Best Selling Books by Daron Acemoglu

0133578119 / 9780133578119 Macroeconomics, Student Value Edition Plus NEW MyEconLab with Pearson eText -- Access Card Package Package consists of: 0133487164 / 9780133487169 Macroeconomics, Student Value Edition 0133498999 / 9780133498998 NEW MyEconLab with Pearson eText -- Access Card -- for Macroeconomics

This paper presents an analysis of what types of values, especially in regards to obedience vs. independence, families impart to their children and how these values interact with social mobility. In the model, obedience is a useful characteristic for employers, especially when wages are low, because independent workers require more incentives (when wages are high, these incentives are automatic). Hence, in low-wage environments, low-income families will impart values of obedience to their children to prevent disadvantaging them in the labor market. To the extent that independence is useful for entrepreneurial activities, this then depresses their social mobility. High-income and privileged parents, on the other hand, always impart values of independence, since they expect that their children can enter into higher-income entrepreneurial (or managerial) activities thanks to their family resources and privileges. I also discuss how political activity can be hampered when labor market incentives encourage greater obedience and how this can generate multiple steady states with different patterns of social hierarchy and mobility.

Transformative technologies like generative artificial intelligence promise to accelerate productivity growth across many sectors, but they also present new risks from potential misuse. We develop a multi-sector technology adoption model to study the optimal regulation of transformative technologies when society can learn about these risks over time. Socially optimal adoption is gradual and convex. If social damages are proportional to the productivity gains from the new technology, a higher growth rate leads to slower optimal adoption. Equilibrium adoption is inefficient when firms do not internalize all social damages, and sector-independent regulation is helpful but generally not sufficient to restore optimality.

We propose a model of the emergence of equality before the law. A society can support “effort” (“cooperation”, “pro-social behavior”) using the “carrot” of future cooperation or the “stick” of coercive punishment. Community enforcement relies only on the carrot and involves low coercion, low inequality, and low effort. A society in which the elite control the means of violence supplements the carrot with the stick, and involves high coercion, high inequality, and high effort. In this regime, elites are privileged: they are not subject to the same coercive punishments as non-elites. We show that it may be optimal -- even from the viewpoint of the elite -- to establish equality before the law, where all agents are subject to the same coercive punishments. The central mechanism is that equality before the law increases elites’ effort, which in turn encourages even higher effort from non-elites. Equality before the law combines high coercion and low inequality -- in our baseline model, elites exert the same level of effort as non-elites. Factors that make the emergence of equality before the law more likely include limits on the extent of coercion, greater marginal returns to effort, increases in the size of the elite group, greater political power for non-elites, and under some additional conditions, lower economic inequality.

Almost all democratic societies evolved socially and politically out of authoritarian and nondemocratic regimes. These changes not only altered the allocation of economic resources in society but also the structure of political power. In this paper, we develop a framework for studying the dynamics of political and social change. The society consists of agents that care about current and future social arrangements and economic allocations; allocation of political power determines who has the capacity to implement changes in economic allocations and future allocations of power. The set of available social rules and allocations at any point in time is stochastic. We show that political and social change may happen without any stochastic shocks or as a result of a shock destabilizing an otherwise stable social arrangement. Crucially, the process of social change is contingent (and history-dependent): the timing and sequence of stochastic events determine the long-run equilibrium social arrangements. For example, the extent of democratization may depend on how early uncertainty about the set of feasible reforms in the future is resolved.

This paper develops a framework to analyze the relationship between the diffusion of new technologies and the decentralization decisions of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. However, the manager can use her informational advantage to make choices that are not in the best interest of the principal. As the available public information about the specific technology increases, the trade-off shifts in favor of centralization. We show that firms closer to the technological frontier, firms in more heterogeneous environments and younger firms are more likely to choose decentralization. Using three datasets of French and British firms in the 1990s we report robust correlations consistent with these predictions.

Many states in Latin America, Africa and Asia lack the monopoly of violence, identified by Max Weber as the foundation of the state, and thus the capacity to govern effectively. In this paper we develop a new perspective on the establishment of the monopoly of violence and the formation of the state. We build a model to explain the incentive of central states to eliminate non-state armed actors (paramilitaries) in a democracy. The model is premised on the idea that paramilitaries may choose to and can influence elections. Since paramilitaries have preferences over policies, this reduces the incentives of the politicians they favor to eliminate them. The model also shows that while in non-paramilitary areas policies are targeted at citizens, in paramilitary controlled areas they are targeted at paramilitaries. We then investigate the predictions of our model using data from Colombia between 1991 and 2006. We first present regression and case study evidence supporting our postulate that paramilitary groups can have significant effects on elections for the legislature and the executive. Next, we show that the evidence is also broadly consistent with the implication of the model that paramilitaries tend to persist to the extent that they deliver votes to candidates for the executive whose preferences are close to theirs and that this effect is larger in areas where the Presidential candidate would have otherwise not done as well. These results illustrate that, consistent with our model, there appears to be a symbiotic relationship between some executives and paramilitaries. Finally, we use roll-call votes to illustrate a possible ''quid pro quo'' between the executive and paramilitaries in Colombia. Keywords: State Capacity, Violence, Elections. JEL Classifications: D7, H11.

(Cont.) Under some additional assumptions on preferences, these results generalize to the case when the government is benevolent but unable to commit to future tax policies. We conclude by providing a brief comparison of centralized mechanisms operated by self-interested rulers to anonymous markets. Keywords: dynamic incentive problems, mechanism design, optimal taxation, political economy, revelation principle. JEL Classifications: H11, H21, E61, P16.

will be the ruling coalition and conditions under which the most powerful individuals will not be included in the ruling coalition. We also use this framework to discuss endogenous party formation.

Kremer, Willis, and You (2021) revisit cross-country convergence patterns over the last six decades. They provide evidence that the lack of convergence that applied early in the sample has now been replaced by modest convergence. They also argue this relationship is driven by convergence in various determinants of economic growth across countries and a flattening of the relationship between these determinants and growth. Although the patterns documented by the authors are intriguing, our reanalysis finds that these results are driven by the lack of country fixed effects controlling for unobserved determinants of GDP per capita across countries. We show theoretically and empirically that failure to include country fixed effects will create a bias in convergence coeffcients towards zero and this bias can be time-varying, even when the underlying country-level parameters are stable. These results are relevant not just for the current paper, but for the convergence literature more generally. Our reanalysis finds no evidence of major changes in patterns of convergence and, more importantly, no flattening of the relationship between institutional variables and economic growth. Focusing on democracy, we show that this variable''s impact continues to be precisely estimated and if anything a little larger than at the beginning of the sample.

We document a statistical association between the severity of the persecution and mass murder of Jews (the Holocaust) by the Nazis during World War II and long-run economic and political outcomes within Russia. Cities that experienced the Holocaust most intensely have grown less, and both cities and administrative districts (oblasts) where the Holocaust had the largest impact have worse economic and political outcomes since the collapse of the Soviet Union. Although we cannot rule out the possibility that these statistical relationships are caused by other factors, the overall patterns appear generally robust. We provide evidence on one possible mechanism that we hypothesize may link the Holocaust to the present - the change it induced in the social structure, in particular the size of the middle class, across different regions of Russia. Before World War II, Russian Jews were predominantly in white collar (middle class) occupations and the Holocaust appears to have had a large negative effect on the size of the middle class after the war.

We document that between 50% and 70% of changes in the US wage structure over the last four decades are accounted for by the relative wage declines of worker groups specialized in routine tasks in industries experiencing rapid automation. We develop a conceptual framework where tasks across a number of industries are allocated to different types of labor and capital. Automation technologies expand the set of tasks performed by capital, displacing certain worker groups from employment opportunities for which they have comparative advantage. This framework yields a simple equation linking wage changes of a demographic group to the task displacement it experiences. We report robust evidence in favor of this relationship and show that regression models incorporating task displacement explain much of the changes in education differentials between 1980 and 2016. Our task displacement variable captures the effects of automation technologies (and to a lesser degree offshoring) rather than those of rising market power, markups or deunionization, which themselves do not appear to play a major role in US wage inequality. We also propose a methodology for evaluating the full general equilibrium effects of task displacement (which include induced changes in industry composition and ripple effects as tasks are reallocated across different groups). Our quantitative evaluation based on this methodology explains how major changes in wage inequality can go hand-in-hand with modest productivity gains.

Using large-scale survey data covering more than 110 countries and exploiting within-country variation across cohorts and surveys, we show that individuals with longer exposure to democracy display stronger support for democratic institutions. We bolster these baseline findings using an instrumental-variables strategy exploiting regional democratization waves and focusing on immigrants'' exposure to democracy before migration. In all cases, the timing and nature of the effects are consistent with a causal interpretation. We also establish that democracies breed their own support only when they are successful: all of the effects we estimate work through exposure to democracies that are successful in providing economic growth, peace and political stability, and public goods.

Modernization theory is a cornerstone of much of political science, despite the mounting evidence against its predictions. In this paper, we argue that the theory''s failings are rooted in predictions that are not conditioned on history and cultural configurations. We outline a theory in which the interplay of the distribution of political power and cultural configurations lead to three distinct self-reinforcing paths of political development, with very different state-society relations, institutions, and economic structures. These are paths to Despotic, Absent and Shackled leviathans. The role of cultural configurations, made up of attributes in a society''s culture set, is critical in legitimizing the social arrangements in each path. For example, a Despotic Leviathan, as in China, cannot be understood without appreciating how Confucian culture has been used to bolster a worldview in which rulers are supposed to be virtuous and regular people are discouraged from political participation. We argued that this interpretation is not inherent to Confucian thought, but has to be understood as an endogenous outcome along the trajectory to the Despotic Leviathan. None of the three different paths we highlight support modernization theory. Under the Absent Leviathan, there is no economic modernization. Under the Despotic Leviathan, economic growth bolsters the existing regime and its supporting cultural configuration, with no tendency towards democracy or associate political changes. Under the Shackled Leviathan, there are dynamics leading to economic growth and political changes with greater bottom-up participation. Nevertheless, the causation does not go from the former to the latter, and these changes are critically dependent on cultural and political entrepreneurship in order to formulate and popularize new cultural configurations and institutionalize political changes.

Artificial Intelligence is set to influence every aspect of our lives, not least the way production is organized. AI, as a technology platform, can automate tasks previously performed by labor or create new tasks and activities in which humans can be productively employed. Recent technological change has been biased towards automation, with insufficient focus on creating new tasks where labor can be productively employed. The consequences of this choice have been stagnating labor demand, declining labor share in national income, rising inequality and lower productivity growth. The current tendency is to develop AI in the direction of further automation, but this might mean missing out on the promise of the "right" kind of AI with better economic and social outcomes.

Health expenditures as a share of GDP have more than tripled over the last half century. A common conjecture is that this is primarily a consequence of rising real per capita income, which more than doubled over the same period. We investigate this hypothesis empirically by instrumenting for local area income with time-series variation in global oil prices between 1970 and 1990 interacted with cross-sectional variation in the oil reserves across different areas of the Southern United States. This strategy enables us to capture both the partial equilibrium and the local general equilibrium effects of an increase in income on health expenditures. Our central estimate is an income elasticity of 0.7, with an elasticity of 1.1 as the upper end of the 95 percent confidence interval. Point estimates from alternative specifications fall on both sides of our central estimate, but are almost always less than 1. We also present evidence suggesting that there are unlikely to be substantial national or global general equilibrium effects of rising income on health spending, for example through induced innovation. Our overall reading of the evidence is that rising income is unlikely to be a major driver of the rising health share of GDP.

The paper provides a political economy theory of the Kuznets curve. When development leads to increasing inequality, this can induce political instability and force democratization on political elites. Democratization leads to institutional changes which encourage redistribution and reduce inequality. Nevertheless, development does not necessarily induce a Kuznets curve, and it is shown that development may be associated with two types of nondemocratic paths: An "autocratic disaster," with high inequality and low output, and an "East Asian Miracle," with low inequality and high output. These arise either because inequality does not increase with development, or because the degree of political mobilization is low.

This paper develops the thesis that credit market frictions may be an important contributor to high unemployment in Europe. When a change in the technological regime necessitates the creation of new firms, this can happen relatively rapidly in the U.S. where credit markets function efficiently. In contrast, in Europe, job creation is constrained by credit market imperfections, so unemployment rises and remains high for an extended period. The data show that there has not been slower growth in the most credit dependent industries in Europe relative to the U.S., but the share of employment in these industries is lower than in the U.S.. This suggests that although credit market imperfections are unlikely to have been the major cause of the increase in European unemployment, they may have played some role in limiting European employment growth.

Upon assuming power for the first time in 1935, the Norwegian Labour Party delivered on its promise for a major schooling reform. The reform raised minimum instruction time in less developed rural areas and boosted the resources available to rural schools, reducing class size and increasing teacher salaries. We document that cohorts more intensively affected by the reform significantly increased their education and experienced higher labor income. Our main result is that the schooling reform also substantially increased support for the Norwegian Labour Party in subsequent elections. This additional support persisted for several decades and was pivotal in maintaining support for the social democratic coalition in Norway. These results are not driven by the direct impact of education and are not explained by higher turnout, or greater attention or resources from the Labour Party targeted towards the municipalities most affected by the reform. Rather, our evidence suggests that cohorts that benefited from the schooling reform, and their parents, rewarded the party for delivering a major reform that was beneficial to them.

This paper proposes a new framework for studying the interplay between culture and institutions. We follow the recent sociology literature and interpret culture as a "repertoire", which allows rich cultural responses to changes in the environment and shifts in political power. Specifically, we start with a culture set, which consists of attributes and the feasible connections between them. Combinations of attributes produce cultural configurations, which provide meaning, interpretation and justification for individual and group actions. Cultural figurations also legitimize and support different institutional arrangements. Culture matters as it shapes the set of feasible cultural figurations and via this channel institutions. Yet, changes in politics and institutions can cause a rewiring of existing attributes, generating very different cultural configurations. Cultural persistence may result from the dynamics of political and economic factors -- rather than being a consequence of an unchanging culture. We distinguish cultures by how fluid they are -- whereby more fluid cultures allow a richer set of cultural configurations. Fluidity in turn depends on how specific (vs. abstract) and entangled (vs. free-standing) attributes in a culture set are. We illustrate these ideas using examples from African, England, China, the Islamic world, the Indian caste system and the Crow. In all cases, our interpretation highlights that culture becomes more of a constraint when it is less fluid (more hardwired), for example because its attributes are more specific or entangled. We also emphasize that less fluid cultures are not necessarily "bad cultures", and may create a range of benefits, though they may reduce the responsiveness of culture to changing circumstances. In many instances, including in the African, Chinese and English cases, we show that there is a lot of fluidity and very different, almost diametrically-opposed, cultural configurations are feasible, often compete with each other for acceptance and can gain the upper hand depending on political factors.

In this essay, we provide a simple conceptual framework to elucidate the forces that lead to institutional persistence and change. Our framework is based on a dynamic game between different groups, who care both about current policies and institutions and future policies, which are themselves determined by current institutional choices, and clarifies the forces that lead to the most extreme form of institutional persistence ("institutional stasis") and the potential drivers of institutional change. We further study the strategic stability of institutions, which arises when institutions persist because of fear of subsequent, less beneficial changes that would follow initial reforms. More importantly, we emphasize that, despite the popularity of ideas based on institutional stasis in the economics and political science literatures, most institutions are in a constant state of flux, but their trajectory may still be shaped by past institutional choices, thus exhibiting "path-dependent change", so that initial conditions determine both the subsequent trajectories of institutions and how they respond to shocks. We conclude the essay by discussing how institutions can be designed to bolster stability, the relationship between social mobility and institutions, and the interplay between culture and institutions.

We develop a theoretical model of security investments in a network of interconnected agents. Network connections introduce the possibility of cascading failures, due to an exogenous or endogenous attack, depending on the profile of security investments by the agents. The general presumption in the literature, based on intuitive arguments or analysis of symmetric networks, is that because security investments create positive externalities on other agents, there will be under-investment in security. We show that this reasoning is incomplete because of a first-order economic force: security investments are also strategic substitutes. In a general (non-symmetric) network, this implies that under-investment by some agents will encourage over-investment by others. We demonstrate, by means of examples, there can be over-investment by some agents, and also that aggregate probabilities of infection can be lower in equilibrium compared to the social optimum. We then provide sufficient conditions for under-investment. This requires both sufficiently convex cost functions, (convexity alone is not enough), and networks that are either symmetric or locally tree-like. We also characterize the impact of network structure on equilibrium and optimal investments. Finally, we show that when the attack location is endogenized, (by assuming that the attacker chooses a probability distribution over the location of the attack in order to maximize damage), there is an additional incentive for over-investment: greater investment by an agent shifts the attack to other parts of the network. Keywords: cascades, contagion, network security, security investments, strategic substitutes, under-investment. JEL Classification: D6, D62.

(Cont.) However, I also show that the results about relative bias do not generalize when more general menus of technological possibilities are considered. In the second part of the paper, I show that there are much more general results about absolute bias. I prove that under fairly mild assumptions, an increase in the supply of a factor always induces changes in technology that are absolutely biased towards that factor, and these results hold both for small changes and large changes in supplies. Most importantly, I also determine the conditions under which the induced-technology response will be strong enough so that the price (marginal product) of a factor increases in response to an increase in its supply. These conditions correspond to a form of failure of joint concavity of the aggregate production function of the economy in factors and technology. This type of failure of joint concavity is quite possible in economies where equilibrium factor demands and technologies are decided by different agents. Keywords: Biased technology, endogenous technical change, innovation, monotone comparative statics. JEL Classifications: O30, O31, O33, C65.