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|Featured Research: Democracy Does Cause Growth
Many experts, academics and pundits warn that democracy can be pernicious to economic growth because of the political gridlocks it engenders, its inability to act fast in the face of crisis, and its unwillingness to adopt growth-enhancing reforms. In "Democracy Does Cause Growth", Daron Acemoglu, Suresh Naidu, Pascual Restrepo and James Robinson show that the evidence runs very much counter to this widespread belief. The main finding is that a country that switches from nondemocracy to democracy achieves about 20 percent higher GDP per capita in the next 25 years or so, and this result is very robust to different econometric approaches and samples. The key to this conclusion are two departures from much of the previous literature: first, the approach adopted in this paper does not compare democracies to nondemocracies, but investigates how a country's growth changes once it becomes democratic (or reverts back to nondemocracy). Second, it recognizes that many countries switch to democracy in the midst of economic problems (making it important to correctly model GDP dynamics). The effect of democracy appears remarkably stable when one focuses on all switches to and from democracy, and when one exploits the regional waves of democratizations as a source of exogenous variation (to avoid the concern that countries might be democratizing just before they embark on a more favorable growth trajectory).
How do democracies achieve this better growth? They do so by investing more in public goods such as education and health, and also increasing investment in physical capital. But perhaps more surprisingly in the face of the beliefs about the problems of democracy, they are also more likely to adopt economic reforms and bring stability.
What about the argument that not all countries are ready for democracy and poor countries are better governed by the iron fist of a benevolent dictator? The data are not favorable to this widespread belief either. The impact of democracy on subsequent growth is positive regardless of the level of economic development or the educational achievement of the workforce.
|Grant to MIT's Poverty Action Lab increases focus on working with governments
The Abdul Latif Jameel Community Initiatives (ALJCI) has committed a substantial grant to the Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT. The new funding will allow J-PAL, which champions the use of randomized controlled trials to help answer critical policy questions in the fight against poverty, to greatly expand the reach and real-world impact of its research by increasing its work with governments to scale up antipoverty policies that work. J-PAL will use this support to create the Government Partnership Initiative (GPI), which will work with governments to design, evaluate, and scale up programs that aim to reduce poverty. GPI will also provide technical support to help governments scale effective policies and further institutionalize evidence-informed policymaking.
|Alp Simsek receives National Science Foundation CAREER Award
Professor Alp Simsek was awarded a NSF CAREER Award for his work on the role of amplification mechanisms in economic crises. NSF CAREER Awards are a Foundation-wide activity that offers the National Science Foundation's most prestigious awards in support of junior faculty who exemplify the role of teacher-scholars through outstanding research, excellent education and the integration of education and research within the context of the mission of their organizations.
|Esther Duflo awarded 2015 Princess of Asturias Social Sciences prize
Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics Esther Duflo has been awarded the 2015 Princess of Asturias Social Sciences Prize for her studies in development economics and pioneering work in adapting and applying the randomized methods that scientific research uses to test drugs and vaccines - control and treatment groups - to the field of economic studies. The Princess of Asturias Awards are aimed at rewarding "the scientific, technical, cultural, social and humanitarian work carried out at an international level by individuals, institutions or groups of individuals or institutions." The Princess of Asturias Award for Social Sciences are conferred on those "whose creative work or research represents an outstanding contribution to the benefit of humanity in the fields of History, Law, Linguistics, Teaching, Political Science, Psychology, Sociology, Ethics, Philosophy, Geography, Economics, Demography or Anthropology, including the disciplines corresponding to each of these fields."
|James Poterba elected to National Academy of Sciences
Mitsui Professor of Economics Jim Poterba is one of the 84 new members and 21 foreign associates from 15 countries elected to the National Academy of Sciences in recognition of their distinguished and continuing achievements in original research. Poterba joins MIT colleagues Samuel A. Bowring (Earth and Planetary Science), Tomasz Mrowka (Mathematics), and Sara Seager (Earth, Atmospheric and Planetary Sciences) as new members in 2015.
|Ivan Werning elected to the American Academy of Arts and Sciences
Robert M. Solow Professor Ivan Werning is among the 197 new members of the American Academy of Arts and Sciences elected for 2015. They include some of the world's most accomplished scholars, scientists, writers, artists, and civic, business, and philanthropic leaders. One of the nation's most prestigious honorary societies, the American Academy is also a leading center for independent policy research. Members contribute to Academy publications and studies of science and technology policy, global security and international affairs, social policy and American institutions, and the humanities, arts, and education.
|Parag Pathak awarded 2016 Social Choice and Welfare Prize
Professor Parag Pathak has received the 2016 Social Choice and Welfare Prize jointly with Fuhito Kojima from the Society for Social Choice and Welfare. The purpose of this Prize is to honor young scholars of excellent accomplishment in the area of Social Choice Theory and Welfare Economics and to award them the Social Choice and Welfare Medal. The laureates should be 40 years or less as of January of the year when the International Meeting of the Society for Social Choice and Welfare is scheduled to take place.
|Featured Research: The Economics of Retirement
The retirement landscape is changing. And Professor James Poterba's research shows that you probably arenít saving enough. Americans are living longer, are more likely to be unemployed, and are working later in life when they can; many of those who had pension guarantees are losing them. Poterba and two colleagues found that roughly half of Americans die with less than $10,000 in assets beyond their annual retirement incomes. Some retirees are one health problem or market slump away from having almost no savings.
|Stephen Ross awarded 2015 Deutsche Bank Prize in Financial Economics
Franco Modigliani Professor of Finance and Economics Stephen A. Ross has received the 2015 Deutsche Bank Prize in Financial Economics for his groundwork and fundamental contributions to the analytical development of financial economics. Jury Chairman and CFS Director Jan Pieter Krahnen explained the decision of the international Jury: "The Jury has chosen Professor Stephen A. Ross for his groundwork and fundamental contributions to the analytical development of financial economics. For more than 25 years major models developed by him have marked the economic world. His models relate to the theory of asset pricing, the analysis of the term structure of interest rates, understanding option prices, and the basic structure of the principal-agent problem. The work of Stephen A. Ross has shaped today's thinking in financial innovation, practice, and policy."
|3 Questions: Amy Finkelstein on testing health care systems
About 80 percent of studies of U.S. medical interventions use randomized controlled trials (RCTs), the gold standard of laboratory research. But only about 18 percent of studies of U.S. health care delivery use RCTs. That can and should change, suggests Amy Finkelstein, the Ford Professor of Economics at MIT, in a Science piece co-written with MIT researcher Sarah Taubman. If so, they assert, researchers who find new ways of applying RCTs to our medical system will be able to produce compelling answers to pressing questions.
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