Seminar 3: Bad institutions (12.10)

Consider first Engerman and Sokoloff's (1997) paper:

1. Try to describe generally how differences in resource endowments affect distribution hence hence institutional development
2. In the paper "Inequality does cause underdevelopment: Insights from a new instrument" (2007), Bill Easterly use the abundance of land suitable for growing wheat relative to the abundance of land suitable for growing sugar cane as an instrument for inequality across countries
   1. Explain the rationale for such an instrument in light of Engerman and Sokoloff's work. The figure shows a version of his first stage regression: Does it correspond to what you would expect?
   2. In the first panel of his Table 4, he attempt to study the causal effect of inequality on development (measured by log per capita income). Discuss his findings.
3. In 19th century Norway, the coast of the northern part of the country was politically and economically dominated by an elite of fish buyers (væreier) facing a nummer of poor fishermen. Further south along the coast, fisheries were less abundant and buyers were less powerful.
   1. What would be the expected outcomes regarding instituional end poilitical development in the two regions according to Engerman and Sokoloff's theory?
   2. It turns out that the first parliamentary representatives from the Labor party (then a revolutionary socialist party) came from the North. How does this fit in Engerman and Sokoloff's framework? How about the model of Acemoglu and Robinson (2001)?

Consider next the paper by Acemoglu, Ticchi, and Vindigni (2011):

1. Explain verbally i) What they try to highligh with the model and ii) The key ingredients of their model
2. Explain why the elites don't go for the inefficient solution when i) The inefficient solution is very inefficient (q₀ if very low) and when ii) The inefficient is almost efficient (q₀ close to 1)
3. What is the effect of inequality on the elites decison