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Economics 172 Issues in African Economic Development

This lecture focuses on the impact of colonial settlement, health conditions, and institutions on African economic development. It discusses the research of Acemoglu, Johnson, and Robinson (2001) on the relationship between tropical disease, European settlement, government institutions, and economic growth. Methodological issues such as omitted variable bias and randomized experiments are also explored. Additionally, the lecture covers Miguel's study (2005) on the link between worms, education, health, and income. The consequences of worm infections, its transmission through poor hygiene, and cheap treatment options are highlighted. The lecture emphasizes the importance of considering omitted variable bias in OLS regression analysis.

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Economics 172 Issues in African Economic Development

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  1. Economics 172Issues in African Economic Development Lecture 5 January 30, 2006

  2. Outline: • Acemoglu, Johnson, and Robinson (2001) on colonial settlement, health, and institutions • Methodological issues: Omitted variable bias and randomized experiments • Miguel (2005) – worms and education Economics 172

  3. Acemoglu, Johnson, Robinson (2001) Economics 172

  4. Acemoglu, Johnson, Robinson (2001) • Their main argument: Less tropical disease  More European settlement  Better government institutions (e.g., rule of law)  Faster economic growth Economics 172

  5. Acemoglu, Johnson, Robinson (2001) • Concern: Omitted variable bias Economics 172

  6. Acemoglu, Johnson, Robinson (2001) • Concern: Omitted variable bias 1. Tropical disease Economic performance today Economics 172

  7. Acemoglu, Johnson, Robinson (2001) • Concern: Omitted variable bias 1. Tropical disease Economic performance today 2. “High potential” regions Economics 172

  8. Economics 172

  9. Miguel and Kremer (2004) • Education is a possible channel linking health, income Poor health Lower income Economics 172

  10. Miguel and Kremer (2004) • Worms are among the world’s most prevalent diseases: Parasite # infections globally Hookworm 1.3 billion Roundworm 1.3 billion Whipworm 900 million Schistosomiasis 200 million • Health and nutrition consequences Economics 172

  11. Miguel and Kremer (2004) • Transmission of worm infections is through poor hygiene and sanitation Economics 172

  12. Miguel and Kremer (2004) • Transmission of worm infections is through poor hygiene and sanitation • Treatment is cheap (<US$1 per year) Economics 172

  13. Omitted variable bias in OLS Economics 172

  14. Omitted variable bias in OLS (1) Yi = a + bTi + cXi + ei Economics 172

  15. Omitted variable bias in OLS (1) Yi = a + bTi + cXi + ei (2) E(Yi | T=1) – E(Yi | T=0) = [a + b + E(Xi | Ti=1) + E(ei | Ti=1)] – [a + 0 + E(Xi | Ti=0) + E(ei | Ti=0)] = b + c [E(Xi | Ti=1) – E(Xi | Ti=0)] Economics 172

  16. Omitted variable bias in OLS Economics 172

  17. For next time: Read Miguel (2005) Economics 172

  18. Whiteboard #1 Economics 172

  19. Whiteboard #2 Economics 172

  20. Whiteboard #3 Economics 172

  21. Whiteboard #4 Economics 172

  22. Whiteboard #5 Economics 172

  23. Map of Africa Economics 172

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