by David Albouy. Reading for Tuesday, 10 June 2008.
In a seminal contribution, Acemoglu, Johnson, and Robinson (2001) argue property-rights institutions powerfully affect national income, using estimated mortality rates of early European settlers to instrument capital expropriation risk. But 36 of the 64 countries in their sample are assigned mortality rates from other countries, typically on mistaken or conflicting evidence. Also, incomparable rates from populations of laborers, bishops, and soldiers – sometimes at war – are combined in a manner favoring their hypothesis. When these data issues are controlled for, the first-stage relationship between mortality and expropriation risk loses robustness, and instrumental-variable estimates become unreliable, often with infinite confidence intervals.
Published: Friday, June 06, 2008
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