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Theory, General Equilibrium and Political Economy in Development Economics

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  • Daron Acemoglu

Abstract

I discuss the role of economic theory in empirical work in development economics with special emphasis on general equilibrium and political economy considerations. I argue that economic theory plays (should play) a central role in formulating models, estimates of which can be used for counterfactual and policy analysis. I discuss why counterfactual analysis based on microdata that ignores general equilibrium and political economy issues may lead to misleading conclusions. I illustrate the main arguments using examples from recent work in development economics and political economy.

Suggested Citation

  • Daron Acemoglu, 2010. "Theory, General Equilibrium and Political Economy in Development Economics," NBER Working Papers 15944, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15944
    Note: DAE POL
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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