Theory, General Equilibrium, and Political Economy in Development Economics
I discuss the role of economic theory in empirical work in development economics with special emphasis on general equilibrium and political economy considerations. I argue that economic theory plays (should play) a central role in formulating models, estimates of which can be used for counterfactual...
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| Format: | Article |
| Language: | en_US |
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American Economic Association
2011
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| Online Access: | http://hdl.handle.net/1721.1/61716 https://orcid.org/0000-0003-0908-7491 |
| Summary: | I discuss the role of economic theory in empirical work in development economics with special emphasis on general equilibrium and political economy considerations. I argue that economic theory plays (should play) a central role in formulating models, estimates of which can be used for counterfactual and policy analysis. I discuss why counterfactual analysis based on microdata that ignores general equilibrium and political economy issues may lead to misleading conclusions. I illustrate the main arguments using examples from recent work in development economics and political economy. |
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