96340 - POLITICAL ECONOMY

Learning outcomes

The goal of this course is to discuss current topics in political economics. Thus, the course will address questions such as: what are the political and institutional determinants of fiscal policy and macroeconomic policy in modern democracies? Which features of political institutions are more likely to foster economic development? At the end of the class student has knowledge on using the concepts and tools of the new political economy to analyze current topics in this field. Student is able to analyze issues such as: - the interaction between politics and economics in shaping macroeconomic policies in modern democracies; - the role of political institutions in the process of economic growth and development. The course is meant to train students to understand how policy decisions are made, and how they can be improved.

Course contents

Erasmus students: Please note that you cannot take this course if you have not yet taken a course in Microeconomics (a formal requirement at EPOS) AND a course in econometrics (a de facto requirement given the content of the course).

Note that this syllabus may be subject to changes; thus, please make sure you are checking the most updated version of the syllabus.

This version was last changed on May 14, 2024.

Topic 1: Introduction
Correlation vs. causation, omitted variable bias, institutions and socio-economic performance

Topic 2: Externalities
The first fundamental theorem of welfare economics, externalities, climate change

Topic 3: Aggregating individual preferences
The Condorcet paradox, Arrow’s impossibility theorem, restrictions on preferences, the median voter theorem, Downsian competition, the Meltzer-Richard’s model

Topic 4: Social capital
What is social capital? Why does it matter? What is the relationship between mass media and social capital?

-- First midterm --

Topic 5: Discrimination and inequality
Statistical and taste-based discrimination, with applications to schooling and cricket

Topic 6: Structural change
Labor, automation, globalization and their heterogeneous effects across workers and places

Topic 7: Voter turnout
Causes and consequences of voter participation

Topic 8: Polarization and Populism

-- Second midterm or Full Exam --

Readings/Bibliography

The course has no single textbook. Readings and teaching materials (e.g., slides, notes, exercises) for each class will be published on the university platform VIRTUALE: https://virtuale.unibo.it/

Below are some of the readings that I will cover, fully or partly, during classes. This list is partial and will likely be updated before and/or during the course. A thorough understanding of many of these readings requires technical skills beyond what students are expected to have at this point in their academic careers. In such cases, in class I will present simplified versions of the underlying theoretical models (for theory readings) or an introductory review of the econometric results (for empirical readings).

To get access to any Harvard Business Case Studies used in the course (e.g., in discussing externalities), please wait for instructions from the lecturer. Specifically, about one week before each case study-based class, the lecturer will send a message on Virtuale explaining where and how to download the relevant cases.

 

Topic 1: Introduction

Required readings:

• Acemoglu, Daron, “Why Nation-Building Failed in Afghanistan.” Project Syndicate, August 20, 2021, https://www.project-syndicate.org/commentary/afghanistan-top-down-state-building-failed-again-by-daron-acemoglu-2021-08 Last Access: February 12, 2024.
• Acemoglu, Daron, Suresh Naidu, Pascual Restrepo, and James A. Robinson, “Democracy Does Cause Growth.” Journal of Political Economy, 2019, 127 (1): 47-100.
• Acemoglu, Daron, and James A. Robinson, “Why Nations Fail.” The New York Review of Books, June 7, 2012. https://www.nybooks.com/articles/2012/08/16/why-nations-fail/ Last Access: February 12, 2024.
• Dell, Melissa, “The Persistent Effects of Peru’s Mining Mita.” Econometrica, 2010, 78 (6): 1863-1903.
• Diamond, Jared, “What Makes Countries Rich or Poor?” The New York Review of Books, June 7, 2012. https://www.nybooks.com/articles/2012/06/07/what-makes-countries-rich-or-poor/?lp_txn_id=1524960 Last Access: February 12, 2024.
  

Recommended readings:

• Angrist, Joshua D., and Jörn-Steffen Pischke, “Mastering ‘Metrics: The Path from Cause to Effect.” Princeton University Press. (Chapters 4 and 5).
• Diamond, Jared, “Guns, Germs, and Steel: The Fates of Human Societies (20th Anniversary Edition).” W. W. Norton & Company.
  

 

Topic 2: Externalities

Required readings:

• Instructor’s notes
• Pons, Vincent, Amram Migdal, and Mike Lynch. “Climate Change: Paris, and the Road Ahead.” Harvard Business School Case 718-038, March 2018. (Revised January 2019.)

 

Topic 3: Aggregating individual preferences

Required readings:

• Instructor’s notes

Recommended readings:

• Acemoglu, Daron, Suresh Naidu, Pascual Restrepo, and James A. Robinson, “Chapter 21 – Democracy, Redistribution, and Inequality” in Handbook of Income Distribution, edited by Anthony B. Atkinson and François Bourguignon, Volume 2B, 2015, Elsevier, 1885-1966.
• Hall, Andrew B., “What Happens When Extremists Win Primaries?”, The American Political Science Review, 2015, 109 (1): 18-42.
• Poole, Keith T., and Howard Rosenthal, “Patterns of Congressional Voting.” American Journal of Political Science, 1991, 35 (1): 228-278.

 

Topic 4: Social capital

Required readings:

• DellaVigna, Stefano, and Ethan Kaplan, “The Fox News Effect: Media Bias and Voting.” Quarterly Journal of Economics, 2007, 122 (3), 1187-1234.
• Gentzkow, Matthew, “Television and Voter Turnout.” Quarterly Journal of Eonomics, 2006, 121 (3), 931-972.
• Chetty, R., Jackson, M.O., Kuchler, T. et al. “Social capital I: measurement and associations with economic mobility.” Nature, 2022, 608: 108-121.
• Chetty, R., Jackson, M.O., Kuchler, T. et al. “Social capital II: determinants of economic connectedness.” Nature, 2022, 608: 122-134.

Recommended readings:

• Haidt, Jonathan, “The Anxious Generation: How the Great Rewiring of Childhood Is Causing an Epidemic of Mental Illness.” Penguin Books Ltd. Kindle Edition.
• Olken, Benjamin, “Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages.” American Economic Journal: Applied Economics, 2008, 1 (4), 1-33.
• Putnam, Robert, “Bowling Alone: The Collapse and Revival of American Community.” 2000. New York: NY (USA): Simon & Schuster.
• Putnam, Robert, Robert Leonardi, and Raffaella Nanetti, “Making Democracy Work: Civic Traditions in Modern Italy.” 1993. Princeton, NJ (USA): Princeton University Press.

 

Topic 5: Discrimination

Required readings:

• Instructor’s notes
• Bertrand, Marianne, and Sendhil Mullainathan, “Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination,” American Economic Review, 2004, 94(4), 991-1013.
• Carlana, Michela, “Implicit Stereotypes: Evidence from Teachers’ Gender Bias.” Quarterly Journal of Economics, 2019, 134 (3), 1163-1224.
• Lowe, Matthew, “Types of Contact: A Field Experiment on Collaborative and Adversarial Caste Integration.” American Economic Review, 2021, 111 (6): 1807-1844.

Recommended readings:

• Arnold, David, Will Dobbie, and Crystal Yang, “Racial Bias in Bail Decisions.” Quarterly Journal of Economics, 2018, 133 (4), 1885-1932.
• Black, Sandra, “Do better schools matter? Parental valuation of elementary education.” Quarterly Journal of Economics, 1999, 114 (2), 577-599.
• Coate, Stephen, and Glenn Loury, “Will Affirmative-Action Policies Eliminate Negative Stereotypes?” American Economic Review, 1993, 83 (5), 1220-1240.
• Goldin, Claudia, and Cecilia Rouse, “Orchestrating Impartiality: The Impact of “Blind” Auditions on Female Musicians.” American Economic Review, 2000, 90 (4), 715-741.
• Miller, Conrad, “The Persistent Effect of Affirmative Action Policy.” American Economic Journal: Applied Economics, 2017, 9 (3), 152-190.

 

Topic 6: Structural Change

Required readings:

• Acemoglu, Daron, and Pascual Restrepo, “Robots and Jobs: Evidence from US Labor Markets.” Journal of Political Economy, 2020, 128 (61), 2019-2452.
• Autor, David, David Dorn, and Gordon Hanson, “The China Syndrome: Local Labor Market Effects of Import Competition in the United States.” American Economic Review, 2013, 103 (6), 2121-2168.

Recommended readings:

• Autor, David, David Dorn, Gordon Hanson, and Kaveh Majlesi, “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure.” American Economic Review, 2020, 110 (10), 3139-3183.
• Fetzer, Thiemo, “Did Austerity Cause Brexit?” American Economic Review, 2019, 109 (1), 3849-3886.

 

Topic 7: Voter Turnout

Required readings:

• Cantoni, Enrico, “A Precinct Too Far: Turnout and Voting Costs.” American Economic Journal: Applied Economics, 2020, 12 (1), 61-85.
• Cantoni, Enrico and Vincent Pons, “Does Context Outweigh Individual Characteristics in Driving Voting Behavior? Evidence from Relocations within the U.S.” American Economic Review, 2022, 112 (4), 1226-1272.
• Cantoni, Enrico and Vincent Pons, “Strict ID Laws Don’t Stop Voters: Evidence from a Nationwide Panel, 2008–2018.” Quarterly Journal of Economics, 2021, 136 (4), 2615-2660.
• Fujiwara, Thomas, “Voting Technology, Political Responsiveness, and Infant Health: Evidence from Brazil.” Econometrica, 2015, 83 (2), 423-464.

Recommended readings:

• Blais, André, and Jean-François Daoust, “The Motivation to Vote: Explaining Electoral Participation,” 2020. Vancouver, BC (Canada): University of British Columbia Press.
• Fraga, Bernard, “The Turnout Gap: Race, Ethnicity, and Political Inequality in a Diversifying America.” Cambridge University Press. Kindle Edition.

 

Topic 8: Polarization and Populism

Required readings:

• Brown, Jacob, Enrico Cantoni, Sahil Chinoy, Martin Koenen, and Vincent Pons, “The Effect of Childhood Environment on Political Behavior: Evidence from Young U.S. Movers, 1992—2021.” National Bureau of Economic Research Working Paper (31759), 2023.
• Cantoni, Enrico and Vincent Pons, “Do interactions with candidates increase voter support and participation? Experimental evidence from Italy,” Economics & Politics, 33(2), 379-402
• Pons, Vincent, “Will a Five-Minute Discussion Change Your Mind? A Countrywide Experiment on Voter Choice in France,” American Economic Review, 2018, 108(6), 1322-1363.
• Pons, Vincent, “Liberté, égalité, fragilité: The Rise of Populism in France.” Harvard Business School Case 717-052, April 2017. (Revised January 2024.)

Recommended readings:

• Brown, Jacob, Enrico Cantoni, Ryan Enos, Vincent Pons, and Emilie Sartre, “The Extent and Causes of Increased Partisan Residential Segregation in the United States.” Working paper, 2024.
• Teixeira, Ruy, and John Judis, “Where Have All the Democrats Gone? The Soul of the Party in the Age of Extremes.” Henry Holt and Co. Kindle Edition.

Teaching methods

Traditional lectures led by the course lecturer.

There will be two in-class review sessions with the course lecturer: one in the last class before the first mid-term and another one in the last class of the course.

 

Comportment:

My goal is that students learn something by attending class. In this spirit, I ask you to put away your phones and to use portable computers (including tablets) only to take notes. Please, do not do anything else with your PC during class. If, for whatever reason, you cannot stay away from your phone for less than two hours, please avoid coming to class.

Assessment methods

Final written exam of one hour, or two midterm exams of one hour each. The second (and final) midterm can be taken only at the first exam session at the end of the semester.

Each exam will consist of 17 multiple choice questions. The exam will be PC-based and will take place in a PC lab.

During exams (midterm or full exams) students will NOT be allowed to use anything but a pen, pencil, and eraser. That is, students will NOT be allowed to bring materials such as: textbooks, lecture notes/slides; any written notes; web-enabled or data storage devices, or smartphones. Candidates found with such items will be removed from the exam and their work will not be graded.

Only students with a sufficiently high grade in the first midterm exam (i.e., 18 or higher) will be admitted to the second one: other candidates must proceed to the full exams.
For students taking the midterm exams (esami parziali), the final grade for the course will be the arithmetic average of the grades in the two midterm exams.

For students taking the full exam, the grade of the exam is the final grade.

The grading system is on a 0-30 scale. The maximum possible score is 30 cum laude, in case all answers are correct, complete, and formally rigorous. If that is not the case, the following grading scheme applies:

<18 fail
18-23 sufficient
24-27 good
28-30 very good
30 cum laude: excellent

To take the exam, candidates are required to register via the University's electronic service (AlmaEsami). Exam grades will be published on Esami OnLine (EOL).

After exams are graded, students will have the chance to see their graded exam on a date/time/location determined by the lecturers and communicated (via VIRTUALE) to the students.

Students will be allowed to reject their final grade for the course at most ONCE. Upon publishing the exam results, the lecturer will inform students about the deadline to reject their grade. Notification of the intention to reject a grade must be sent in writing (by email). After the date specified, grades will be electronically registered (verbalizzato).

Teaching tools

Slides, lecture notes, and readings will be available on the platform VIRTUALE: https://virtuale.unibo.it/

Office hours

See the website of Enrico Cantoni