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This chapter investigates the relationship between five initial conditions in states—temperature, precipitation, distance to oceans, distance to rivers and lakes, and colonial legal system—and long-run levels of state political competition. State political competition is measured by examining the division of seats in the legislature between the political parties, although a number of other measures of state political competition are also examined. This chapter sketches some relationships between initial conditions and state political competition. It emphasizes the importance of state political competition, because it is thought to lead to better economic and social outcomes. In fact, there is a strong positive association between the extent of political competition and outcomes.

This concluding chapter calls for an understanding of both historical inheritance and the process of change, which thus argues for a deeper understanding of long-run change. To fully grasp the role that history plays in long-run outcomes, social scientists have to go beyond simply establishing a causal connection between social and economic outcomes today and events in the past; that is merely one step. Social scientists must then take a second step and actually uncover why institutions fail to change or why they successfully evolve. Only then will they understand how events of long ago can have enduring consequences, and why intervening forces may not dilute the influence of the past. The task will require both general models and long-run data that cover the decades between the ancient causes and modern outcomes.

This chapter critically analyses the few economic theories that specifically investigate how social identity can impact economic outcomes and why we might encounter discrimination in market settings. The unfortunate but hard reality all over the world is that identities do matter, and significantly so. This chapter presents those economic theories, incidentally put forth within the neo-classical framework, which bring home the fact that discrimination is perfectly compatible with market orientation and profit maximization, and that models based on discriminating agents also reach an equilibrium, albeit a different and sub-optimal (that is, not Pareto optimal) one, as compared to the equilibrium in an economy with no discrimination. Most importantly, these theories provide a motivation about why ‘rational’ economic agents might discriminate.

This introductory chapter sets out the purpose of the book, which is to examine the ability of nations to maintain dissimilar institutional arrangements in the face of powerful transnational forces of change. It then analyses the impacts of those national institutional arrangements on policy making and economic outcomes. It discusses the conditions under which countries enjoy stable, different institutions and the limits to the consequences of cross-national contrasts. A national institutionalist analytical framework is used to structure the study: it provides claims and hypotheses that are tested emprically; it allows the conclusions of the case study to be related to broader debates about institutions and to refine national institutionalist claims. An overview of the subsequent chapters is presented.

This chapter talks about three major intertwined themes that emerge in the new cultural economics: causal effects of culture on economic outcomes and institutions, the origins of culture, and the issues of cultural transmission, persistence, and change. It emphasizes the studies related to the field of long-run economic growth and development which explores culture as one of the key “deep determinants” of economic performance. The chapter reviews some of the recent empirical studies attempting to identify the causal effects of culture, and examines the research on the origins of culture, its social benefits, and costs. It also considers the evidence on cultural persistence and discusses the mechanisms of cultural transmission and change.

This chapter offers a statistical analysis of 42 elections in 28 OECD countries from 2007 through 2011. The results demonstrate that citizens reward or punish incumbent governments based on economic growth in the year or two preceding each election. This effect was substantial, with differences in expected vote shares of 24 percentage points over the observed range of GDP growth, and with little or no apparent regard for global economic conditions. Once economic voting is taken into account, there is little evidence of any consistent ideological shift to the left or the right in OECD electorates, or of differential evaluation of economic conditions under left- or right-wing governments.

Theoretical and empirical evidence from the past two decades shows that socioeconomic development is affected by the quality of governance and its institutions. Traditional factors in production obviously contribute to the growth process, but the residual or total factor productivity incorporates not only technical change, but also organisational and institutional change. Well-functioning and healthy institutions not only affect the rate of economic growth but, moreover, the distribution. If governance structures and supporting institutions are healthy, then the distribution of benefits of growth will be equitable. This chapter argues that the process by which good economic policies and aggregate economic outcomes are translated into an equitable distribution of wealth and benefits involves the institutions of governance. This chapter addresses the following three questions: 1) Why is good governance significant for development?; 2) What are the critical success factors needed for achieving development and good governance?; and 3) What are the channels by which governance affects development? It then explores the case of governance and development in Pakistan in detail.

This concluding chapter considers the implications for policy and prevention raised in the preceding chapters, focusing on three preconditions for the prevention of youth violence through improvements in economic conditions. First, a strong relationship between youth violence and economic conditions must be established, net of other influences. Second, prevention programs should target the specific economic conditions that affect youth violence, and their effectiveness in improving those conditions must be demonstrated. Third, the economic improvements must be sufficiently large to lead to reductions in youth violence. In the future, it will be important to better understand the short- and long-term relationships between macroeconomics and violence and to evaluate prevention programs for their effect on economic outcomes.

This exploratory chapter tries to link the electoral consequences of the Great Recession and the protest to which it has given rise. In the first part, the expectations of the economic voting literature are confirmed in a comparative analysis of electoral outcomes, which shows that the fiscal consequences (large budgetary deficits) in particular are giving rise to severe punishment of governing parties by the electorate. The second part links this electoral punishment to the political protest which, in the countries most hit by the crisis, is shown to have been triggered (Western Europe)/reinforced (Central- and Eastern Europe) by fiscal problems of the state in the crisis.

Teen childbearing is widely considered a major social problem. This chapter focuses on program interventions, but it also includes a brief discussion of the potential impacts of relevant public policies. The effectiveness of teen pregnancy prevention as an antipoverty strategy depends on two key elements: (1) the effectiveness of teen pregnancy prevention interventions in preventing teen pregnancies and births and (2) the effectiveness of reducing teen childbearing in driving down rates of poverty. There is a lack of evidence demonstrating the effectiveness of many program interventions, but there is some cause for optimism that the best programs may work in the right settings. The chapter discusses the evidence on the link between teen childbearing and subsequent economic outcomes including rates of poverty among teen mothers. The evidence is weak that driving down rates of teen childbearing per se will lead to measurable reductions in poverty.

Many states have discussed raising the school leaving age to seventeen or eighteen, almost making high school completion compulsory. This chapter uses these recent changes to the school leaving age to explore the potential for compulsory schooling to serve as an effective policy for improving current social-economic outcomes, especially for today's disadvantaged youth. The purpose is to present new evidence and discussion for considering whether to support such policies. Past studies only indicate that compulsory school laws appear to have been effective in generating adult gains for would-be dropouts many decades ago. The chapter focuses on whether recent changes and experiences have had any impact on increasing school enrollment and attainment. It estimates the subsequent impact on earnings and on other labor market outcomes for the small fraction affected by these laws. The overall results suggest that raising the school leaving age above sixteen offers significant gains to earnings and employment outcomes, on average, to students who otherwise would have left sooner.

This chapter provides an overview of some basic concepts and philosophy in microeconomic theory. Microeconomic theory concerns the behavior of individual economic actors and the aggregation of their actions in different institutional frameworks. This description introduces four categories: the individual actor, traditionally either a consumer or a firm; the behavior of the actor, traditionally utility maximization by consumers and profit maximization by firms; an institutional framework, which describes what options the individual actors have and what outcomes they receive as a function of the actions of others, traditionally the price mechanism in an impersonal marketplace; and the mode of analysis for modeling how the various actors' behaviors will aggregate within a given framework, traditionally equilibrium analysis. Ultimately, the purpose of microeconomic theory is to provide a better understanding of economic activity and outcomes. The chapter then considers the levels of scope, detail, emphasis, and complexity of the theories and models presented in the book.