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Research related to:  Growth/Development

Shrinking dictators: how much economic growth can we attribute to national leaders?

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National leaders – especially autocratic ones - are often given credit for high average rates of economic growth while they are in office (and draw criticism for poor growth rates). Drawing on the literature assessing the performance of schoolteachers and a simple variance components model, we develop a new methodology to produce optimal (least squares) estimates of each leader’s contribution to economic growth. We find that even in the world where leaders affect growth, the average rate of growth during a leader’s tenure is mostly uninformative about that leader’s contribution to growth...

William Easterly and Steven Pennings

The Role of Growth Slowdowns and Forecast Errors in Public Debt Crises

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According to the well‐known arithmetic of debt dynamics, a growth slowdown results in rising debt ratios if fiscal policy does not adjust. This mechanical effect plays a role in a surprisingly wide variety of public debt crises, from the Latin American debt crisis of the 80s and 90s to the low income HIPC crisis of the same period to the current Eurozone debt crisis and US debt crisis. Growth slowdowns often result in growth projections by fiscal authorities that are too optimistic, one of the possible reasons for which fiscal policy fails to adjust. Sound forecasting practices of projecting mean reversion and being more conservative the worse the debt situation are ignored in some major debt crises.
William Easterly

Reestablishing the Income-Democracy Nexus

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Reestablishing the Income-Democracy Nexus
A number of recent empirical studies have cast doubt on the “modernization theory” of democratization, which posits that increases in income are conducive to increases in democracy levels. This doubt stems mainly from the fact that while a strong positive correlation exists between income and democracy levels, the relationship disappears when one controls for country fixed effects. This raises the possibility that the correlation in the data reflects a third causal characteristic, such as institutional quality. In this paper, we reexamine the robustness of the income-democracy relationship . . . 
Jess Benhabib, Alejandro Corvalan and Mark M. Spiegel

Institutions and Economic Performance: An Introduction to the Literature

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This essay serves as the introduction to a collection of critical writings on the relationship between institutions and economic performance. The essay not only provides an overview of the field but also explores some of the thorny questions surrounding the definition and measurement of institutions.
Kevin E. Davis

Uneven Growth: A Framework for Research in Development Economics

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The textbook paradigm of economy-wide development rests on the premise of “balanced growth”: that is, on the presumption that all sectors will grow in unison over time as a country gets richer. This view has served us reasonably well in several circumstances, particularly those pertaining to macroeconomic models of long-term growth. An implicit view that growth is balanced across sectors, or something close to it, also underlies the notion of “trickle-down,” a stance that has strongly influenced development policy. Of course, we would all agree that balanced growth is an abstraction . .  
Debraj Ray

Was the Wealth of Nations determined in 1000 BC?

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We assemble a dataset on technology adoption in 1000 Bc, 0 Ad, and 1500 AD for the predecessors to today’s nation states. Technological differences are surprisingly persistent over long periods of time. Our most interesting, strong, and robust results are for the association of 1500 AD technology with per capita income and technology adoption today . . . 

Selling Out on the UN Security Council

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Election to the United Nations Security Council (UNSC) provides nations with an opportunity to trade policy support in exchange for aid and other forms of financial assistance. Nations elected to one of the ten temporary two year seats on the United Nations Security Council experience substantially lower economic growth during their time on the council than comparable nations not on the UNSC. Over the two year period of UNSC membership and the following two years, during which a nation is ineligible for reelection, UNSC nations experience a 3.5% contraction in their economy relative to nations not elected to the UNSC. Further, on average nations in the UNSC become less democratic and experience an increase in the level of restrictions on press freedom. The effects of UNSC membership on political and economic development are particularly strong in non-democratic states.
Alastair Smith, NYU and Bruce Bueno de Mesquita, NYU

Economic Freedom, Culture and Growth

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How does economic freedom and culture impact economic growth? This paper argues that culture and economic institutions, specifically economic freedom, both play a role in economic development independently, but the strength of their impact can only be better understood when both are included in the growth regression. We find that, when both are included in the growth regression, the impact of culture is greatly diminished, while economic freedom continues to have a significant impact on economic growth. Our results suggest that economic freedom is more important than culture for growth outcomes, though the mechanisms through which culture affects growth warrant further investigation. We posit that culture may be more important for initial growth, diminishing in significance once the institutions of economic freedom have been established.
Claudia Williamson, NYU and Rachel Mathers, West Virginia University

Capital Controls, Political Institutions, and Economic Growth

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The case study literature suggests that liberal international capital flows can have extremely different growth consequences depending on the political environment. Despite this, little systematic attention has been paid to how politics affects the relationship between capital controls and long term growth in a large-n context. Focusing on the conflict alleviating properties of democracy we demonstrate that authoritarian countries with a large number of societal divisions are negatively affected by capital controls, while neither democratic nor homogeneous countries suffer adverse growth effects from capital controls . . . 

Was the Wealth of Nations Determined in 1000 B.C.?

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We assemble a dataset on technology adoption in 1000 BC, 0 AD, and 1500 AD for the predecessors to today's nation states. We find that this very old history of technology adoption is surprisingly significant for today's national development outcomes. Although our strongest results are for 1500 AD, we find that even technology as old as 1000BC matters in some plausible specifications.
Diego Comin, New York University; William Easterly, New York University; Erick Gong, UC Berkeley

Reliving the 50s: the Big Push, Poverty Traps, and Takeoffs in Economic Development

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he classic narrative of economic development -- poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income -- has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce . . .

Reliving the 50s: the Big Push, Poverty Traps, and Takeoffs in Economic Development

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The classic narrative of economic development -- poor countries are caught in poverty traps, out of which they need a Big Push involving increased aid and investment, leading to a takeoff in per capita income -- has been very influential in development economics since the 1950s. This was the original justification for foreign aid. The narrative lost credibility for a while but has made a big comeback in the new millennium. Once again it is invoked as a rationale for large foreign aid programs. This paper applies very simple tests to the various elements of the narrative. Evidence to support the narrative is scarce . . .
William Easterly, NYU

Development, Democracy, and Mass Killings

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Using a newly assembled dataset spanning from 1820 to 1998, we study the relationship between the occurrence and cruelty of episodes of mass killing and the levels of development and democracy across countries and over time. We find that massacres are more likely at intermediate levels of income and less likely at very high levels of democracy, but we do not find evidence of a linear relationship between democracy and probability of mass killings. In the XXth century, discrete improvements in democracy are systematically associated with less cruel massacre episodes. Episodes at the highest levels of democracy and income involve relatively fewer victims . . . 

Artificial States

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Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures of the degree to which states are artificial. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
Alberto Alesina, Harvard University; William Easterly, NYU; Janina Matuszeski, Harvard University

The Last Instance: Are Institutions the Primary Cause of Economic Development?

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Following North, neo-institutionalists claim that institutions are the ”primary” cause of economic development, ”deeper” than the supply of factors and methods for their use, what Marxists would call “forces of production.” Yet while the conclusion is different, the historical narratives differ little across these perspectives. How, then, are such conclusions derived? Can anything be said to be ”primary”? I conclude that “causal primacy” is an answer to an incorrectly posed question. Institutions and development are mutually endogenous and the most we can hope for is to identify their reciprocal impacts . . . 

What Can the Rule of Law Variable Tell Us About Rule of Law Reforms?

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The recent resurgence of optimism regarding the role of legal reforms in promoting development seems to be based in part upon cross country statistical analyses that purport to show causal relationships between variables measuring characteristics of legal institutions and variables measuring levels of various kinds of development. However, the persuasiveness of these analyses is limited by the quality of the legal data upon which they rely. As it turns out, many of the variables that are commonly used to measure respect for the rule of law, enforcement of property rights and contracts do not capture information capable of shedding light upon the potential impact of purely legal reforms . . . 
Kevin Davis, School of Law, NYU

What Can the Rule of Law Variable Tell us About Rule of Law Reforms?

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In 2001 per capita income in Haiti was $480, the infant mortality rate was seventy-nine per 1000 live births and the illiteracy rate (age fifteen and over) hovered around fifty percent. By comparison, in the United States, less than two hours flying time away, the per capita in- come was $34,280, the infant mortality rate was seven per 1000 live births, and the illiteracy rate was negligible. Understanding the reasons why these sorts of disparities in important measures of development arise and persist is one of the greatest challenges in all of the social sciences . . . 
Kevin Davis