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Author Archives: Kritchasorn Jarupasin
Welcome new member
We would like to welcome the following new member of the InsTED network.
Dr Petros Sekeris (University of Portsmouth) His research interests are in applied microeconomics, including in development economics, the political economy of developing countries, institutional economics, and in the economics of conflicts.
The ‘Institutions Hypothesis’ and International Trade
According to Douglas North’s ‘Institutions Hypothesis’, powerful groups within a society will manipulate their nation’s economic institutions in their own interests if they are not bound by appropriate constraints, with potentially deleterious effects on economic development. The main focus is on institutions that specify and enforce contracts and property rights to reduce transactions costs. Existing powerful groups block the enforcement of property rights, and with it investment in new technology, in order to protect their economic rents. Societies are able to make technological advances only if they can defeat such groups. The literature on the interaction between economic institutions and international trade shows that poor institutions can be a source of rent for some groups while institutions can also be a source of comparative advantage in trade. Consequently, the welfare consequences of institutional comparative advantage are often ambiguous. Another branch of the literature focuses instead on the interaction between international trade and political institutions, for example studying the effects of constraints imposed by democratic institutions on the executive branch of government. Trade and growth are found to expand far more in countries where the executive cannot use their power to monopolize the gains from trade.
Acemoglu, D., S. Johnson and J.A. Robinson (2005); “The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth.” American Economic Review, 95(3): 546-579. [Working paper version]
Acemoglu, D. and J.A. Robinson (2000); “Political Losers as a Barrier to Economic Development.” American Economic Review, 90(2): 126-130. [Working paper version]
Besley, T.J., K.B. Burchardi, and M. Ghatak (2012); “Incentives and the De Soto Effect.” Quarterly Journal of Economics, 127(1): 237–282. [Working paper version]
Costinot, A., (2009); “On the Origins of Comparative Advantage.” Journal of International Economics, 77(2): 255-264. [Working paper version]
Do, Q.-T. and A. Levchenko (2009); “Trade, Inequality, and the Political Economy of Institutions.” Journal of Economic Theory, 144(4): 1489-1520. [Working paper version]
Gancia, G. and Zilibotti, F. (2009); “Technological Change and the Wealth of Nations” Annual Review of Economics, 1: 93-120. [Working paper version]
Garfinkel, M., S. Skaperdas and C. Syropoulos, (2008); “Globalization and Domestic Conflict.” Journal of International Economics, 76(2): 296-308. [Working paper version]
Krusell, P. and J.-V. Ríos-Rull (1996); “Vested Interests in a Positive Theory of Stagnation and Growth.” Review of Economic Studies, 63(2): 301-329. [Working paper version]
Levchenko, A., (2007); “Institutional Quality and International Trade.” Review of Economic Studies, 74(3): 791-819. [Working paper version]
Levchenko, A., (2013); “International Trade and Institutional Change.” Journal of Law, Economics, and Organization, 29(5): 1145-1181. [Working paper version]
North (1991); “Institutions.” Journal of Economic Perspectives, 5(1): 97-112.
Nunn, N., (2007); “Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade.” Quarterly Journal of Economics, 122(2): 569-600. [Working paper version]
R.G. Raghuram and L. Zingales (2000); “The Tyranny of Inequality.” Journal of Public Economics 76(3): 521–558. [Working paper version]
Geography, Institutions, and Economic Growth
One of the great debates in economics concerns the determinants of economic development, investment and growth. Most recently, this literature has focused on whether geography or institutions play the more decisive role in determining economic development. A major issue in this debate concerns the appropriate treatment of the endogeneity of the economic institutions themselves. Much of the literature has been concerned with finding valid instruments to control for this endogeneity, or with finding natural experiments in which institutions changed exogenously such as the fall of the Berlin Wall. It is probably fair to say that explanations centring on key institutions that enforce contractual arrangements and protect property rights from expropriation by the state dominate the literature at the present time. But recent work has made a persuasive case that both institutions and geography matter by studying the interaction of colonial history and geography to identify the partial effects of institutions and geographical endowments. An early concern of the growth literature was on how resources move from agriculture to a ‘modern’ manufacturing sector, and another recent theme takes insights on the importance of geography and institutions to return to that earlier issue of how resources move between sectors. With the importance of ‘clusters’ of institutions now generally accepted, another strand of the literature seeks to identify in greater detail the precise mechanisms through which particular institutions enhance economic activity.
Acemoglu, D., S. Johnson, and J. A. Robinson (2001); “The Colonial Origins of Comparative Development: An Empirical Investigation.” American Economic Review, 91(5): 1369-1401. [Working paper version]
Acemoglu, D., S. Johnson, and J. A. Robinson (2002); “Reversal of Fortune: Geography and Institutions in the Making of Modern World Income Distribution.” Quarterly Journal of Economics, 117(4): 1231-1294. [Working paper version]
Acemoglu, D., S. Johnson, and J. A. Robinson (2005); “Institutions as the Fundamental Cause of Long Run Growth.” Published in P.M. Aghion and S.N. Durlauf (eds) Handbook of Economic Growth 1A, 385–472. Amsterdam: Elsevier [Working paper version]
Auer, R. (2013); “Geography, Institutions, and the Making of Comparative Development.” Journal of Economic Growth, 18(2), pages 179-215. [Working paper version]
Dort, T., P.-G. Méon and K. Sekkat (2013); “Does Investment Spur Growth Everywhere? Not Where Institutions Are Weak.” CEB Working Paper N° 13/030. [Working paper version]
Eicher, T., and T. Schreiber (2010); “Structural Policies and Growth: Time Series Evidence from a Natural Experiment” Journal of Development Economics, 91(1): 169-179. [Working paper version]
Gallup, J.L., J.D. Sachs, and A.D. Mellinger (1998); “Geography and Economic Development.” In Annual World Bank Conference on Development Economics 1998 (April), The World Bank: Washington, DC. [Working paper version]
Hall, R.E., and C.I. Jones (1999); “Why Do Some Countries Produce So Much More Output per Worker Than Others?” Quarterly Journal of Economics, 114(1): 83-116. [Working paper version]
Hibbs, D., and O. Olsson (2004); “Geography, Biogeography, and Why some Countries are Rich and Others are Poor.” Proceedings of the National Academy of Sciences, 101: 3715-3720. [Working paper version]
Lim, J., (2013) “Institutional and Structural Determinants of Investment Worldwide.” World Bank Policy Research Working Paper 6591. [Working paper version]
Klenow, P.J., and A. Rodriguez-Clare (1997); “The Neoclassical Revival in Growth Economics: Has it Gone Too Far?” Published in B. Bernanke and J. J. Rotemberg (eds.), NBER Macroeconomics Annual. Cambridge and London: MIT Press, pp. 73–103.
Welcome new members
We would like to welcome the following new members of the InsTED network
Prof Chad P. Bown (World Bank) His research interests are in the political economy of international trade laws and institutions, trade policy negotiations, and trade disputes.
Dr Qi Zhang (LSE & University of Oxford) His primary research fields are international trade, and industrial organization, with secondary fields in macroeconomics, and monetary economics.
Devaluing to Prosperity: Misaligned Currencies and Their Growth Consequences
Experts have long questioned the effect of currency undervaluation on overall GDP growth. They have viewed the underlying basis for this policy intervention in currency markets to keep the price of the home currency cheap as doomed to failure on both theoretical and empirical grounds. Moreover, the view has been that overvalued currencies hurt economic growth but undervalued currencies cannot help in growth acceleration. A parallel belief has been that the real exchange rate that is, a country’s competitive ranking cannot be affected by merely changing the nominal exchange rate. This view is grounded in the belief, and expectation, that inflation follows any devaluation of currency. Hence, the conclusion that the real exchange rate cannot be affected by policy.
However, given China’s remarkable performance in recent decades, this traditional view is being reexamined. China devalued its currency by large amounts in the 1980s and early 1990s; instead of inflation, it achieved high growth. Today, there is near-universal demand for China to significantly revalue its currency.
This book examines the veracity of various propositions relating to currency misalignments, and their effect on various items of policy interest. The author subjects more than a century of global exchange rate management and growth outcomes to rigorous empirical analysis and demonstrates convincingly that a country can systematically devalue and yet prosper.
The analysis helps in interpreting several phenomena, especially for the last three decades, which have witnessed high economic growth in developing countries, a widening of global imbalances, and a sharp increase in reserve accumulation, particularly among high-growth Asian economies. The book shows that these events are strongly linked via a consistent policy of currency undervaluation in Asian economies. [Publisher’s book website]
Book review by Michael P. Dooley in Journal of Economic Literature, 51(3): 890-891, September 2013. (Scroll down to Section F International Economics.)
Book review by G. Srinivasan in Frontline, March 2013.