Source: The Colonial Origins of Comparative Development: An Empirical Investigation by Daron Acemoglu, Simon Johnson, James A.
Question:
Source: The Colonial Origins of Comparative Development: An Empirical Investigation by Daron Acemoglu, Simon Johnson, James A. Robinson
https://www.aeaweb.org/articles?id=10.1257/aer.91.5.1369
1.As described by Acemoglu et al. in "The Colonial Origins of Comparative Development: An Empirical Investigation" why might the correlation between institutions and economic growth not be interpreted as a causal relationship?
2.How do the authors justify European settler mortality rates to be a good instrument for institutions? Explain how the instrument fulfills the exclusion and relevance conditions.
3.How do the authors measure institutions in the paper and what are some limitations to this approach?
4.The authors use an IV to instrument for the possible endogeneity between institutions and economic growth. There is a possibility that their IV is capturing a general effect of diseases (such as malaria). Why is that problematic? How do the authors attempt to prove its validity?
5.What are the main findings and what they suggest about the relative size of the measurement error in relation to reverse causality.
Expert Answer:
Acemoglu et al caution that the correlation between institutions and economic growth might not imply a direct causal relationship due to potential con... View the full answer
