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The New Comparative Economics

The New Comparative Economics - NBER WORKING PAPER SERIES...

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NBER WORKING PAPER SERIES THE NEW COMPARATIVE ECONOMICS Simeon Djankov Edward L. Glaeser Rafael La Porta Florencio Lopez-de-Silanes Andrei Shleifer Working Paper 9608 http://www.nber.org/papers/w9608 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 April 2003 We are grateful to Daron Acemoglu, Olivier Blanchard, Rafael DiTella, Simon Johnson, Peter Murrell, Katharina Pistor, Richard Posner, Dani Rodrik, Gerard Roland, Lawrence Summers, and Daniel Treisman for helpful comments. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. ©2003 by Simeon Djankov, Edward L. Glaeser, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer. All rights reserved. Short sections of text not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including ©notice, is given to the source.
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The New Comparative Economics Simeon Djankov, Edward L. Glaeser, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer NBER Working Paper No. 9608 April 2003 JEL No. H1, K1, P1, P14, P16, P37, P5, P51 ABSTRACT In recent years, comparative economics experienced a revival, with a new focus on comparing capitalist economies. The theme of the new research is that institutions exert a profound influence on economic development. We argue that, to understand capitalist institutions, one needs to understand the basic tradeoff between the costs of disorder and those of dictatorship. We then apply this logic to study the structure of efficient institutions, the consequences of colonial transplantation, and the politics of institutional choice. Simeon Djankov Edward L. Glaeser The World Bank Harvard University 1818 H Street, NW 315a Littauer Center Washington, DC 20433 Cambridge, MA 02138 [email protected] and NBER [email protected] Rafael La Porta Florencio Lopez-de-Silanes Harvard University Yale School of Management M7 Littauer Center 135 Prospect Street Cambridge, MA 02138 New Haven, CT 06520 and NBER and NBER [email protected] [email protected] Andrei Shleifer Harvard University M9 Littauer Center Cambridge, MA 02138 and NBER [email protected]
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2 This field has its own category in the Journal of Economic Literature , called Economic Systems. The subcategories are capitalist systems, socialist systems, socialist institutions, other economic systems and comparative economic systems. 1 I. Introduction. The traditional field of comparative economics deals mostly with the comparison of socialism and capitalism 2 . Under socialism, the principal mechanism of resource allocation is central planning. Under capitalism, this mechanism is the market. Comparative economics, which dates back at least to the discussions of market socialism in the 1930s, asks under what circumstances either the plan or the market delivers greater economic efficiency and equality.
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