A city’s metropolitan governance structure has a critical influence on the quality of life and economic outcomes of its inhabitants. This column quantifies the impact of governance on productivity using data from five OECD countries. Administrative fragmentation, which complicates policy coordination across a city, has a negative effect on individual productivity. This finding, combined with benefits from good governance such as improved transport and lower pollution levels, highlights the importance of well-designed metropolitan authorities.
Rudiger Ahrend, Alexander C. Lembcke, Abel Schumann, 19 January 2016
Kent Jones, 30 November 2015
WTO members have somehow found it extremely difficult, in the 21st century, to reach a comprehensive multilateral agreement to expand mutual gains from trade. This column argues that success in expanding global trade will depend on major trading countries’ willingness to seek new institutional paths to multilateral agreements, through new negotiating modalities, openness to the expansion of regional agreements to new members, and in establishing reciprocity expectations for members according to their development status.
Kevin Bryan, 27 November 2015
Douglass North, economic historian and co-recipient of the 1993 Nobel Memorial Prize in Economic Sciences, passed away this week. This column pays tribute to one of the great social scientific pioneers of the modern era – focusing on one particular example of how North drew on historical, empirical and theoretical evidence to understand the interactions between institutions and economic change.
Sebastian Edwards, Alvaro F. Garcia Marin, 02 January 2015
Given the widely recognised importance of institutions to economic development, the question arises of how to promote development through institutional change. This column investigates how constitutional provision of the right to education affects educational attainment. Initial analysis indicates a negative correlation, but this relationship is not robust to controlling for legal origin. Factors such as judicial review likely affect implementation of constitutional provisions.
Mercedes Delgado, Christian Ketels, Michael Porter, Scott Stern, 18 September 2014
There is a consensus among economists that ‘deep roots’ – geography, natural endowments, and institutions – are important determinants of prosperity differences across countries. This column argues that deep roots matter, but they are neither the whole story nor an excuse for political inaction today. Current policies are important – especially the broad range of policies that shape the business environment and the sophistication of companies – and they are affected but not determined by the past.
James Boughton, 15 September 2014
The international financial system is not working fine and reforms of regional and global institutions are much needed. This column discusses some of the transformations that the IMF could implement in order to keep pace with the changes in the world economy. One problem for the credibility of the IMF is the G20 in its current design and organisation. Institutional reforms, however, should be combined with advances in economic policy in order to promote economic growth and financial stability.
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.
André Carlos Martínez, Aldo Musacchio, Martina Viarengo , 09 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.
Joshua Aizenman, 03 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.
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.
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.
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.
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.
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.
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.
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.
Graziella Bertocchi, Arcangelo Dimico, 22 July 2012
We evaluate the empirical relevance of de facto vs. de jure determinants of political power in the U.S. South between the end of the nineteenth and the beginning of the twentieth century. Our results indicate that de jure voting restrictions reduce black registration but that black disfranchisement starts well before 1890 and is more intense where a black majority represents a threat to the de facto power of white elites.
Bernardo Guimaraes, Kevin D Sheedy, 05 July 2012
Institutions are a key determinant of economic development and indeed many developing institutions are deeply dysfunctional. This column presents a new model suggesting that those in power may prefer to keep bad institutions despite their anti-development effects since they alllow the elite to grab a bigger slice of a smaller pie.
Eduardo Cavallo, Carlos Scartascini, 12 May 2012
For some commentators, the recent financial crises are a sign that financial development has gone too far. Yet there are still countries where such concerns are the stuff of dreams. This column focuses on why the level of financial development in poor countries remains so low and what policymakers can do about it.
Maurizio Bovi, 02 December 2011
The countries most affected by the Eurozone debt crisis seem also to be characterised by bad institutions and large shadow economies. This column describes the bad equilibrium in which bad governments offer few and low-quality public services and make people less willing to pay for services. Firms stay underground, public receipts stay low, and governments remain inefficient. In sum, the presence of inept bureaucracy may be strongly associated with the shadow economy.