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  5. Theory, General Equilibrium, and Political Economy in Development Economics

Theory, General Equilibrium, and Political Economy in Development Economics

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Abstract

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.

Citation

Acemoglu, Daron. 2010. "Theory, General Equilibrium, and Political Economy in Development Economics." Journal of Economic Perspectives, 24 (3): 17-32. DOI: 10.1257/jep.24.3.17

Additional Materials

JEL Classification

  • D50 General Equilibrium and Disequilibrium: General
  • O10 Economic Development: General
  • P00 Economic Systems: General
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