🗓️ Session 6: Institutional Economics and Development II
Abstract
The session builds upon the previous theoretical introduction to institutional economics and focuses on the influential work of Acemoglu, Johnson, and Robinson (AJR) on colonial origins of comparative development. We analyze their argument that colonial institutions - whether “extractive” or “inclusive” - created path-dependent legacies that explain today’s global inequality. While examining the methodological innovations like instrumental variable estimation, we also critically assess the limitations of this approach, including its narrow definition of institutions, historical oversimplification, and potential ideological bias toward “Global Standard Institutions.”
🖥️ Lecture Slides
The slides will be made available here after the lecture.
📚 Mandatory Reading
- Chang (2010)
- Measuring Institutions with the Worldwide Governance Indicators (Gräbner-Radkowitsch 2026) — the tutorial on using the WGI as a measure of institutional quality, on Method and Inquiry
- Spithoven (2026) — please read before the session; we discuss it in class. Reading question: Which factors do Acemoglu and Robinson treat as fixed in Nogales, and which does Spithoven say changed after 1855? The article is open access: https://doi.org/10.1080/00213624.2026.2657235.
🏆 Further Readings
- Acemoglu et al. (2001)
- Seminal paper on the colonial origins of comparative development, demonstrating how early institutions shaped long-term economic outcomes
- SlaveVoyages: Trans-Atlantic Slave Trade Estimates (Voyages Team 2026)
- The standard database of the transatlantic slave trade: how many enslaved people were taken from which African regions to which parts of the Americas, 1501–1866
- Oosterlinck et al. (2022)
- The Haitian independence debt of 1825 and its long shadow: Haiti’s debt-to-GDP ratio from 1825 to 2020, and what the debt meant for the economy
✍️ Coursework
Evaluate Acemoglu, Johnson, and Robinson’s argument about colonial origins of development:
- Explain their distinction between “extractive” and “inclusive” institutions
- Assess their methodological approach (settler mortality as instrumental variable)
- Critically examine at least three limitations discussed in the lecture (narrow institutional definition, historical oversimplification, context-blindness, etc.)
- Consider alternative explanations for contemporary development differences
Exercise 3: The Development Puzzle (350 words)
Choose one of the country pairs mentioned in the “development puzzle” (North/South Korea, or find your own example of similar countries with different outcomes). Analyze:
- How would AJR’s institutional theory explain the differences?
- What factors might their approach overlook (power relations, ongoing exploitation, geopolitics)?
- How might an OIE perspective provide different insights?
If you have questions or problems, please post them in the Moodle forum.
🔗 Additional Resources
- World Bank Worldwide Governance Indicators: https://www.worldbank.org/en/publication/worldwide-governance-indicators
- Comprehensive database of institutional quality measures across countries
- Polity Project: https://www.systemicpeace.org/polityproject.html
- Data on political institutions and democratic governance