ECON4350/6350 Special Topics in Economics Political Economics. Course Outline Semester 2, Part A: Course-Specific Information

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1 ECON4350/6350 Special Topics in Economics Political Economics Course Outline Semester 2, 2012 Part A: Course-Specific Information Students are also expected to have read and be familiar with Part B Supplement to All Course Outlines. This contains Policies on Student Responsibilities and Support, Including Special Consideration, Plagiarism and Key Dates.

2 Table of Contents 1 STAFF CONTACT DETAILS Communications with staff 1 2 COURSE DETAILS Teaching Times and Locations Units of Credit Summary of Course Aims and Relationship to Other Courses Student Learning Outcomes 2 3 LEARNING AND TEACHING ACTIVITIES Approach to Learning and Teaching in the Course Learning Activities and Teaching Strategies 2 4 ASSESSMENT Formal Requirements Assessment Details Problem Sets Research Paper Class participation 4 5 COURSE EVALUATION AND DEVELOPMENT 4 6 COURSE RESOURCES 5 7 COURSE SCHEDULE 6

3 1 STAFF CONTACT DETAILS Lecturers: Gabriele Gratton Room 470A Consultation time Wed (or by appointment) Pauline Grosjean Room 442A Consultation time Wed (or by appointment) 1.1 Communications with staff You should feel free to contact your lecturer(s) about any academic matter. However, I strongly encourage, for efficiency, all enquiries about the subject material be made at lectures or tutorials or during consultation time. Discussion of course subject material will not be entered into via lengthy s. correspondence on administrative matters (e.g. advising inability to attend tute) will be responded to within 48 hours, but not over weekends. Please note that the lecturer has no advance notice of the date and time of the exam [the subject of many s]. 2 COURSE DETAILS 2.1 Teaching Times and Locations Lectures start in 1 (to 12): The Time and Location are: Fri 12-3pm ASB Units of Credit The course is worth 6 units of credit. This course is taught in parallel to both undergraduate and postgraduate students. 2.3 Summary of Course The course covers the major research areas in political economics both from a theoretical and an empirical perspective. Topics include: Social choice and voting theory, electoral competition, political agency, the economics of corruption, media and democracy, historical origins and persistence of institutions, economic effects of institutions, dictatorship and regime changes. 2.4 Aims and Relationship to Other Courses This course is offered as part of the honours economics stream in the B.Com and B.Econ degrees. Prerequisites for this course are ECON2101, ECON3209 OR ECON3209. ECON4350/6350 Special Topics in Political Economics 1

4 2.5 Student Learning Outcomes On completion of the course, students should be able to: 1. Describe, interpret, and critically analyse formal models of political theory. 2. Apply specific mathematical and game theoretic tools to analyze political and social phenomena. 3. Discuss and critically analyse different empirical strategies for the identification of causal effects in complex social and political problems. 4. Conduct independent, original research in the field of political economics Graduate Attributes Learning Outcomes ASB Graduate Attributes Attribute No. All Critical thinking and problem solving 1 1,3 Communication 2 3,4 Teamwork and leadership 3 All Social, ethical and global perspectives 4 All In-depth engagement with relevant disciplinary 5 knowledge All Professional skills 6 3 LEARNING AND TEACHING ACTIVITIES 3.1 Approach to Learning and Teaching in the Course The philosophy underpinning this course and its Teaching and Learning Strategies are based on Guidelines on Learning that Inform Teaching at UNSW. These guidelines may be viewed at: Specifically, the lectures, tutorials and assessment have been designed to appropriately challenge students and support the achievement of the desired learning outcomes. A climate of inquiry and dialogue is encouraged between students and teachers and among students (in and out of class). The lecturers and tutors aim to provide meaningful and timely feedback to students to improve learning outcome Learning Activities and Teaching Strategies The examinable content of the course is defined by the references given in the Lecture Schedule and the content of Lectures. Lectures The purpose of Lectures is to provide a logical structure for the topics that make up the course; to emphasize the important concepts and methods of each topic, and to provide relevant examples to which the concepts and methods are applied. Out-of-Class Study While students may have preferred individual learning strategies, it is important to note that most learning will be achieved outside of class time. Lectures can only provide a structure to assist your study, and tutorial time is limited. ECON4350/6350 Special Topics in Political Economics 2

5 An ideal strategy (on which the provision of the course materials is based) might include: Reading of the relevant chapter(s) of the text and any readings before the lecture. This will give you a general idea of the topic area. Attendance at lectures. Here the context of the topic in the course and the important elements of the topic are identified. The relevance of the topic should be explained. Attempting all assignments. 4 ASSESSMENT 4.1 Formal Requirements In order to pass this course, you must: achieve a composite mark of at least 50 out of 100; and make a satisfactory attempt at ALL assessment tasks. This means a mark of at least 40% in all assessment items. 4.2 Assessment Details Assessment Task Weighting Learning Outcomes assessed ASB Graduate Attributes assessed Length Problem Sets 36% 1,2,3,4 1,2,4,5,6 See 4.3 below Research paper 50% 1,2,3,4 1,2,3,4,5,6 See 4.4 below Participation 14% 1,2,3,4 1,2,3,4,5,6 See 4.5 below Due Date 23:59 on Nov 1 st 4.3 Problem Sets A problem set is due any second week, and students are required to submit solutions at the beginning of lecture (no more than 10 minutes late). ECON6350 students will be evaluated on all questions, including those marked as optional for ECON Research Paper All the students are expected to produce a piece of original research, analysing a wellspecified question in political economics, containing at least a simple analytical model and a description of an effective empirical strategy to test some implications of the model. The topic of the paper should be discussed in advance with at least one of the lecturers. In addition, ECON6350 students are required to present a satisfactory literature review and at least one application using actual data. The evaluation of the essay will follow the following grading table: ECON4350/6350 Special Topics in Political Economics 3

6 Task Weighting Weighting ECON4350 ECON6350 Originality, creativity and pertinence 20% 15% Literature Review N/A 20% Model 30% 20% Empirical Strategy 30% 20% Empirical Application N/A 20% Presentation and style 20% 5% Research papers are expected to be between 4 and 6 pages long for ECON4350 students and between 5 and 8 pages for ECON6350 students, including references, mathematical formulas, and appendix, but excluding tables and figures (a further 2 pages maximum mathematical appendix is allowed if long algebraic proofs or derivations are necessary). Any common typing format is acceptable: a page is assumed to be equivalent to 600 words. 4.5 Class participation Each student will receive from 0 to 14 points for class participation. The grade is calculated as the sum of two individual (0 to 7) grades from each lecturer. This assessment is meant to encourage open discussion, attendance, critical thinking and questioning during class. 5 COURSE EVALUATION AND DEVELOPMENT Each year feedback is sought from students and other stakeholders about the courses offered in the School and continual improvements are made based on this feedback. UNSW's Course and Teaching Evaluation and Improvement (CATEI) Process is one of the ways in which student evaluative feedback is gathered. You are strongly encouraged to take part in the feedback process. ECON4350/6350 Special Topics in Political Economics 4

7 6 COURSE RESOURCES The website for this course is on UNSW Blackboard at: There is no single textbook covering the entire material for this course. Daron Acemoglu s Political Economy Lecture Notes (DA Notes) are freely available online at together with other valuable material. The complete pdf file is available at Other textbooks suggested are: David Austen-Smith and Jeffrey S Banks (1999) Positive Political Theory I: Collective Preferences, The University of Michigan Press David Austen-Smith and Jeffrey S Banks (2005) Positive Political Theory II: Strategy & Structure, The University of Michigan Press Timothy Besley (2006) Principled Agents? The Political Economy of Good Government, Oxford University Press Torsten Persson and Guido Tabellini (2000) Political Economics: Explaining Economic Policy The MIT Press Christophe P Chamley (2004) Rational Herds: Economic Models of Social Learning, Cambridge University Press Ronald Wintrobe (1998) The Political Economy of Dictatorship, Cambridge University Press Daron Acemoglu and James A Robinson (2006) Economic Origins of Dictatorship and Democracy, Cambridge University Press ECON4350/6350 Special Topics in Political Economics 5

8 7 COURSE SCHEDULE Lectures start in 1 and finish in 12. (***: Main source for lecture) LECTURE SCHEDULE Topic Reference July July 3 30 July- 3 August 4 Social Choice and Voting Theory 1) Modelling collective preferences and choices 2) Basis of voting theory and electoral competition 3) Voting, uncertainty and information 4) Voting and economic policy Political Agency and Media 1) ***DA Notes, Ch. 4,7 2) ***Lecture notes 1, available on UNSW Blackboard 3) Austen-Smith and Banks (1999;2005) 4) Persson and Tabellini (2000) Ch. 3 and 8. 5) T Piketty (1995) Social Mobility and Redistributive Politics, Quarterly Journal of Economics, 110: ) T Fedderson and W Pesendorfer (1996) The Swing Voter s Curse, American Economic Review, 86: ) M Fey and J Kim (2002) The Swing Voter s Curse: a Comment, American Economic Review, 92: ) T Feddersen and W Pesendorfer (1997) Voting Behaviour and Information Aggregation in Elections With Private Information, Econometrica, 65: ) R B Myerson (2000) Large Poisson Games, Journal of Economic Theory 94: ) G Gratton (2012) Pandering, Faith, and Electoral Competition, working paper, available at ndering.pdf 11) Z Song, K Storesletter and F Zilibotti (forthcoming 2012) Rotten Parents and Disciplined Children: A Politico-Economic theory of Public Expenditure and Debt, Econometrica, available at ssz_rottenparents_2012.pdf 1) ***Lecture notes 2, available on UNSW Blackboard ECON4350/6350 Special Topics in Political Economics 6

9 6-10 August August August August 1) Modelling political behaviours 2) Principles of political agency 3) Pandering 4) Media and democracy Political Regimes 1) Modelling dictatorships 2) Inequality and redistribution in democracy Regime Changes 1) Revolutions and coups 2) Information and coordination The Economic Effect of Institutions: Does Political Economy Matter? 2) Besley (2006), Ch. 3 3) T Besley and A Prat (2006) Handcuffs for the Grabbing Hand: Media Capture and Government Accountability, American Economic Review, 96: ) M Gentzkow and J Shapiro (2006) Media Bias and Reputation, Journal of Political Economy, 114: ) A Prat and D Strömberg (2011) The Political Economy of Mass Media, working paper, available at 1.pdf 1) ***Lecture notes 3, available on UNSW Blackboard 2) Wintrobe (1998), Part II 3) Acemoglu and Robinson (2006), Part II 1) ***Lecture notes 4, available on UNSW Blackboard 2) Acemoglu and Robinson (2006), Part III 3) Chamley (2004), Ch. 11 and 12 1) Acemoglu, Johnson and Robinson (2001) The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review 91(5). 2) Alesina, Easterly and Matuszeski. Artificial States. JEEA 9(2) 3) Jones and Olken Do Leaders Matter? National Leadership and Growth Since WWII. Quarterly Journal of Economics 120(8) 4) Nunn, Nathan (2008) The Long Term Effects of Africa s Slave Trade Quarterly Journal of Economics 123(1) 5) Dell (2010). The Persistent Effect of the Mining Mita. Econometrica 78(6) 6) La Porta, Lopez-de-Silanes, Shleifer and Vishny. ECON4350/6350 Special Topics in Political Economics 7

10 7) Mid-Session Break: 3 7 September Law and Finance. Journal of Political Economy Sept Sept. Political Regimes and Growth Corruption and Media 1) Democracy and Growth Robinson, James Economic Development and Growth. Annual Review of Political Science (9) Rodrik, Dani, and Romain Wacziarg Do Democratic Transitions Produce Bad Economic Outcomes? American Economic Review, 95:2 Tavares, Jose, and Romain Wacziarg How Democracy Affects Growth, European Economic Review 45:8 Grosjean and Senik Democracy, Market Liberalization and Political Preferences. Review of Economics and Statistics 93(1) 2) Electoral Cycles and Ideology Lee, Moretti and Butler Do Voters Affect or Elect Policies? Evidence from the US House. Quarterly Journal of Economics 119(3) Levitt, Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime. The American Economic Review Persson and Tabellini. Do electoral cycles differ across political systems? Mimeo ftp://ftp.igier.unibocconi.it/wp/2003/232.pdf 3) Resevation Chattopadhyay and Duflo. The impact of Reservation in the Panchayati Raj: Evidence from a Nationwide Randomized Experiment. Economic and Political ly 39(9): , ) Corruption Fisman Estimating the Value of Political Connections. American Economic Review 91 FIsman and Miguel Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets. Journal of Political Economy. Hsieh and Moretti Did Iraq Cheat the United ECON4350/6350 Special Topics in Political Economics 8

11 Sept. Culture, Values and Cooperation Nations? Underpricing, Bribes, and the Oil for Food Program. QJE Khwaja and Mian Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market. The Quarterly Journal of Economics 120 Reinikka and Svennson Local Capture: Evidence from a Central Government Transfer Program in Uganda. QJE 119 Svensson Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms The Quarterly Journal of Economics 118 Olken Monitoring Corruption: Evidence from a Field Experiment in Indonesia. Journal of Political Economy. 2) Media Gerber, Karlan, and Bergan Does the Media Matter? A Field Experiment Measuring the Effect of Newspapers on Voting Behavior and Political Opinions. American Economic Journal: Applied Economics Gentzkow, Sinkinson, and Shapiro The Effect of Newspaper Entry and Exit on Electoral Politics. AER 101. Enikolopov, Petrova, and Zhuravskaya, Media and Political Persuasion: Evidence from Russia. AER. Besley and Burgess The Political Economy of Government Responsiveness: Theory and Evidence from India, QJE, Vol 117 Eisensee and Stromberg News Droughts, News Floods, and U.S. Disaster Relief, QJE, Vol 122.2) Gentzkow Television and Voter Turnout, QJE, Vol 121 (3) 1) The economic effects of culture Tabellini, Guido Culture and Institutions: Economic Development in the Regions of Europea Journal of European Economic Association, 8, Tabellini, Guido.2008) The Scope of Cooperation: Values and Incentives. Quarterly Journal of Economics, 123 ECON4350/6350 Special Topics in Political Economics 9

12 Oct Persistence and Change in Institutions Guiso, Luigi, Paola Sapienza and Luigi Zingales Does Culture Affect Economic Outcomes? Journal of Economic Perspectives, 20, Guiso, Luigi, Paola Sapienza and Luigi Zingales Cultural Biases in Economic Exchange. Quarterly Journal of Economics, 124. Fernandez, Raquel and Alessandra Fogli Culture: An Empirical Investigation of Beliefs, Work and Fertility American Economic Journal: Macroeconomics, 1. Voth, Hans-Joachim and Nico Voigtlander. Persecution Perpetuated: The Medieval Origins of Antisemitic Violence in Nazi Germany QJE Forh.. 1) Persistence Becker, Boeckh, Hainz and Woessman. The Empire Is Dead, Long Live the Empire! Long-Run Persistence of Trust and Corruption in the Bureaucracy. CEPR Discussion paper 8288 Bockstette, Chanda and Putterman States and Markets, the Advantages of an Early Start. Journal of Economic Growth Grosjean The Institutional Legacy of The Ottoman Empire: Islamic Rule and Financial Development in South Eastern Europe. Journal of Comparative Economics 39 2) Change Acemoglu, Cantoni, Johnson and Robinson The Consequences of Radical Reform: The French Revolution, AER 101 (7) Banerjee, Chattopadhyay, Duflo, Keniston and Singh. Can Institutions be Reformed from Within? Evidence from a Randomized Experiment with the Rajasthan Police. MIT Department of Economics Working Paper No Jha Financial Innovations and Political Development: Evidence from Revolutionary England. Stanford GSB Working Paper No Jha and Wilkinson. Veterans, Organizational Skill and ECON4350/6350 Special Topics in Political Economics 10

13 Oct Oct. Conflict NO LECTURES Ethnic Cleansing: Evidence from the Partition of South Asia. Mimeo, Stanford University 1) Conflict Dube, Oeindrila and Juan Vargas Commodity Price Shocks and Civil Conflict: Evidence from Colombia, mimeo, Harvard University. Miguel, Satyanath and Sergenti Economic Shocks and Civil Conflict: An Instrumental Variables Approach, Journal of Political Economy 112 (4). Abadie and Garbeazabal The Economic Costs of Conáict: A Case Study of the Basque Country, American Economic Review 93. Berman, Shapiro, and J Felter Can Hearts and Minds Be Bought? The Economics of Counterinsurgency in Iraq. Journal of Political Economy, August Beath, Fotini and Enikolopov, Winning Hearts and Minds: Ev- idence from a Field Experiment in Afghanistan, MIT Political Science Department, WP # Voors, Nillesen, Bulte, Lensink, Verwimp, and van Soest Violent Conflict and Behavior: a Field Experiment in Burundi. AER Cassar, Grosjean and Whitt Civil War, Social Capital and Market Development: Experimental and Survey Evidence on the Negative Consequences of Violence. Australian School of Business working paper No ) Media and Conflict Della Vigna, Enikolopov, Mironova, Petrova and Zhuravskaya. Unintended media effects in a conflict environment: Serbian radio and Croatian nationalism. Working paper, mimeo UC Berkeley Yanagizawa-Drott,David, Propaganda and Conflict: Theory and Evidence from the Rwandan Genocide ECON4350/6350 Special Topics in Political Economics 11