14.

75: Political Economy and Economic Development

Spring 2020
Syllabus

Contact information:
Professor Abhijit Banerjee
Room E52-540
Email: banerjee@mit.edu
Office hours: By appointment only.
Contact Mary Pietrusko (mpietrusko@povertyactionlab.org) to schedule an appointment during
office hours.

Professor Benjamin Olken

Room E52-542
Email: bolken@mit.edu
Office hours: Wednesdays 2:30-4:00, by appointment only.
Contact Mary Pietrusko (mpietrusko@povertyactionlab.org) to schedule an appointment during
office hours.

TA: Ari Bronsoler and Cory smith

Email: corybsmith@mit.edu , aribro@mit.edu
Office hours: Tuesday 2:30-4 PM and Thursday 2:30-4pm PM, E52-548

Class times:
Lectures TR 1:00-2:30 (E25-117)
Recitation times:
More advanced topics: Friday 3-4pm (E51-376)
Basic statistics 1-2pm (E51-372)

Course Website:
https://learning-modules.mit.edu/class/index.html?uuid=/course/14/sp20/14.75#dashboard

Goals for the class:

In this class, we will study some of key theoretical and empirical ideas for why and how politics
and institutions affect economic development. We will also look at a variety of empirical
examples drawn from throughout the developing world.

We have three basic goals for this class:

• Building a foundation for critical thinking about the role of political economy in
understanding economic development. We intend to have vigorous class discussions to
encourage this.
• Understanding some core theoretical concepts in political economy, with illustrations
from developing countries whenever possible.
• Understanding empirical evidence in economics. What makes a good empirical study?
How do we learn about the world empirically? What are some of the techniques we can
use to better understand the world?

Prerequisites:
The prerequisites for the class are 14.01 (introductory microeconomics) and some basic
familiarity with probability and/or statistics. For the statistics pre-requisite, we recognize that
there are many courses at MIT that introduce you to probability and statistics in various ways,
such as 14.30 (Statistics for Economics), 14.31 (Data Analysis for Social Scientists), or 14.32
(Econometrics) or the equivalents in course 6 or 18 (such as 6.008, 6.036, or 18.650) – all of
these classes should fulfill the requirements for the purpose of this course. If you’re unsure if you
have the relevant pre-requisites, please email us.

Grading and Assignments:

• Problem sets and group presentations (25%). There will be 5-7 problem sets, so one
approximately one assignment every 3-4 lectures. These will be a mix of theoretical
exercises and empirical exercises. You will need to use R to complete the problem sets. R
can be downloaded freely from https://www.rstudio.com/. We will drop the lowest
problem set and/or pop quiz grade.
• In-class midterm (25%).
• Final exam (35%).
• Pop quizzes (5%). On 3-5 randomly chosen days throughout the semester, we will start
class with a very short, non-technical pop-quiz. They will cover the main points of the
reading material for that day, as well as the material we’ve been talking about in class.
The pop quiz will be held right at the start of class (i.e. at 1:05); if you’re not here then
that will count as a zero on that pop quiz. These quizzes are intended to be fairly easy if
you’ve done the reading, but had if you haven’t – think of them as a commitment device
for you.
• Class participation (10%). We will have ample discussions throughout the semester.
• Assignment are due at the start of class on the due date listed on the assignment. Any
assignment turned in during the 24 hours after the due date (i.e. by 1:00PM the following
day) will lose 40% of the total possible points. No assignments will be accepted after
that. (The syllabus indicates tentative problem set due dates. The deadlines are subject to
change and will be clearly indicated on the assignment itself and in class.)

If you are dealing with a personal or medical issue that is impacting your ability to attend class,
complete work, or take an exam, please discuss this with Student Support Services (S3). The
deans in S3 will verify your situation, and then discuss with you how to address the missed work.
Students will not be excused from coursework without verification in advance of the due date
from Student Support Services.

Readings:
The readings for this class are mostly academic economics papers, but interspersed with readings
from other sources. We expect you to do the required readings before class (the ones labeled
“Read” on the syllabus), and may ask about them on the pop quizzes. We will not go over all of
the details of the papers in class, but will expect you to have read them beforehand so that we can
discuss them, and I may call on people to summarize them. You are not expected to understand
every single detail or every single equation in every article we assign, but you are expected to
understand the methods used by the authors to reach their conclusions. In addition to the main
reading we’ve listed for each class, we’ve also listed the other papers that I may discuss in class,
but for these papers you are only responsible for the material we discuss in class.
We will draw on several occasions from the textbook Analyzing Politics (2nd edition), by
Kenneth A. Shepsle.

If you are interested in some general background reading related to the topics we’ll cover in this
course, you may be interested in checking out some of the following books. We will draw on
several of these explicitly, but the rest are optional. They are all pretty easy reading. We’re
including them only in case you are looking for some interesting reading over Spring Break or
over the summer – really, we mean it, other than what’s listed on the syllabus explicitly below,
the remainder aren’t required or expected.
• Acemoglu, Daron, and James Robinson, Why Nations Fail : The Origins of Power,
Prosperity, and Poverty
• Chandrasekharan, Rajiv, Imperial Life in the Emerald City
• Banerjee, Abhijit and Esther Duflo, Poor Economics
• Easterly, William, The Elusive Quest for Growth
• Kapuscinski, Ryszard, The Shadow of the Sun
• Klitgaard, Robert, Tropical Gangsters: One Man’s Experience With Development and
Decadence in Deepest Africa
• Klitgaard, Robert, Controlling Corruption
• Fisman, Raymond and Edward Miguel, Economic Gangsters

Class Participation
We strongly encourage class participation! We will be handing out name cards starting the
second day of class. Please bring them to each class, at least until both of us reliably learn all of
your names.
Detailed Class Schedule
(Lecture schedule is approximate).

I. Introduction (Olken)

Lecture, Feb 4: Introduction: Why study political economy and development? Motivation and
course overview.

II. Does political economy matter for economic development? Some facts and some
empirical techniques. (Olken)

Lecture, Feb 6/11: The Role of Leaders and Democratic Institutions.

Plus: a refresher on statistical inference.
• Read:
o Jones and Olken “Hit or Miss? The Effect of Assassinations on Institutions and
War” (2009), American Economic Journal: Macroeconomics, 1:2, 55–8.
• Other papers I will discuss in class:
o Jones, Benjamin F. and Olken, Benjamin A. (2005) "Do Leaders Matter? National
Leadership and Growth Since World War II," Quarterly Journal of Economics,
120 (3), 835-864.

Recitation, Feb 7: Introduction to R (optional recitation, but recommended if you are unfamiliar
with R and want a structured guide)

Lecture, Feb. 13/20: The Deep Determinants of Economic Development: Macro evidence.
Plus: Introduction to instrumental variables and fixed effects estimation.
• Read:
o Acemoglu, Daron, Johnson, Simon and Robinson, James A. (2001) "The Colonial
Origins of Comparative Development: An Empirical Investigation," American
Economic Review, 91(5), 1369-1401.
• Other papers I will discuss in class:
o Nunn, Nathan (2008) “Long Term Effects of Africa’s Slave Trades” Quarterly
Journal of Economics, MIT Press, vol. 123(1), pages 139-176
o Dell, M., Jones, B. F., & Olken, B. A. (2012). Temperature shocks and economic
growth: Evidence from the last half century. American Economic Journal:
Macroeconomics, 4(3), 66-95.

Recitation, Feb 14: Review of OLS, 2SLS, and causal inference

Lecture, Feb 20/25: The Deep Determinants of Economic Development. Micro evidence.
Plus: Introduction to regression discontinuity designs.
• Read:
o Dell, Melissa (2010) "The Persistent Effects of Peru's Mining Mita,"
Econometrica, Vol. 78, No. 6, 1863–1903.
• Other papers I will discuss in class:
o Dell, Melissa, and Benjamin Olken, “The Development Effects of the Extractive
Colonial Economy: The Dutch Cultivation System in Java,” NBER WP #24009.
 o Papaioannou and Michalopoulos, “Divide and Rule or the Rule of the Divided?
Evidence from Africa” NBER Working Paper #17184.
• Pset #1 Due – 2/20
• Recitation, Feb. 21: Review of problem set 1
o

Group Discussion 1 (Abhijit): Feb 27. Leaders and institutions in practice.

• For the second half of class on Feb 27, group discussion based on the following
readings:
• The Road to Kumasi (pp. 14-23) and The Structure of the Clan (pp. 24-34)
• The Cobra’s Heart (pp. 44-52) and Inside the Mountain of Ice (pp. 53-61)
• Zanzibar (pp. 71-97)
• The Anatomy of a Coup d’Etat (pp. 98-107)
• Amin (pp. 137-146)
• The Cooling Hell (pp. 233-260)
• Salt and Gold (pp. 280-288)

Recitation, Feb28: Review of voting theory, the Downsian model

III. What does all this mean for development practice? (Banerjee)

Lecture Mar 3: History, Institutions and Development Practice

• Read (please read both the book chapter and the paper)
• Chapter 10, “Politics, Policies” from Poor Economics
• Banerjee and Duflo: “Under the Thumb of History? Political Institutions and
the Scope for Action http://www.nber.org/papers/w19848

Lecture and Discussion, Mar 5: Building a state?

We will assign readings by group from the following:

• Discussion of model in Besley and Persson, “The Origins of State Capacity:
Property Rights, Taxation and Politics”, AER, 2009
• Chapters 3-7 from “Imperial Life in the Emerald City”, Rajiv Chandrasekharan
• https://paulromer.net/why-i-wouldnt-live-in-a-privately-run-city/
• https://paulromer.net/tag/charter-cities/
• https://www.economist.com/international/2012/10/06/unchartered-
territory?zid=295&ah=0bca374e65f2354d553956ea65f756e0

• Pset #2 Due – 03/05

Recitation, Mar 6: Review of Problem set 2

IV. Voting in Theory and in Practice (Banerjee)

Lecture, Mar 5, 10: Classical voting theory: The Median Voter Theorem, Arrow Impossibility
Theorem, the Condorcet Paradox, etc.
• Read:
o Shepsle, Analyzing Politics (2nd edition), pp. 90-99, 110-123
• Other papers I will discuss in class:
o Miller, Grant, (2008), Quarterly Journal of Economics, “Women's Suffrage,
Political Responsiveness, and Child Survival in American History.” Vol. 123 (30)
pp. 1287-132
o Meltzer and Richards (1981) “A Rational Theory of the Size of Government”,
Journal of Political Economy, Vol. 89 (5), 914-927.
o Santosh Anagol & Thomas Fujiwara, 2016. "The Runner-Up Effect," Journal of
Political Economy, vol 124(4), pages 927-991.

Lecture, Mar 12: Voting in Practice: Citizen-Candidate Models, Politician Identity and the
Failure of the Median Voter Theorem.
• Read
o Duflo and Chattopadhyay, (2004) “Women as Policy Makers: Evidence From
a Randomized Experiment in India.” Econometrica, Vol. 72, No. 5, 1409-1443.
• Other papers I will discuss in class:
o Pande, Rohini, (2003) "Can Mandated Political Representation Increase Policy
Influence for Disadvantaged Minorities", American Economic Review 93 (4), pp
1132-1151.
• Pset #3 due March 12th

Recitation March 13
• Review of Problem set 3

Lecture, Mar 17: Voting in Practice: Agency Models

• Read:
o Banerjee, Kumar, Pande, and Su, (2011) “Do Informed Voters Make Better
Choices? Experimental Evidence from Urban India” Working Paper.
• Other papers I will discuss in class:
o Manacorda, M., Miguel, E., & Vigorito, A. (2011). Government transfers and
political support. American Economic Journal: Applied Economics, 3(3), 1-28.
o Finan and Ferraz, Exposing Corrupt Politicians: The Effect of Brazil's Publicly
Released Audits on Electoral Outcomes, (2008) Quarterly Journal of Economics,
Vol. 123 (2)
o Finan and Ferraz, “Electoral Accountability and Corruption in Local Governments:
Evidence from Audit Reports” American Economic Review, 2011, 101: 1274-1311.

Midterm exam, March 19

Movie and Discussion, March 31: “Project Democracy: Part 1”

Lecture, Apr 2: Voting in Practice: Vote buying, voter intimidation, and clientelism
• Read:
o Llareguy, Horacio, John Marshall and Laura Tucco, “Breaking Clientelism or
Rewarding Incumbents? Evidence from an Urban Titling Program in Mexico”
(2015), mimeo Harvard.
https://www.dropbox.com/s/s043qdwds25qp8h/CORETT_v7.pdf?dl=0
• Other papers I will discuss in class:
o Finan, F., & Schechter, L. (2012). “Vote‐Buying and Reciprocity.” Econometrica,
80(2), 863-881.
o Gans-Morse, Jordan, Sebastian Mazzuca, and Simeon Nichter (2009) “Who Gets
Bought? Vote Buying, Turnout Buying, and Other Strategies.” Weatherhead Center
For International Affairs, Harvard, #09-0006.
o Nichter, Simeon (2008), "Vote Buying or Turnout Buying? Machine Politics and
the Secret Ballot," APSR 102 (1), 19-31.

Recitation 7, apr 3: Banerjee and Pande, Parochial Politics

Movie and discussion, Apr 7: “Project Democracy: Part 2”

V. Corruption (Olken)

Lecture, April 9: Is Corruption Inefficient?

• Read:
o Bertrand, Marianne, Simeon Djankov, Rema Hanna, and Sendhil Mullainathan,
(2007) "Obtaining a Driver's License in India: An Experimental Approach to
Studying Corruption," Quarterly Journal of Economics, Vol. 122 (4) l639-1676.
• Other papers I’ll discuss
o “Corruption,” (with Abhijit Banerjee, Rema Hanna, and Sendhil Mullainathan), The
Handbook of Organizational Economics. Ed. Robert Gibbons and John Roberts.
Princeton University Press, 1109-­‐1147, 2012.
o Fisman, Raymond. (2001). “Estimating the value of political connections”.
American Economic Review, 91(4), 1095-1102..

Recitation, April 10, Fujiwara, T. (2015). “Voting technology, political

responsiveness, and infant health: evidence from Brazil.” Econometrica, 83(2), 423-
464.

Lecture, April 14: The corrupt official’s decision problem: balancing risks, rents, and incentives
• Read
o Khan, Adnan Q., Asim I. Khwaja, and Benjamin A. Olken (2016). "Tax Farming
Redux: Experimental Evidence on Performance Pay for Tax Collectors." Quarterly
Journal of Economics 131 (1): 219-271.
• Other papers I’ll discuss
 o Olken, Benjamin (2007). "Monitoring Corruption: Evidence from a Field
Experiment in Indonesia," Journal of Political Economy, Vol. 115(2) 200-249.
o Becker, Gary and Stigler, George, (1974) "Law Enforcement, Malfeasance, and
Compensation of Enforcers," Journal of Legal Studies 3(1), 1-18.

Lecture and Discussion, April 16: The Industrial Organization of Corruption

• Read
o Olken, Benjamin A. and Patrick Barron (2009), "The Simple Economics of
Extortion: Evidence from Trucking in Aceh", Journal of Political Economy 117 (3),
pp 417-452.
• Other papers I’ll discuss
o Shleifer, Andrei and Vishny, Robert (1993) "Corruption," Quarterly Journal of
Economics, 108 (3) 599-617.
o Burgess, R., Hansen, M., Olken, B.A., Potapov, P. and Sieber, S (2012). “The
Political Economy of Deforestation in the Tropics.” Quarterly Journal of
Economics, 127(4), pp.1707-1754.

Discussion:
• Chapters from Klitgaard, Controlling Corruption. What works and doesn’t work in
practice? Why?
• Pset #4 due April 16th

Recitation, April 17, Review of problem set 4.

VI. Service Delivery (Banerjee)

Lecture, April 21/23: Public supply of public goods: Health and Education

• Read
o Chapter 3 and 4 from Poor Economics
• Other papers I’ll discuss
o Das, Jishnu, Alaka Holla, Aakash Mohpal, and Karthik Muralidharan. 2016.
"Quality and Accountability in Health Care Delivery: Audit-Study Evidence from
Primary Health-care in India”, American Economic Review, December.
o Das J, Chowdhury A, Hussam R, Banerjee AV, 2016, “The impact of training
informal health care providers in India: A randomized controlled trial” Science,
October 7.

Recitation April 24 TBD.

April 28, discussion of movie: “The Name of the Disease”

VII. Discrimination and Affirmative Action (Banerjee)

Lecture, April 30, Discrimination and affirmative action

Pset #5 due

• Read
 o Lori Beaman, Raghabendra Chattopadhyay, Esther Duflo, Rohini Pande and Petia
Topalova, “Powerful Women: Does Exposure Reduce Bias?”, 2009, Quarterly
Journal of Economics
• Other papers I will discuss in class
o Steve Coate and Glenn Loury, 1993, “Will Affirmative-Action Policies Eliminate
Negative Stereotypes?”, American Economic Review
o Pandey, Priyanka, Karla Hoff, 2006, “Discrimination, Social Identity, and Durable
Inequalities”, American Economic Review

Recitation, May 1, Review of Problem set 5

Lecture and Discussion, December 3, Affirmative Action

• Read (please read both)

o https://www.newyorker.com/magazine/2017/10/09/the-limits-of-diversity
o https://www.newyorker.com/news/news-desk/the-uncomfortable-truth-about-
affirmative-action-and-asian-americans

VIII. Media (Olken)

Lecture, May 5: The Risks: The Impact of a Biased Mass Media
• Read:
o Yanagizawa-Drott, David (2014).“Propaganda and Conflict: Theory and Evidence
from the Rwandan Genocide”, Quarterly Journal of Economics 129(4): 1947-1994.
o Kapuscinski, “A Lecture on Rwanda”
• Other papers I will discuss in class:
o Olken, Benjamin A. (2009). “Do TV and Radio Destroy Social Capital? Evidence
from Indonesian Villages”, American Economic Journal: Applied Economics 1(4):
1-33
o Martin, Gregory J. and Ali Yurukoglu (2017). “Bias in Cable News: Persuasion and
Polarization”, American Economic Review 107(9): 2565–2599.
o Adena, Maja, Ruben Enikolopov, Maria Petrova, Veronica Santarosa and Katia
Zhuravskay (2015). “Radio and the Rise of the Nazis in Prewar Germany”,
Quarterly Journal of Economics 130(4): 1885-1939.
o DellaVigna, Stefano, Ruben Durante, Vera Mironova, Maria Petrova and Ekaterina
Zhuravskaya (2014). “Cross-Border Media and Nationalism: Evidence from
Serbian Radio in Croatia”, American Economic Journal: Applied Economics 6(3):
103-132

Lecture, May 7: Social Media and Political Protests

• Read
o Madestam, Andreas, Daniel Shoag, Stan Veuger and David Yanigazawa-Drott
(2013).“Do Political Protests Matter? Evidence from the Tea Party Movement”,
Quarterly Journal of Economics 128(4): 1633-1685.
• Other papers I will discuss in class:
o Enikolopov, Ruben, Alexey Makarin, and Maria Petrova (2017). “Social Media and
Protest Participation: Evidence from Russia”, mimeo
 o Cantoni, Davide, David Y. Yang and Y. Jane Zhang (2017). “Protests as Strategic
Games: Experimental Evidence from Hong Kong's Anti-Authoritarian Movement”,
mimeo.
o Alatas, Vivi, Arun G. Chandrasekhar, Markus Mobius, Benjamin A. Olken and
Cindy Paladines (2018). "When Celebrities Speak: A Nationwide Twitter
Experiment Promoting Vaccination in Indonesia”
• Pset #6 due
• Recitation, May 8, PS6 review

Lecture and discussion, May 12: Media Bias

• Reading for group discussion (we will divide these up)
o Alcott, Hunt and Matthew Gentzkow, “Social Media and Fake News in the 2016
Election
o Boxell, Levi, Matthew Gentzkow, and Jesse Shapiro, “Greater Internet Use is Not
Associated with Faster Growth in Political Polarization among US Demographic
Groups”
o Chapters from Cass Sunnstein, Chapters from C. Sunstein, #Republic: Divided
Democracy in the Age of Social Media