Institutions, Human Capital, and Development
In this article, we revisit the relationship among institutions, human capital, and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified, both because of the usual omitted variable bias problems and because of differential measurement er...
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Annual Reviews
2015
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Online Access: | http://hdl.handle.net/1721.1/95986 https://orcid.org/0000-0003-0908-7491 |
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author | Acemoglu, Daron Gallego, Francisco A. Robinson, James A. |
author2 | Massachusetts Institute of Technology. Department of Economics |
author_facet | Massachusetts Institute of Technology. Department of Economics Acemoglu, Daron Gallego, Francisco A. Robinson, James A. |
author_sort | Acemoglu, Daron |
collection | MIT |
description | In this article, we revisit the relationship among institutions, human capital, and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified, both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about four to five times greater than that implied by micro (Mincerian) estimates, found in the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, whereas the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of former colonies. |
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format | Article |
id | mit-1721.1/95986 |
institution | Massachusetts Institute of Technology |
language | en_US |
last_indexed | 2024-09-23T14:20:05Z |
publishDate | 2015 |
publisher | Annual Reviews |
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spelling | mit-1721.1/959862022-09-29T08:46:21Z Institutions, Human Capital, and Development Acemoglu, Daron Gallego, Francisco A. Robinson, James A. Massachusetts Institute of Technology. Department of Economics Acemoglu, Daron In this article, we revisit the relationship among institutions, human capital, and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified, both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about four to five times greater than that implied by micro (Mincerian) estimates, found in the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, whereas the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of former colonies. Comisión Nacional de Investigación Ciencia y Tecnología (Chile) (CONICYT/Programa de Investigación Asociativa (project SOC1102)) United States. Army Research Office (ARO MURI W911NF-12-1-0509) 2015-03-12T16:59:39Z 2015-03-12T16:59:39Z 2014-08 2014-02 Article http://purl.org/eprint/type/JournalArticle 1941-1383 1941-1391 NBER Working Paper 19933 http://hdl.handle.net/1721.1/95986 Acemoglu, Daron, Francisco A. Gallego, and James A. Robinson. “ Institutions, Human Capital, and Development.” Annual Review of Economics 6, no. 1 (August 2014): 875–912. https://orcid.org/0000-0003-0908-7491 en_US http://dx.doi.org/10.1146/annurev-economics-080213-041119 Annual Review of Economics Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Annual Reviews NBER |
spellingShingle | Acemoglu, Daron Gallego, Francisco A. Robinson, James A. Institutions, Human Capital, and Development |
title | Institutions, Human Capital, and Development |
title_full | Institutions, Human Capital, and Development |
title_fullStr | Institutions, Human Capital, and Development |
title_full_unstemmed | Institutions, Human Capital, and Development |
title_short | Institutions, Human Capital, and Development |
title_sort | institutions human capital and development |
url | http://hdl.handle.net/1721.1/95986 https://orcid.org/0000-0003-0908-7491 |
work_keys_str_mv | AT acemogludaron institutionshumancapitalanddevelopment AT gallegofranciscoa institutionshumancapitalanddevelopment AT robinsonjamesa institutionshumancapitalanddevelopment |