Estimados Académicos y Académicas FEN,

Les extendemos la invitación al seminario que organiza el Departamento de Economía, en el que se presentará el trabajo titulado "Explaining Comparative Development and Inequality: Insights From State versus Elite Extraction and from a New and Better Instrument".

Expone: Andrés Irarrázaval, Investigador vistante, FEN UChile.

Abstract: What explains comparative development levels? By building on the literature on long-term development and state capacity, this paper develops a new instrumental variable (IV) approach to identify the channels explaining cross-country income and inequality differences. By exploiting the interaction between climate zones (using latitude) and native state history during European colonization as IV, we are able to explain 70% of colonial settlements in 1900 and subsequent institutional development. This new strategy also addresses the flaws of previous attempts that suffer from measurement error, weak instrument bias, and narrow research frameworks, thus allowing us to better identify the causality chains leading from colonialism to current outcomes. The results confirm the “colonial origins” thesis emphasis on executive checks but challenge the key role given to market over state mechanisms. Comparative development and inequality seem primarily explained by state capacity levels, not by differences in market or property regulation. In Africa, Latin America, and India, despite relative convergence toward market institutions and “inclusive” economic playing fields over the 20th century, both underdevelopment and elite extraction persist via a state capacity trap. Across the periphery, persistent limited democratic checks have undermined the formation of the state’s credible commitments to build extractive (tax) capacity. Then, the resulting lack of funds limits the state's capacity to (I) support markets and private sector development by providing public goods, and (II) tackle inequality via generous welfare systems ensuring substantial redistribution. Overall, these appear to be the two pillars of shared prosperity.

El formato será presencial y el seminario se desarrollará en la Sala P-305.

Saludos cordiales,

Dirección de Investigación