KOÇ UNIVERSITY
Instructor: Prof. Sumru Altug Term: Spring 2014
Office: CAS 250 E-mail:
Phone: X1673 Class Hrs: TTh 15:30-16:45
ECON 480/580
The Economics of Institutions
Aims
The course will examine the role played by institutions and political economy considerations in determining overall economic performance.
The course aims:
· To describe the role and evolution of institutions in economic growth
· To discuss the empirical evaluation of institutions and culture on economic outcomes
· To understand the role of institutional failure on economic outcomes
Objectives
By the end of the course, students should be able to understand:
· The role of institutions and culture in economic growth
· The nature of contractual arrangements in determining economic outcomes
· The basic tools of political economics
· The role of institutional failure
· Models of governance and mis-governance
· Empirical issues in validating the effect of institutions and culture on economic outcomes
Assessment
Midterm 35
Final Exam 45
Term Paper 20
Your letter grade depends on your total point accumulation out of 100 possible points. Plan well ahead for exams. There will be no early exams, e-exams and no make-ups. If you miss the midterm exams due to health reasons, provided that you have a valid doctor’s report, you will be assigned additional questions in the final exam.
Attendance
Poor attendance at lectures is a factor that undermines the quality of education for all concerned -- the instructor, those who attend classes and lectures, and those who don't. Students are encouraged to attend all lectures.
Academic Honesty
“Honesty and trust are important to all of us as individuals. Students and faculty adhere to the following principles of academic honesty at Koç University:
1. Individual accountability for all individual work, written or oral. Copying from others or providing answers or information, written or oral, to others is cheating.
2. Providing proper acknowledgement of original author. Copying from another student’s paper or from another text without written acknowledgement is plagiarism.
3. Authorized Teamwork. Unauthorized help from another person or having someone else write one’s paper or assignment is collusion.
Cheating, plagiarism, and collusion are serious offenses resulting in an F grade and disciplinary action.”
Course Outline
· Introduction
1. North, Douglas C. (1990). Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press
2. Acemoglu, D., S. Johnson and J. Robinson (2006). “Institutions as a Fundamental Cause of Long-run Growth,” In P. Aghion and S. Durlauf (eds.) Handbook of Economic Growth, Amsterdam: North-Holland.
3. Coase, Ronald H. (1960) “The Problem of Social Cost,” Journal of Law and Economics,3, 1-44.
4. Farrell, Joseph (1987) “Information and the Coase Theorem,” Journal of Economic Perspectives, 1, 113-129.
5. Greif, A. (1993). “Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Trader Coalition,” American Economic Review 83, 525-48.
6. Greif, A., P. Milgrom and B. Weingast (1994). (1994). “Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualistic Societies,” Journal of Political Economy 102, 912-950.
7. Aoki, M. (2006). “Mechanisms of Endogenous Institutional Change,” SIEPR Discussion Paper No. 05-13
· Some Evidence
1. Engerman, S. and K. Sokoloff (1997). “Factor Endowments, Institutions, and Differential Paths to Growth among New World Economies,” In S.H. Haber (ed.) How Latin America Fell Behind, Stanford: Stanford University Press.
2. Glaeser, E., R. La Porta, F. Lopez-Silanes and A. Schleifer (2004). “Do Institutions Cause Growth?” Journal of Economic Growth 9, 271-303.
3. Glaeser, E., G. Ponzetto, and A. Shleifer (2006). “Why Does Democracy Need Education?” NBER WP 12128.
4. La Porta, R., F. Lopez-Silanes, A. Schleifer and R. Vishny (1998). “Law and Finance,” Journal of Political Economy 106, 1113-1155.
5. Acemoglu, Daron, Simon Johnson and James A. Robinson (2001). “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review, 91, 1369-1401
6. Acemoglu, Daron, Simon Johnson and James A. Robinson (2002). “The Reversal of Fortune, Geography and Institutions in the Making of the Modern World Income Distribution,” Quarterly Journal of Economics 117, 1231-1294
7. Rodrik, D., A. Subramanian, and F. Trebbi (2002). ``Institutions Rule: The Primacy of Institutions over Geography and Integration in EconomicDevelopment,'' IMF Working Paper 02/189 (Washington: International MonetaryFund).
8. Sachs, J. (2003). “Institutions Don't Rule: Direct Effects of Geography on Per Capita Income,” NBER WP 9490.
9. Przeworski, A. (2004). “Institutions Matter?” Government and Opposition 527-540
10. Pzreworski, A. (2004). “Geography versus Institutions: Were Fortunes Reversed?” New York University, manuscript
11. Ma, Debin (2012). “Political Institutions and Long-run Growth Trajectory: Some Lessons from Two Millenia of Chinese Civilization,” CEPR DP 8791
· Culture and Economic Outcomes
1. Guiso, L., P. Sapienza and L. Zingales (2004). “The Role of Social Capital in Financial Development,” American Economic Review 94, 526-56.
2. Guiso, L., Sapienza, P., and L. Zingales (2006). “Does Culture Affect Economic Outcomes?” Journal of Economic Perspectives 20, 23-48.
3. Guiso, L., Sapienza, P., and L. Zingales (2009). “Cultural Biases in Economic Exchange,” Quarterly Journal of Economics 124, 1095-1131.
4. Fernandez, R. and A. Fogli (2009). “Culture: An Empirical Investigation of Beliefs, Work, and Fertility,” American Economic Journal: Macroeconomics 1, 146-177.
5. Tabellini, G. (2010). “Culture and Institutions: Economic Development in the Regions of Europe,” Journal of the European Economic Association 8, 677-716.
6. Altug, S. and F. Canova (2012). “Do Institutions and Culture Matter for Business Cycles?”, manuscript
· Basic Models of Politics
1. Persson and Tabellini (2000). Political Economics: Explaining Economic Policy, Cambridge, MA: The MIT Press, Chapters 2,3, and 6
· Institutional Failure
1. Mauro, P. (1995). “Corruption and Growth,” Quarterly Journal of Economics, 110, 681-713.
2. Schleifer, A. and R. Vishny (1992). “Corruption,” Quarterly Journal of Economics 108, 599-618.
3. Schleifer, A. and R. Vishny (1992). “Politicians and Firms,” Quarterly Journal of Economics 109, 995-1026.
4. Banerjee A. (1997). “A Theory of Misgovernance,” Quarterly Journal of Economics 112, 1289-1332.
5. Murphy, K., A. Schleifer and R. Vishny (1993). “Why is Rent-seeking So Costly to Growth?” American Economic Review 83, 409-414.
6. Fisman, Ray and Shang-Jin Wei (2004). “Tax Rates and Tax Evasion: Evidence from “Missing Imports” in China”, Journal of Political Economy, 112, 471-496.
7. Di Tella, Rafael and Ernesto Schargrodsky (2003). “The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires,” Journal of Law and Economics, 46, 269-92.
8. Dixit, A. G. Grossman and E. Helpman (1997). “Common Agency and Coordination: General Theory and Application to Tax Policy, Journal of Political Economy 105, 752-69.
9. Naritomi, J. R. Soares, and J. Assunção (2007). “Rent Seeking and the Unveiling of ‘De Facto’ Institutions: Development and Colonial Heritage within Brazil,” NBER WP 13545