Publications by Author: Robinson, James A.

We construct a simple model where political elites may block technological and institutional development, because of a 'political replacement effect'. Innovations often erode elites' incumbency advantage, increasing the likelihood that they will be replaced. Fearing replacement, political elites are unwilling to initiate change, and may even block economic development. We show that elites are unlikely to block development when there is a high degree of political competition, or when they are highly entrenched. It is only when political competition is limited and also their power is threatened that elites will block development. Blocking is more likely to arise when elites have a relatively high degree of security with existing technologies and arrangements that will be eroded as a result of economics change, and when political stakes are higher. External threats, on the other hand, may reduce the incentives to block. We argue that this model provides an interpretation for why Britain, Germany and the U.S. industrialized during the nineteenth century, while the landed aristocracy in Russia and Austria–Hungary blocked development.

In this paper we investigate the effect of the absence of a secret ballot on electoral outcomes and resource allocation. Once voting behavior is observable, votes can be bought and sold in a `market for votes'. We distinguish between direct vote buying, where individuals sell their own votes to political parties, and indirect vote buying, where people also sell the votes of others and we characterized the circumstances in which vote buying changes the electoral outcome. We then provide a microfoundation for indirect vote buying, which usually takes the form of employers selling the votes of their employees. This can occur when the employment relationship involves rents since employers can use the threat of withdrawal of these rents to control the political behavior of their workers. This increases the demand for labor and generates an added incentive to own land, increasing the price of land. We test the predictions of the model by examining in detail the effects of the introduction of the secret ballot in Chile in 1958. We show that this change in political institutions had implications for voting behavior and land prices which are consistent with the predictions of our model.

Existing literature looks at the cross–sectional correlation between education and democracy rather than at the within variation. Hence existing inferences may be potentially driven by omitted factors influencing both education and democracy in the long run. A causal link between education and democracy suggest that we should also see a relationship between change sin education and democracy suggests that we should also see a relationship between change sin education and changes in democracy. In other words, we should ask whether a given country (with its other characteristics held constant) is more likely to become more democratic as its population becomes more educated. We show that the answer to this question is no. Figure 1 illustrates this by plotting the change in the Freedom House democracy score between 1970 and 1995 versus the change in average years of schooling during the same time period? Countries that become more educated show no greater tendency to become more democratic.

We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross–country correlation between income and democracy, but do not typically control for factors that simultaneously affect both variables. We show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy. We also present instrumental–variables estimates using two different strategies. These estimates also show no causal effect of income on democracy. Furthermore, we reconcile the positive cross–country correlation between income and democracy with the absence of a causal effect of income on democracy by showing that the long–run evolution of income and democracy is related to historical factors. Consistent with this, the positive correlation between income and democracy disappears, even without fixed effects, when we control for the historical determinants of economic and political development in a sample of former European colonies.

This paper develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development. We first document the empirical importance of institutions by focusing on two "quasi–natural experiments" in history, the division of Korea into two parts with very different economic institutions and the colonization of much of the world by European powers starting in the fifteenth century. We then develop the basic outline of a framework for thinking about why economic institutions differ across countries. Economic institutions determine the incentives of and the constraints on economic actors, and shape economic outcomes. As such, they are social decisions, chosen for their consequences. Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favor of groups with greater political power. The distribution of political power in society is in turn determined by political institutions and the distribution of resources. Political institutions allocate de jure political power, while groups with greater economic might typically possess greater de facto political power. We therefore view the appropriate theoretical framework as a dynamic one with political institutions and the distribution of resources as the state variables. These variables themselves change over time because prevailing economic institutions affect the distribution of resources, and because groups with de facto political power today strive to change political institutions in order to increase their de jure political power in the future. Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad–based property rights enforcement, when they create effective constraints on power–holders, and when there are relatively few rents to be captured by power–holders. We illustrate the assumptions, the workings and the implications of this framework using a number of historical examples.

In Takatoshi Ito and Andrew K. Rose eds. Growth and Productivity in East Asia, Chicago and London; The University of Chicago Press.

There is a growing consensus among economists that differences in institution, in particular the enforcement of property rights, rule of law, and constraints placed on politicians and elites, have a first–order effect on long–run economic development? Recent empirical findings support this notion. There is a strong correlation between institutions and economic financial development? especially when we look at the historically determined differences in institutions?
In this paper and a companion paper, Acemoglu et al. (2003), we argue that institutions also have a first–order effect ion short– and medium–run economic instability. We document that societies that have weak institutions for historical reasons have suffered substantially more output volatility and experienced more severe output, exchange rate, banking, and political crises over the past thirty years. The link we document between the historically determined component of institutions and economic instability calls for a quiet different view of medium–run macroeconomic volatility, and for more work to understand the relationship between institutions and volatility. This paper is therefore meant more as a progress report to encourage others to investigate these issues.

Our analysis begins with the puzzle: how did Botswana develop a legal–rational state? We suggest that three key interlinked factors were important. First, during the pre–colonial period the Tswana developed local states with relatively limited kingship or chiefship and with a political structure that was able to integrate people of other ethnic groups such as Kalanga. Second, facing the onslaught first of the Boers, next of the British South African Company, and finally of the Union of South Africa, Tswana political elites attempted to maintain a good measure of independence by defensively modernizing. (The Tswana were not unique in this British Africa, either in the types of political institutions they evolved, or in their desire to modernize. What is unique about Botswana is they way that local state elites were coordinated in the whole of colonial national territory, pursuing similar policies to fend off the most pernicious effects of colonialism.) Finally, the political elites in both local states before independence and the national state at independence heavily invested in the country?s most important economic activity, ranching. This gave them a strong incentive to promote rational state institutions and private property. Moreover, the integrative nature of traditional Tswana political institutions reduced the likelihood that alternative groups would aggressively contest the power of the new unitary state.

Underdevelopment is thought to be about lack of investment, and many political economy theories can account for this. Yet, there has been much investment in developing countries. The problem has been that investment growth has not led to output growth. We therefore need to explain not simply underinvestment, but also the missallocation of investment. The canonical example of this is the construction of white elephants–investment projects with negative social surplus. In this paper we propose a theory of white elephants. We argue that they are a particular type of inefficient redistribution, which are politically attractive when politicians find it difficult to make credible promises to supporters. We show that it is the very inefficiency of such projects that makes them politically appealing. This is so because it allows only some politicians to credibly promise to build them and thus enter into credible redistribution. The fact that not all politicians can credibly undertake such projects gives those who can a strategic advantage. Socially efficient projects do not have this feature since all politicians can commit to build them and they thus have a symmetric effect on political outcomes. We show that white elephants may be preferred to socially efficient projects if the political benefits are large compared to the surplus generated by efficient projects.

In this paper I discuss the nature of the political constraints that the World Bank faces in delivering basic services to the poor. The main problem arises because the Bank has to work through domestic governments which have political aims different from helping the poor. The conceptual approach attractive to economists and central to the WDR2004 is the notion of politician proofing . Given that political incentives derail good policies, how can those policies be politician–proofed? I argue that evidence and theory suggests that such an approach is ultimately futile, basically because we simply do not understand the relevant political incentives. I discuss alternative policy strategies and conclude that what is required is a much more fundamental assessment of what type of political equilibria deliver services to the poor. As I illustrate with the case of Botswana, once the political equilibrium is right, everything goes right and politician proofing in redundant.

In recent theories of comparative development the role of institutional differences has been crucial. Yet what explains comparative institutional evolution? We investigate this issue by studying the coffee exporting economies of Latin America. While homogeneous in many ways, they experienced radically different paths of economic (and political) development which is conventional traced to the differential organization of the coffee industry. We show that the different forms that the coffee economy took in the 19th century was critically determined by the legal environment determining access to land, and that different laws resulted from differences in the nature of political competition. Our analysis suggests that explanations of institutional differences which stress economic fundamentals can only be part of the story. At least in the economies we study, while geography, factor endowments and technology are clearly important, their implications for the institutional structure and thus development are conditional on the form that political competition takes in society. Endowments are not fate.

CEPR Discussion Papers 3206, Centre for Economic Policy Research, February 2002.

Countries that have pursued distortionary macroeconomic policies, including high inflation, large budget deficits and misaligned exchange rates, appear to have suffered more macroeconomic volatility and also grown more slowly during the postwar period. Does this reflect the casual effect of these macroeconomic policies on economic outcomes? One reason to suspect that the answer may be no is that countries pursuing poor macroeconomic policies also have weak "institution," including political institutions that do not constrain politicians and political elites, ineffective enforcement of property rights for investors, widespread corruption, and a high degree of political instability.

This paper documents that countries that inherited more "extractive" institutions from their colonial past were more likely to experience high volatility and economic crises during the postwar period. More specifically, societies where European colonists faced high mortality rates more than 100 years ago are much more volatile and prone to crises. Based on our previous work, we interpret this relationship as due to the casual effect of institutions on economic outcomes: Europeans did not settle and were more likely to set up extractive institutions in areas where they faced high mortality. Once we control for the effect of institutions, macroeconomic policies appear to have only a minor impact on volatility and crises. This suggests that distortionary macroeconomic policies are more likely to be symptoms of underlying institutional problems rather than the main causes of economic volatility, and also that the effects of institutional differences on volatility do not appear to be primarily mediated by any of the standard macroeconomic variables. Instead, it appears that weak institutions cause volatility through a number of microeconomic, as well as microeconomic, channels.

The paper provides a political economy theory of the Kuznets curve. When development leads to increasing inequality, this can induce political instability and force democratization on political elites. Democratization leads to institutional changes which encourage redistribution and reduce inequality. Nevertheless, development does not necessarily induce a Kuznets curve, and it is shown that development may be associated with two types of nondemocratic paths: an "autocratic disaster," with high inequality and low output, and an "East Asian Miracle," with low inequality and high output. These arise either because inequality does not increase with development, or because the degree of political mobilization is low.

This paper documents that the Rise of Western Europe between 1500 and 1850 is largely accounted for by the growth of European nations with access to the Atlantic and, in particular, by those that engaged in colonialism and transoceanic trade. Significant variation in economics performance among Atlantic trading nations is explained by the fact that countries with relatively non–absolutist initial institutions experienced faster growth.

We suggest that Atlantic trade and colonialism affected Europe not only directly, but also indirectly by inducing institutional changes. In particular, where initial political institutions placed significant checks on the monarchy, the growth of New World and Asian trade after 1500 strengthened merchant groups in favor of constraining the power of the monarchy further, and enabled them to demand and obtain changes in institutions to protect their property rights. These induced changed in political institutions were central to the subsequent process of economic growth. In contrast, when initial political institutions were more absolutist, trade was monopolized by the crown and groups loyal to the monarchy, and a strong coalition in favor of institutional change failed to emerge.

Despite some success stories in the 1960s and early 1970s, Africa is poor and getting poorer. There is also an almost universally pessimistic consensus about its economic prospects. This consensus started to emerge in recent empirical work on the determinants of growth with Barro's (1991) discovery of a negative "African Dummy" and was summed up by Easterly and Levine?s (1997) title, "Africa's Growth Tragedy." Table 4.1 collects some familiar comparative evidence on Africa?s economic performance. The average sub–Saharan African country is poorer than the average low–income country and getting poorer. Indeed, the average growth rate has been negative since 1965, and there is approximately a 35–fold difference between the per capital income level of the average sub–Saharan country and the United States.

Against this background of poor performance, one African country, Botswana, has not only performed well, but better than any other country in the world in the last 35 years. In table 4.2 we examine the facts about Botswana in both an African and more general context. Botswana had a PPP–adjusted income per capital of $5,796 in 1998, almost four times the African average, and between 1965 and 1998, it grew at an annual rate of 7.7 percent.

I argue that the impact of development on the distribution of political power in society may create an incentive for a state to become 'predatory' and fail to promote economic development. I develop a model of endogenous policy choice where public investment, while socially productive, simultaneously increases the ability of agents outside the ruling group to contest political power. The model shows that ineffcient underinvestment (predatory behavior) tends to arise in societies where, (1) there are large benefits to holding political power, and which are, (2) well endowed which natural resources, (3) badly endowed with factors which are complementary to public investment, such as human capital, and (4) intrinsically unstable. I document the importance of the mechanism I propose in accounting for the behavior of actual predatory regimes.

North and Weingast (1989) argued that the English Glorious Revolution of 1688 redistributed political power in such a way as to enhance the enforcement of property rights. They supported their hypothesis by presenting evidence that interest rates fell and interpreted this as a fall in the risk premium demanded by lenders. I argue that one cannot test their theory in this way since it implicitly rests on the assumption that the risk of debt repudiation was exogenous. This was clearly not so. If lenders anticipated that the incentives of the Stuart monarchs to default depended on the interest rate, then instead of changing a risk premium, they ration credit. There is a fact much evidence that this was the case. In these circumstances a reduction in the desire, or the ability, of the monarch to default leads not to a fall in interest rates, but a relaxation of rationing. Thus the theory of North and Weingast is immune to the critique of Clark (1996) and is entirely consistent with the available evidence.