TSE M2 PPD Institutions and Long-Run Development (2022-2023)

Why are some countries so much richer than others today? Why do some countries grow so much faster? What sustains development over the long run? Among all exiting hypotheses, empirical evidence points toward several explanations, and in particular institutions, as the main sources of long-run growth and inequality across nations. Still, the existence of effective institutions is usually taken as a given in economics when analyzing issues of market failures, public goods provision, and optimal taxation. However, this starting point is generally unwarranted in the perspective of many developing economies today and across most of human history. In fact, weak or failing institutions are the rule rather than the exception. Understanding how effective institutions emerge is of paramount importance as it is one of the main correlates of development today. This course will explore the following issues: why are institutions crucial in explaining long-run development? What can explain cross-country variations in institutions? How can they explain current patterns in economic development? How do geography and culture interact with institutions? The course will provide simple theoretical tools to think about these complex causal relationships. Moreover, beyond nourishing the narrative, the course will also emphasize an empirical approach to assess the validity of the conceptual framework.