31536 - Political Economy Of Institutions

Learning outcomes

The main purpose of the course is to understand the institutional foundations of a market economy. Being socially constructed, the economy is built up from the convergence of three different modes of enforcing the rules of conduct arising from conflicts of interest (driven by scarcity) and from conflicts of value (driven by identity). Indeed, the enforcement can operate via: a) ethical norms (based on guilt); b) social norms (based on shame); c) legal norms (based on sanctions of state-sponsored coercion). In other words, the economy is the social realm where the ethical, political and legal dimensions meet. The economy is always in the process of becoming. The course aims at explaining how that process works.

Prerequisites: intermediate microeconomics and public finance

Course contents

1. Physiology of a market economy and the economic role of political institutions

2. Institutions rule and economic development

3. Market failures and government failures

4. Voting rules and representative democracy

5. Financing democracy and growth strategies

6. The new comparative economics: the frontier of institutional possibilities

7. Social capital and politics of institutional choice: the case of transition economies

8. Globalization and the new international economic order

9. The economics of reciprocity and gift giving: the civil economy perspective

Readings/Bibliography

Syllabus: (numbers refer to topics listed above)

1.         J. Stiglitz, Economics of the Public Sector, 3rd ed., New York: Norton, 2000 (Chapters 1, 2, 3).

D. Mueller, Perspectives on Public Choice, CUP, Cambridge, 1997, (Chapters, 2,3).

2.         D. North, Understanding the process of economic change, Princeton Univ. Press, 2005.

A. Greif, Institutions and the path to the modern economy, CUP, Cambridge, 2006.

E. Screpanti, S. Zamagni, An outline of the history of economic thought, II ed., Oxford, OUP, 2005 (Chapter 12).

3.         J. Stiglitz, Chapters, 4, 5, 6, 8.

D. Mueller, Chapter 8.

J. Hunt, “Why are some public officials more corrupt than others?”, NBER, Aug. 2005.

4.         J. Stiglitz, ch.7.

T. Persson, “Forms of democracy, policy and economic development”, NBER, March 2005.

D. Acemoglu, S. Johnson, J. Robinson, “Institutions and the fundamental cause of long-run growth”, June 2004.

M. Gradstein, “Inequality, democracy and the emergence of institutions”, CEPR, Sept. 2003.

R. Rigobon, D. Rodrik, “Rule of law, democracy, openness and income”, NBER, Sept. 2004.

D. Acemoglu, J.Robinson, “Persistence of power, elites and institutions”, CEPR, April 2006.

P. Aghion, A. Alesina, F. Trebbi, “Democracy, technology and growth”, NBER, 13180, June 2007.

5.         H. Gersbach, V. Liesseni, “Financing democracy”, CES, WP. 821, De. 2002.

E. Glaeser, R. La Porta, A. Shleifer, “Do institutions cause growth?”, July 2003.

R. Hausmann, L. Pritchett, D. Rodrik, “Growth accelerations,”, NBER, June 2004.

B. Mulligan, R. Gil, X. Sala-i-Martin, “Social security and democracy”, NBER; May 2002.

T. Parsson, G. Tabellini, “The growth effect of democracy”, CESIFO, 2016, June 2007.

6.         M. Aoki, Towards a comparative institutional analysis, Cambridge, The MIT Press, 2007.

L. Pasinetti, Keynes and the Cambridge Keynesians, Cambridge, CUP, 2007. (Book Three).

R. Scazzieri, “A theory of framing and coordination”, RISEC, 50, 2003.

S. Bowles, “Endogenous preferences: the cultural consequences of markets and other economic institutions”, Journal of Economic Literaturte, 36, 1998.

A. Sen, Rationality and Freedom, Cambridge, Harvard Univ. Press, 2002 (Chapters 5, 15, 17).

E. Glaeser, A. Shleifer et al., “The new comparative economics,” CEPR, 2003

7.         J. Temple, “Growth effects of education and social capital in the OECD countries,” CEPR, 2001

P. Dasgupta, I. Serageldin (eds.), Social Capital, The World Bank, Washington, 2000

A. Sen, Development as freedom, A. Knopf, New York, 1999

E. Gleaser, R. La Porta, A. Shleifer, “Do institutions cause growth?” NBER, June 2004

J. Falkinger, V. Grossmann, “Institutions and development; the interaction between trade regime and political system”, IZA, Aug. 2004.

S. Durlauf, M. Fafchamps, “Social Capital”, NBER, May 2004.

C. Bellemare, S. Kroger, “On representative social capital”, IZA, May 2004.

8.         P. Segerstrom, “Naomi Klein and the antiglobalization movement,” CEPR, Dec. 2003

D. Rodrik, “Feasible globalizations,” CEPR, 2002

C. Hamilton, “Globalization and democracy,” CEPR, Nov. 2002 World Bank, “Poverty in an age of globalization,” Washington, Oct. 2002

T. Andersen, T. Herbertsson, “Measuring globalization,” IZA, 2003

P. De Grauwe and M. Polan, “Globalization and social spending,” CES, 2003

K. O'Rourke, “Globalization and inequality: historical trends,” CEPR, 2001

A. Harrison, “Globalization and poverty”, NBER, 12347, June 2006

D. Acemoglu, ‘Politics and economics in weak and strong states”, NBER, ApriI 2005.

D. Dornbusch, “The new international architecture”, CES, Sept. 2002.

S. Fischer, “Financial crises and reform of the international financial system”, NBER, Oct. 2002.

9.         A. Faik, “Charitable giving as a gift exchange”, CEPR, Jan. 2004.

J. Micklewright, A. Wright, “Private donations for international development” CEPR,    March 2004.

P. Sacco, P. Vanin, S. Zamagni, “The economics of human relationships”, 2006.

L. Guiso, P. Sapienza, L. Zingales, “Cultural biases in economic exchange”, CEPR, Jan. 2005.

F. van der Ploeg, “The welfare state redistribution and the economy: reciprocal altruism, consumer rivalry and second best', CES, July 2004.

O. Ben-Shakhar et al., “Reciprocity and emotions”, CES, Oct, 2004.

T. Dohmen et Al., “Homo reciprocans: Survey evidence on prevalent behaviour and success”, CEPR, 5789, Aug.2006.

L. Bruni, S. Zamagni, Civil Economy, Oxford, Peter Lang, 2007.

S. Kolm, Reciprocity, Cambridge, CUP, 2008.

Assessment methods

A 20-22 page final paper, on a topic freely chosen by the student among those listed below, will be required. An acceptable paper should contain either a critical survey of the literature or, even better, an original contribution. Class participation is mostly welcome.

Office hours

See the website of Stefano Zamagni