How history can contribute to better economic education
Coen Teulings, 11 July 2014
The financial crisis and the Great Recession have led to calls for more economic history in economic education. This column argues for a much broader use of history in economics courses, as a device for teaching both the logic and the empirical relevance of economics. A proposed curriculum would include the rise of agriculture, urbanisation, war, the rule of law, and demography.
Historians tend to stress the particularities in history. Each event is unique, caused by a set of conditions that will never reproduce themselves again. In turn, each event causes new events, which therefore are equally unique and equally irreproducible. Hence, historians conduct painstaking research into the details of these conditions to understand the course of history.
Topics: Economic history, Education
Tags: agglomeration, Agriculture, economic history, geography, history, Industrial Revolution, institutions, new economic geography, urbanisation
Institutions, trade shocks, and regional differences in long-run educational and development trajectories
André Carlos Martínez, Aldo Musacchio, Martina Viarengo , 9 July 2014
Institutions are known to play a powerful and enduring role in countries’ divergent levels of economic development. This column presents evidence that institutions matter for within-country inequality, too. In Brazil, changes in export prices and export tax revenues led to an increase in education spending in states that experienced commodity booms, which increased the number of schools and improved educational outcomes such as literacy rates. However, the effect was limited in states where slavery was predominant in colonial times.
Understanding the determinants of long-run socio-economic development is a major concern for academics and policymakers in many countries around the world.
Topics: Development, Economic history, Education
Tags: Brazil, colonialism, development, education, extractive institutions, growth, Inequality, institutions, trade shocks
The euro crisis: Muddling through, or on the way to a more perfect euro union?
Joshua Aizenman, 3 July 2014
After a promising first decade, the Eurozone faced a severe crisis. This column looks at the Eurozone’s short history through the lens of an evolutionary approach to forming new institutions. German dominance has allowed the euro to achieve a number of design objectives, and this may continue if Germany does not shirk its responsibilities. Germany’s resilience and dominant size within the EU may explain its ‘muddling through’ approach to the Eurozone crisis. Greater mobility of labour and lower mobility of under-regulated capital may be the costly ‘second best’ adjustment until the arrival of more mature Eurozone institutions.
The short history of the Eurozone has been remarkable and unprecedented – the euro project has moved from the planning board to a vibrant currency within less than ten years.
Topics: Institutions and economics, International finance, Monetary policy
Tags: ECB, euro, eurozone, Eurozone crisis, Germany, GIIPS, inflation targeting, institutions
British and French educational legacies in Africa
Denis Cogneau, Alexander Moradi , 17 May 2014
The quasi-experiment of arbitrary border design allows for causal interpretation of institutional effects across territories. This column presents evidence on the impact of British and French colonial education policies in West Africa. British flexibility and French centralisation resulted in educational attainment differences that persist – across one border – even among some cohorts of the current workforce.
Britain and France followed two very distinct approaches to education in their African colonies (Garner and Schafer 2006).
Topics: Development, Economic history, Education
Tags: Africa, colonialism, institutions, West Africa
New evidence on the durability of social norms
John Helliwell, Shun Wang, Jinwen Xu, 12 March 2014
Social norms have been shown to have important effects on economic outcomes. This column discusses new evidence showing that social norms are deeply rooted in long-standing cultures, but do evolve in reaction to major changes. It draws on a fully global sample involving migrants in more than 130 countries, using seven waves of the Gallup World Poll.
Recent studies find that individuals’ social norms – as evidenced by their opinions and behaviour – can be transmitted from one generation to the next within the same cultural setting (Algan and Cahuc 2010, Bjørnskov 2012, Dohmen et al. 2012, Guiso et al. 2006, Rainer and Siedler 2009, Rice and Feldman 1997).
Topics: Frontiers of economic research, Migration
Tags: Culture, immigration, institutions, migration, social attitudes, social norms, trust
Unemployment, labour-market flexibility and IMF advice: Moving beyond mantras
Olivier Blanchard, Florence Jaumotte, Prakash Loungani, 18 October 2013
The state of labour markets in advanced economies remains dismal despite recent signs of growth. This column explains the IMF’s logic behind the advice it provided on labour markets during the Great Recession. It argues that flexibility is crucial both at the micro level, i.e. on worker reallocation, and at the macro level, e.g. on collective agreements. It suggests that the IMF approach is close to the consensus among labour-market researchers.
Growth in advanced economies is gaining some speed. The IMF projects these economies will grow 2% next year, up from an expected 1.2% this year. The average unemployment rate in advanced economies is expected to inch down from its peak of 8.3% in 2010 to 8% next year. This is progress, but it is clearly not enough. The state of labour markets remains dismal for a number of reasons.
Topics: Labour markets, Welfare state and social Europe
Tags: collective bargaining, EZ crisis, IMF, institutions, labour-market flexibility, trust, unemployment, Unemployment insurance
National institutions and subnational development in Africa
Stelios Michalopoulos, Elias Papaioannou, 11 October 2013
During the ‘Scramble for Africa,’ the arbitrary design of colonial borders partitioned many ethnicities across two or more contemporary African states. This column presents recent research that exploits this quasi-experiment to study the effect of institutions on development. The overall effect of institutions is insignificant; but this masks considerable heterogeneity driven by diminishing government influence in remote areas. These findings conflict with previous cross-country work in economics, but support arguments put forward by the African historiography.
Few issues have received more inquiry in the social sciences than "what are the fundamental determinants of comparative development?" The institutional view asserts that the ultimate causes of underdevelopment are poorly performing institutional structures, such as lack of constraints on the executive, poor property-rights protection, as well as inefficient legal and court systems (s
Topics: Development, Economic history, Institutions and economics
Tags: Africa, Culture, institutions, politics and economics
Finding his own way: Ronald Coase (1910-2013)
Steven Medema, 18 September 2013
Ronald Coase’s contributions to economics were much broader than most economists recognise. His work was characterised by a rejection of ‘blackboard economics’ in favour of detailed case studies and a comparative analysis of real-world institutions. This column argues that the ‘Coase theorem’ as commonly understood is in fact antithetical to Coase’s approach to economics.
Ronald Coase, who passed away last week at the age of 102, left an indelible mark on both economics and law. In 1991 he was awarded the Nobel Memorial Prize in Economic Sciences in recognition of his work on transaction costs and property rights.
Topics: Institutions and economics
Tags: case studies, history of economic thought, institutions, methodology, transaction costs
Unleashing growth: The decline of innovation-blocking institutions
Klaus Desmet, Stephen L. Parente, 18 May 2013
Innovation is the beating heart of modern growth. This column argues that innovation-blocking institutions weaken when markets expand and competition intensifies. The rise and decline of medieval Italian crafts guilds offer valuable insights into this process. Policies that promote greater market integration and stronger competition are key steps in lowering the barriers to innovation.
Two hundred years ago, during the Napoleonic Wars, the Luddite movement rocked the English industrial landscape. Dissatisfied with falling wages and increased competition from mills employing cheap rural labour, the Luddites broke into factories at night, smashing spinning frames and power looms.
Topics: Economic history, Productivity and Innovation
Tags: growth, guilds, institutions
What explains political institutions? Evidence from colonial British America
Elena Nikolova, 17 August 2012
Why do some states develop as democracies while others remain authoritarian? The question continues to puzzle social scientists. This column presents new data from 13 British American colonies from before the American Revolution. It shows that democratic institutions had a lot to do with the need to attract workers.
Under what circumstances do democratic as opposed to authoritarian institutions emerge? Although a large literature has tackled this question (see Acemoglu et al. 2001, Acemoglu and Robinson 2012, Engerman and Sokoloff 2000), we still have an imperfect knowledge of how representative institutions originate and change.
Topics: Labour markets, Politics and economics
Tags: colonisation, democracy, economic history, institutions, US