Essays in Economic Growth, Political Economy and Institutions

Abstract

This dissertation analyzes the effects of political and economic institutions on economic development and growth.The first essay develops an overlapping-generations political economy model to analyze the incentives of various social groups to finance human capital accumulation through public education expenditures. The contribution of this study to the literature is that it helps explain the observed differences in the economic growth performance of natural resource-abundant countries. The results suggest that the preferred tax rates of the manufacturers on one hand and the political coalition of manufacturers and landowners, on the other hand, are equal to the socially optimal tax rate. However, we show that owners of natural resources prefer an excessively high tax rate, which suppresses aggregate output to a suboptimal level. The third essay develops a counter argument to Acemoglu et al. (2010) where the thesis is that French institutions and economic reforms fostered economic progress in those German regions invaded by the Napoleonic armies. By providing historical data on urbanization rates used as proxies for economic growth, I demonstrate that similar different rates of economic growth were observed in the regions of France in the postNapoleonic period as well. The existence of different economic growth rates makes it hard to argue that the differences in economic performance in the German regions that were invaded by the French and those that were spared a similar fate follow from regional differences in economic institutions.vi