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Theory, General Equilibrium and Political Economy in Development Economics

26 Pages Posted: 22 Apr 2010  

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: January 30, 2010

Abstract

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.

Keywords: economic development, economic theory, methodology of economics, political

JEL Classification: O10, O12, B41, D50, P48

Suggested Citation

Acemoglu, Daron, Theory, General Equilibrium and Political Economy in Development Economics (January 30, 2010). MIT Department of Economics Working Paper No. 10-06. Available at SSRN: https://ssrn.com/abstract=1593824 or http://dx.doi.org/10.2139/ssrn.1593824

Daron Acemoglu (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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