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Institutions and Economic Performance-E.Helpman-A Bit of History (2 )

As I stated in Phase 1, this post is devoted to chapters 4 and 5 and the closing of the historical overview of the work of Helpman. Indeed, we recall briefly that his work consists of three main sections: History, Theory and contemporary evidence to illustrate and explain the importance of institutions and their evolution in the economy of a country. The channels of influence is so complex and diverse, it is clear that each paper studies a selected aspect of the relationship without being exhaustive.
These two chapters are based on the hypothesis of Engerman-Sokoloff, conducting a careful analysis of history to to provide historical verification of this theory.

Chapter 4, "Slavery, Inequality and Economic Development in the Americas" by Nathan Nunn proceeds in two steps defined:


- Nunn wants to check if the historically heavy reliance slavery in the newly conquered countries, is causing economic inequalities
- In a second step, Nunn seeks to ensure that economic inequalities are the cause underdevelopment which marks the following decades.


Indeed, the sequence highlighted by Engerman and Sokoloff is as follows: factor endowments (including property) determine the use of slaves on plantations causing a deepening economic inequalities and policies affecting the evolution of institutions in a manner favorable to economic development. In other words, under this assumption around the world who have had a heavy reliance on slavery, as a result of initial inequality in endowments institutions have formed more negative or less conform to the requirements of economic development, thereby failing to solid democratic foundation of a strong education system, funding important research and innovation ...

By focusing on the American continent, Nunn tested this hypothesis on the 1750s, seeking to estimate the impact of the share of slaves in the population on GDP per capita of the early twenty-first century, to prove that inequalities in development today are explained by inequalities Past tied to slavery.

Nunn seeks initially to estimate the relationship between current income and the proportion of slaves in the total population in 1750. Why it considers the following log-linear relationship, which involves other fundamental variables of economic development: a + =
lnYi b.Si / Li + c.Li / Ai + I + ui

with Yi income per national head in 2000, Si / Li by slaves in the total population in 1750, Li / Al density of population in 1750, I and a fixed effect reflecting the nationality of the settlers, reflecting their degree of involvement and type of settlement (exploitation of natural resources, territorial conquest). These fixed effects are introduced in order to capture the largest share of the argument of Engerman and Sokoloff. Acemoglu had already largely developed this idea that the type of colonization and the nationality of the settlers strongly impacts the future economic development of the colonized country, particularly through the contrasting trends established institutions (see Acemoglu, Johnson and Robinson 2002).

It is obvious that the analysis and selection of variables Nunn is conditioned by the availability of historical variables, which obliges to speculate further. Thus, the population density is introduced in order to control the model, since it is supposed to capture the economic prosperity of the time (cf. Acemoglu, Johnson and Robinson 2002). The variable is used by Nunn to approximate the distribution of factors of production when the historical use and ownership of land shortage. The results of estimating this equation are very satisfactory, with significant coefficients. For example, the proportion of slaves in the population is negatively correlated with income in 2000 as illustrated by the case of Jamaica in 1750 which recorded an incredible rate since 90% of the population came from the slave trade. Jamaica currently supports a low GDP per capita of $ 3,640 in 2000. However, Nunn shows that while Jamaica had a more moderate appeal to slavery, for example 46% of the population (the time registered in the Bahamas), Jamaica's per capita income would be $ 11,580 instead of 3640 $.
Nunn tests the robustness of the result by splitting the group of countries (Americas) into two groups: Canada / US and other African countries in order to evict any bias associated with analysis the heterogeneity of economies. The relationship between past slave use and income today remains negative and significant. Yet if the results confirm the general philosophy of the hypothesis of Engerman and Sokoloff, they do not analyze the channels through which influence the use of acts of slavery on the development of contemporary inequalities.


The author refines his study focusing partly on the British West Indies, then a second time on the various U.S. states. What
Nunn seeks to prove that the chains are causality between the two phenomena . Indeed, Engerman and Sokoloff stipulated that slavery plantations caused a widening economic inequalities, which resulted in turn delayed economic development to the present day through a lack of institutional evolution. It is important to analyze separately the two relations, namely in a first-slave relationship, inequalities and inequities in development. Using the Gini coefficient on the data available in 1860, Nunn shows a positive and significant relationship between the proportion of slaves in the population and inequality economic in terms of land ownership. Within the U.S., economic inequalities are persistent long-term. It is well known that the U.S. is one of the most unequal countries in the world and Nunn agrees that finding, stating that the most unequal states in 1860 are also the most unequal in 2000. It remains to demonstrate the relationship Nunn-economic inequalities in the past, present development, the result of institutional change favoring the elites instead of providing the foundations for balanced growth. However, according to historical data it is impossible to show that economic inequality in 1860 are correlated with per capita incomes of the 2000s. It is therefore impossible to use the positive relationship between slavery and inequality in explaining the relationship between slavery and economic development in the long term. If the latter relationship reflects a historical reality, it can not be explained through the initial economic inequality and those resulting from slavery today.

Regarding the British West Indies, historical data available by countries (Bahamas, Grenada, Guyana, Jamaica, St. Lucia, Trinidad and Tobago ... etc.) are important in any case sufficient to test the hypothesis in more detail (data collected by Higman in 1984) it becomes possible to test channels of influence specified by Engerman-Sokoloff at the heart of the relationship Slavery underdevelopment. Nunn can now test if the relationship also depends on how the settlers made use of slavery. By distinguishing the forced laborers in plantations (large scale) or domestic slaves or in some factories to assess whether the two types of servo impacting the same way as the development today. In fact, Nunn said that the Caribbean is characterized, the slaves were exploited in plantations of coffee, sugar or cotton. The estimated equation is similar to the first, except that each type of slavery may impact differently on economic development. Nunn demonstrates that whatever the configuration and type of control, the effect on development is negative, which strengthens the relationship started. It is impossible to prove that the control in plantations is more detrimental to economic development than any other form of slavery. When Nunn decided to replicate his analysis using data available on various U.S. states, the results carry much the same.

So if this is not through the arguments of Engerman and Sokoloff that can explain this relationship, it remains a question mark on his explanation and the causal chain leading to inequalities of contemporary economic development.

So that Acemoglu, Bautista, Querubin and Robinson also analyze the impact inequality on economic performance, starting from the same premise, but differs significantly from the perspective used by Nathan Nunn. Indeed, in Chapter 5, Acemoglu et al. distinguished from the outset economic inequalities inequalities policies. Indeed, given the relative failure of Nathan Nunn to demonstrate that slavery past impacts the present development through the deepening of economic inequalities, the authors seek to prove that the arguments of Engerman and Sokoloff is considering not valid not economic inequality but inequality policies. Using the close relationship between economic and political inequalities, Acemoglu et al. seek to demonstrate that it is the political inequalities that are the cause of economic inequality in the origin of developmental delay. The relationship is simple: if the elites control political power, they can create and sustain rent-seeking, which will prevent any renewal policy and have no interest in providing essential public services to economic development, including the enrollment of population. It should be noted that the existing literature the issue is very controversial, especially on the relationship between democracy and economic development level, sometimes divergent opinions are about the ambiguity of the relationship.

I propose that next post should be devoted to the analysis of this historical controversy, but mainly on the theoretical link between Democracy (political inequalities) and Economic Development, putting in parallel the historical analysis of Acemoglu and developments Theoretical selected by Helpman in his book to provide an overview of the complexity of the issue.

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Hadopi dream versus video streams

Loved son of two and a few histograms, Sylvain Dejean, Thierry and Raphael Suire Pénard obtained interesting results concerning the effects of web laws. The latter has already influenced the incentive to hack, primo the number of pirates has grown from 3% in the space of three months on a sample of 2000 people, two thirds Deuxio pirates who do more networks Peer to Peer turned to streaming (equally illegal) or to sites of accommodation style megaupload ... So that's a pretty mess budget, MPs and soon the inspectors and judges paid into private property of cultural property which, because of new technologies, are and remain property of non-exclusive and non-rival ...

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Institutions and Economic Performance-E.Helpman-A Bit of History (1)

The aim of the book Helpman is to bring light on the incremental gains in productivity and growth that characterize the world economy. Indeed, if income differences around the world were first explained in terms of endowments in physical and human capital, it is now clear that appropriations can not alone explain why productivity Total factors are sources of uneven development as they are today.

The approach is not to give an exhaustive description of the role of institutions in economic performance between countries, because the channels of influence are so large and varied that it is much too ambitious to formalize all so simply. The goal is to show how the institutions have a major impact on the economy using three different perspectives and essential
to understand the complexity phenomena: the history of institutions and reforms, the theory that develops around the integration of institutions as a fundamental predictor of economic performance, and finally the stylized facts or evidence which confirms the contemporary role institutions in the economy. Thus, historical analysis, theoretical and empirical, Elhanan Helpman wanted to provide the foundation for the analysis of the relationship between institutional reforms and development / economic growth.
1and Component: The Story

It is first important to master the history of institutions and training over time to establish a correlation with the development of technical progress and growth of a country. Helpman has selected five papers, which are all the historical analysis of the influence of institutions on economic policies and performance that are related to illustrate the diversity of channels of influence.

The first chapter titled "The Impact of Administrative Power on Political and Economic Development" by Avner Grief is the assumption that institutions be they political, economic or legal should not be considered as the key element of the analysis of economic performance. Indeed, it assumes that the decision-making power is not applied directly by the institutions, but by the appropriate administrative structures of a country, which according to the author, determine both the functioning of institutions and economic development . He observes in fact, that throughout history, the executive whether a republic or a monarchy, the delegates implementation of its decisions to the administrative structures, thus giving flexibility and an undeniable power to administrators in terms of implementation of decisions.

Thus, Grief says that the training institutions is often analyzed in the presence of the representative assemblies of the people and the guarantee of property rights, emanating from a balance of power between the executive and directors. An administration consists of individuals and organizations directly involved in the implementation of executive decisions and political choices, whether military, financial or legislative. ; Thus, administration strong as the one who has delegated authority to enable it to raise an army, levy taxes, reform laws ... That the administration must implement and enforce decisions, thereby providing an apparent sovereignty and known population.

Grief also emphasizes that a strong administration must resist the enforcement of certain policy choices, then have a leadership position on executive power (monarchy or presidency). When the earnings of directors related to cooperation and enforcement of policy choices reach a sufficiently high level, the constitutional system (coexistence of an executive and a constituent assembly) is Pareto optimal for the political regime and administrators. Avner Grief

performs a historical analysis of constitutional regimes starting from the period of the Middle Ages in Europe, which is very characteristic of constitutional monarchies as illustrated by the British Parliament but also in France, Germany ("Landtag"), or in the Iberian Peninsula, all these regimes are characterized by the presence of a constituent assembly to cons- significant. At the end of the fifteenth century, no fewer than 25 meetings were recorded in major European sovereignty (including Scotland, England, Spain, Portugal, France, the Netherlands, Germany Austria, Poland, Hungary, Sweden, Denmark and Norway). According to the assumptions of Grief, all these constituent assemblies were composed of individuals with an independent administrative authority (feudal lord or independent cities ...), which reinforces the idea that Assembly is there to ensure the rights of directors (property rights) in response to a gap in the written law or common.

These constituent assemblies of medieval Europe, have been implemented by the executive powers that were then not able to enforce decisions across the country, forcing them to resort to a territorial government with an obvious local sovereignty. They were gradually possible to raise larger armies and taxes sweeping the entire territory, in compliance with this condition balance between interests of the executive and directors (Lordships or corporations).

Yet, faced with external threats at the time as part of a struggle for the conquest or preservation of their territory, EU leaders have failed to find a solution between maintaining the internal balance assumption administrations strong enough that they apply the policy choices within the public interest. Thus, EU leaders have paid the price too low of an administration rewarded for its commitment in the fight against external threats : The Holy Roman Empire lost the Swiss cantons and Italy and other European leaders then decided to adopt a balanced constitutional system that gives meaning to Avner Grief.

For example, the French Estates General, exceptional meetings convened by the King in a political crisis were created in 1302 under Philip the Fair in order to seek the consent of the French people in military and fiscal issues. In particular, they were summoned by the initiator before entering into open conflict with Pope Boniface VIII. They were then regularly convened for all major tax issues but also political, especially during the 100 years war (1337-1453), reflecting a balance between the powers of the Crown (the executive) directors and for what. is that with the arrival of Henry IV as an imbalance in power begins threatening the Pareto-optimal system. Indeed, as Henry IV himself, before being crowned, a powerful director, ruler of Navarre, he ruled in granting and delegating more powers to the directors, creating the stewards who had a particular function of supervision of state activities. All successive kings (the Bourbons) lost more and more control and sovereignty at least until 1661 before the arrival of Louis XIV. This imbalance between the Crown and the former directors who were part of the States General, revolted repeatedly pushing the successive kings not to convene such meetings exceptional imbalance deepened and led to tensions and political crisis of 1789 originally from the French Revolution. Avner Grief explains in part the immense political and economic crisis of 1789 by the coming to power of Henry IV, who was the initiator of a political renewal, breaking a balance between the executive and administrators. The system of Constitutional Assembly in which the powers are ideally located east, at least for the author, the way to ensure the prosperity of a state.

The author writes a final extension of his analysis by examining the implications of administrative structures on the initial economic and institutional reforms in a country. In other words, certain structures initial administrative will not only seek to maintain a balance of power but also to develop sources of wealth in favor of increased development, giving rise to a virtuous circle of economic growth. Indeed, the working assumption that the elite initially in place are chilly to the idea of introducing progressive economic reforms for fear of the rise and prosperity of new economic groups, theoretically pushing the administration to implement policies not favorable to growth. Unlike an initial structure in which directors have a moderate power (as part of a self-charging or other mechanisms for awareness by directors of their responsibility towards the general interest) is beneficial because these will pursue policies conducive to economic growth, to develop new sources of wealth and thus ensure their own maintenance .

In Chapter 2, Joel Mokyr an analysis of institutional origins of the Industrial Revolution in a British paper entitled "The Institutional Origins of Industrial Revolution." The fundamental question that arises the author differs from previous analysis: what is the role played by institutions in the process of technological innovation in Britain and in the adoption of these new technologies. British institutions have largely been culled in the seventeenth century, imposing more stress to the Monarchy for the sake of strengthening the powers of Parliament. In this perspective, a large coalition of merchants and landowners began its existence in order to protect both commercial laws and property rights found that it greatly strengthened.

It is true that the author highlights a confusion that is often made between the occurrence of an industrial revolution in the United Kingdom and the convergence of European economies in the nineteenth, the so-called European Industrial Revolution. Yet this confusion can lead to misinterpretations about the explanations of these phenomena. While the institutional context is important whatever the point of view. In fact, we just explain that the reform of the functioning of the Crown of England had a key role in economic growth, but Obviously, the Enlightenment (Mokyr 2005, 2006), and the emergence of modern science (Bekar, Carlow and Lipsey 2005, Jacob and Stewart 2004) have affected the whole of Europe and promoted economic convergence and Development of the European continent. Nevertheless, the United Kingdom led all its neighbors and maintained its supremacy throughout the eighteenth and nineteenth century and this must be explained by a specificity of British institutions, according to Mokyr.

Mokyr emphasizes primarily as institutions that contribute to such growth, based on a technological breakthrough (Scheme the Schumpeterian growth with creative destruction) must above all encourage this dynamic process of creative destruction, rather than endure changes fairly static encouraging the continuation of activities at the time, ie mainly agriculture. Indeed, the Revolution was not due to respect for property rights or access to credit as it is often heard, since these processes interact with a static economy in maintaining agricultural activities and investments short term. North is that in 1981, advance the first argument really suitable for British growth model, namely that the UK is the pioneer in the development of patents protecting intellectual property. We are well in the context of a process that encourages innovation and change, and illustrates that institutional requirements are not the same between a pattern of growth "to Smith or to Schumpeter.

But what differentiates the UK from its European neighbors is not so much the nature of policies, which are quickly conducted in the rest of Europe, largely influenced by the Enlightenment, but by the speed and flexibility with which the British Parliament has adapted its policy. Indeed, political elites who remained in a logic of cooperation (in the same logic qu'Avner Grief adopted) because of the influence of light, have encouraged innovation in a particularly dynamic, through policy changes undoubtedly faster than the rest of Europe. It is here as part of an analysis of so-called formal political institutions. But it adds as Mokyr is that the influence of light does not stop not for the cooperation of institutions and political elites, but has imposed on classes of entrepreneurs and traders, influenced by the idea that a "gentle commerce" in the words of Montesquieu is a factor of peace and therefore social progress. Yet because of the respect for private property and commercial rights in the United Kingdom, social progress has felt much more quickly than in other European countries for which the influence of light has indeed resulted in policy reforms important, but has not attracted the same level of cooperation of economic agents that United Kingdom.

Mokyr underlines the central role of so-called informal institutions that have forged in the collective unconscious, a belief in social progress and the ability of all individuals to accumulate human capital . Cooperation of social groups was only possible because the formal institutions British had previously been able to guarantee everyone's rights, based on the principle of free enterprise and respect for property rights.

Chapter 3 is devoted to paper and Voth Drelishman entitled "Institutions And The Resource Curse in Early Modern Spain "dealing mainly Dutch syndrome and its impact on institutions Castilian and subsequent decline of the country. By their title, the authors imply that if Spain has become one of the greatest European powers of the sixteenth and seventeenth century, proud of the victory of the Reconquista, but especially rich in its considerable resources into gold and silver these resources have gradually degraded eventually the sustainability of its institutions. The authors then proceed in stages, first analyzing the links between a country's resources and the institutional environment, to discuss terms initials of the English economy in the sixteenth century that will explain the changes and transformations in the country following the massive Silver. Finally, after detailing the events of the windfall associated with the use of these new resources, the authors explain and demonstrate the different effects of the resource boom of Spain on its own development by focusing analysis on the relationship between institutions and sources of income of a country.

Melhum, Moene and Torvik (2006) analyzed the phenomenon of Dutch disease, with the heart of process of institutional quality of a country. Indeed, it appears that some countries are more likely to suffer a decline due to the influx of resources than others. It is clear that in fact it initial state institutions that will determine changes in economic performance following a resource boom.

The executive was clearly stronger in the sixteenth, under the hegemony of the Catholic Monarchs (1474-1516) of Castile and Aragon, strong to regain their territory over centuries of Arab invasion. This victory has strengthened the desire to centralize power and kings Ferdinand and Isabela swept medieval political organization in order to concentrate all powers, by removing the nobility and the clergy of any decision of government affairs. The only institution

preserved and developed this legacy is the Magistrates Court or "Cortes", ie an assembly comprising representatives of the elite and middle class, becoming the only cons-power of the Crown of Spain . Relations between Crown and the constituent assembly are often tense, fighting power and revenue; Relations which déséquilibrèrent quickly with plenty of resources in Silver from the New World, which was captured by the English Crown. With decision-making authority regarding the use of these new resources, representing members of the "Cortes" lost all power and funding capacity for the benefit of the executive, which freed itself and cons of all-power, its representative principalities.

The institutional evolution of the sixteenth century Spain is exactly the opposite of the trend in Britain and the Netherlands, where the political regimes became parliamentary systems where the executive is faced with an assembly composed of representatives of the people or at least the elite market. Thus, as noted above, economic growth in each was based on a constraint imposed on the monarchy, foreshadowed as non-responsive to economic need, while economic growth in Spain has to short term based on an extreme concentration of power and domination territorial kingdoms of Castile and Aragon strengths of their new resources. However, this strategy economic, as the author explains, no longer holds the road as soon as the sources of income do not self-feed longer. Thus, the English Crown failed to use its resources wisely in order to guarantee income over time and suffered the full brunt of the downside early in the seventeenth and the Dutch disease has deprived the regime of a tax base sufficient to offset higher spending.

The last two chapters of historical analysis of structure based on the initial work of Engerman and Sokoloff who came to conclude that the factor endowments of a country have a considerable explanatory power on economic growth, it is through this observation that the authors explain productivity differentials between the rich and poor areas suffering from underdevelopment.

Engermann and Sokoloff developed a detailed argument involving the heart of their explanation of the role of institutions. Indeed, assuming that the use of slavery depends on the initial endowment of labor input, particularly in agriculture, it is obvious that slavery rapidly developing economies of key inequalities that whether economic and political. Yet according to Engerman and Sokoloff, economy using slaves as labor, bases its economy on the increasing inequality and then put at risk any possible institutional changes . For more slaves are numerous, more institutions become immutable, with extreme concentration of power and lack of power-cons. Yet it is historically proven that good economic performance usually associated with a high institutional quality, a situation for which the balance of power and cooperative behaviors seem to be the optimal outcome to develop an intensive growth model.

We will see in a future post how Nathan Nunn in his paper "Slavery, Inequality and Economic Development: An Examination Of The Engerman-Sokoloff hypothesis" and Acemoglu, Bautista, Querubin and Robinson will attempt to verify empirically from historical data available if the impact of economic inequality and political checks on institutional change and development in countries . We will then be possible to present the theoretical developments and empirical analysis adapted to our contemporary economies interconnections between major institutions and Economic Development.