Theory, General Equilibrium, and Political Economy in Development Economics
Author(s)
Acemoglu, Daron
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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.
Date issued
2010-06Department
Massachusetts Institute of Technology. Department of EconomicsJournal
Journal of Economic Perspectives
Publisher
American Economic Association
Citation
Acemoglu, Daron. 2010. "Theory, General Equilibrium, and Political Economy in Development Economics." Journal of Economic Perspectives, 24(3): 17–32.
Version: Author's final manuscript
ISSN
0895-3309