu, Daron

Friedman, Thomas L, James A Robinson, and Daron Acemoglu. 2012. “Why Nations Fail”. Publisher's Version
Why Nations Fail: The Origins of Power, Prosperity, and Poverty
Robinson, James A, and Daron Acemoglu. 2012. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Random House. Publisher's VersionAbstract

Is it culture, the weather, geography? Perhaps ignorance of what the right policies are?

Simply, no. None of these factors is either definitive or destiny. Otherwise, how to explain why Botswana has become one of the fastest growing countries in the world, while other African nations, such as Zimbabwe, the Congo, and Sierra Leone, are mired in poverty and violence?

Daron Acemoglu and James Robinson conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it). Korea, to take just one of their fascinating examples, is a remarkably homogeneous nation, yet the people of North Korea are among the poorest on earth while their brothers and sisters in South Korea are among the richest. The south forged a society that created incentives, rewarded innovation, and allowed everyone to participate in economic opportunities. The economic success thus spurred was sustained because the government became accountable and responsive to citizens and the great mass of people. Sadly, the people of the north have endured decades of famine, political repression, and very different economic institutions—with no end in sight. The differences between the Koreas is due to the politics that created these completely different institutional trajectories.

Based on fifteen years of original research Acemoglu and Robinson marshall extraordinary historical evidence from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, Latin America, England, Europe, the United States, and Africa to build a new theory of political economy with great relevance for the big questions of today, including:

  • China has built an authoritarian growth machine. Will it continue to grow at such high speed and overwhelm the West?
  • Are America’s best days behind it? Are we moving from a virtuous circle in which efforts by elites to aggrandize power are resisted to a vicious one that enriches and empowers a small minority?
  • What is the most effective way to help move billions of people from the rut of poverty to prosperity? More philanthropy from the wealthy nations of the West? Or learning the hard-won lessons of Acemoglu and Robinson’s breakthrough ideas on the interplay between inclusive political and economic institutions?

Why Nations Fail
will change the way you look at—and understand—the world.

Robinson, James A, and Daron Acemoglu. 2012. “Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Book Review).” The Economist. Publisher's Version
Robinson, James A, Daron Acemoglu, María Angélica Bautista, and Pablo Querubín. 2007. “Economic and Political Inequality in Development: The Case of Cundinamarca, Colombia”.Abstract
Is inequality harmful for economic growth? Is the underdevelopment of Latin America related to its unequal distribution of wealth? A recently emerging consensus claims not only that economic inequality has detrimental effects on economic growth in general, but also that differences in economic inequality across the American continent during the 19th century are responsible for the radically different economic performances of the north and south of the continent. In this paper we investigate this hypothesis using unique 19th century micro data on land ownership and political office holding in the state of Cundinamarca, Colombia. Our results shed considerable doubt on this consensus. Even though Cundinamarca is indeed more unequal than the Northern United States at the time, within Cundinamarca municipalities that were more unequal in the 19th century (as measured by the land gini) are more developed today. Instead, we argue that political rather than economic inequality might be more important in understanding long-run development paths and document that municipalities with greater political inequality, as measured by political concentration, are less developed today. We also show that during this critical period the politically powerful were able to amass greater wealth, which is consistent with one of the channels through which political inequality might affect economic allocations. Overall our findings shed doubt on the conventional wisdom and suggest that research on long-run comparative development should investigate the implications of political inequality as well as those of economic inequality.
Also NBER Working Paper No. 13208.
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Robinson, James A, Daron Acemoglu, Simon Johnson, and Davide Cantoni. 2007. “From Ancien Régime to Capitalism: The French Revolution as a Natural Experiment”.Abstract
In this paper we exploit the invasion of Europe, particularly Germany, by French Revolutionary armies as a ‘natural experiment’to investigate the causal effect of the institutions of the ancien régime on economic development. A central hypothesis which can account for comparative development within Europe is that economic growth emerged …first in places which earliest escaped ancien régime and feudal institutions. However, though there is a correlation between these two events, this does not demonstrate that it was the collapse of the ancien régime that caused the rise of capitalism. This is because there may be problems of reverse causation and omitted variable bias. We show how the institutional reforms (essentially the abolition of the ancien régime) brought by the French in Germany can be exploited to resolve these problems. These reforms were akin to an exogenous change in institutions unrelated to the underlying economic potential of the areas reformed. We can therefore compare the economic performance of the areas reformed to those not reformed before and after the Revolutionary period to examine the impact of the reforms. The evidence we present is consistent with the hypothesis that the institutions of the ancien régime did indeed impede capitalism.
Robinson, James A, Daron Acemoglu, Simon Johnson, and Pierre Yared. 2007. “Reevaluating the Modernization Hypothesis”.Abstract
This paper revisits and critically reevaluates the widely-accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy. We argue that existing studies …find support for this hypothesis because they fail to control for the presence of omitted variables. There are many underlying historical factors that affect both the level of income per capita and the likelihood of democracy in a country, and failing to control for these factors may introduce a spurious relationship between income and democracy. We show that controlling for these historical factors by including …fixed country effects removes the correlation between income and democracy, as well as the correlation between income and the likelihood of transitions to and from democratic regimes. We argue that this evidence is consistent with another well-established approach in political science, which emphasizes how events during critical historical junctures can lead to divergent political-economic development paths, some leading to prosperity and democracy, others to relative poverty and non-democracy. We present evidence in favor of this interpretation by documenting that the …fixed effects we estimate in the post-war sample are strongly associated with historical variables that have previously been used to explain diverging development paths within the former colonial world.
Robinson, James A, and Daron Acemoglu. 2006. “Persistence of Power, Elites and Institutions”.Abstract
We construct a model of simultaneous change and persistence in institutions. The model consists of landowning elites and workers, and the key economic decision concerns the form of economic institutions regulating the transaction of labor (e.g., competitive markets versus labor repression). The main idea is that equilibrium economic institutions are a result of the exercise of de jure and de facto political power. A change in political institutions, for example a move from nondemocracy to democracy, alters the distribution of de jure political power, but the elite can intensify their investments in de facto political power, such as lobbying or the use of paramilitary forces, to partially or fully offset their loss of de jure power. In the baseline model, equilibrium changes in political institutions have no effect on the (stochastic) equilibrium distribution of economic institutions, leading to a particular form of persistence in equilibrium institutions, which we refer to as invariance. When the model is enriched to allow for limits on the exercise of de facto power by the elite in democracy or for costs of changing economic institutions, the equilibrium takes the form of a Markov regime-switching process with state dependence. Finally, when we allow for the possibility that changing political institutions is more difficult than altering economic institutions, the model leads to a pattern ofcaptured democracy, whereby a democratic regime may survive, but choose economic institutions favoring the elite. The main ideas featuring in the model are illustrated using historical examples from the U.S. South, Latin America and Liberia.
Robinson, James A, and Daron Acemoglu. 2005. Economic Origins of Dictatorship and Democracy. Cambridge University Press. Publisher's VersionAbstract
This book develops a framework for analyzing the creation and consolidation of democracy. Different social groups prefer different political institutions because of the way they allocate political power and resources. Thus democracy is preferred by the majority of citizens, but opposed by elites. Dictatorship nevertheless is not stable when citizens can threaten social disorder and revolution. In response, when the costs of repression are sufficiently high and promises of concessions are not credible, elites may be forced to create democracy. By democratizing, elites credibly transfer political power to the citizens, ensuring social stability. Democracy consolidates when elites do not have strong incentives to overthrow it. These processes depend on the strength of civil society, the structure of political institutions, the nature of political and economic crises, the level of economic inequality, the structure of the economy, and the form and extent of globalization.
Winner, John Bates Clark Medal, American Economic Association, 2005
Winner, Woodrow Wilson Foundation Award, 2007
Winner, William H. Riker Award, Political Economy Section, 2007