Daron Acemoglu

Massachusetts Institute of Technology, Cambridge, Massachusetts, United States

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Publications (340)273.85 Total impact

  • Daron Acemoglu, David Laibson, John A. List
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    ABSTRACT: Internet-based educational resources are proliferating rapidly. One concern associated with these (potentially transformative) technological changes is that they will be disequalizing--as many technologies of the last several decades have been--creating superstar teachers and a winner-take-all education system. These important concerns notwithstanding, we contend that a major impact of web-based educational technologies will be the democratization of education: educational resources will be more equally distributed, and lower-skilled teachers will benefit. At the root of our results is the observation that skilled lecturers can only exploit their comparative advantage if other teachers complement those lectures with face-to-face instruction. This complementarity will increase the quantity and quality of face-to-face teaching services, potentially increasing the marginal product and wages of lower-skill teachers.
    American Economic Review 01/2014; 104(5). · 2.69 Impact Factor
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    ABSTRACT: An increasingly influential 'technological-discontinuity' paradigm suggests that IT-induced technological changes are rapidly raising productivity while making workers redundant. This paper explores the evidence for this view among the IT-using US manufacturing industries. There is some limited support for more rapid productivity growth in IT-intensive industries depending on the exact measures, though not since the late 1990s. Most challenging to this paradigm, and to our expectations, is that output contracts in IT-intensive industries relative to the rest of manufacturing. Productivity increases, when detectable, result from the even faster declines in employment.
    American Economic Review 01/2014; 104(5). · 2.69 Impact Factor
  • Daron Acemoglu, Alexander Wolitzky
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    ABSTRACT: We propose a model of cycles of conflict and distrust. Overlapping generations of agents from two groups sequentially play coordination games under incomplete information about whether the other side consists of bad types who always take bad actions. Good actions may be misperceived as bad and information about past actions is limited. Conflict spirals start as a result of misperceptions but also contain the seeds of their own dissolution: Bayesian agents eventually conclude that the spiral likely started by mistake, and is thus uninformative of the opposing group's type. The agents then experiment with a good action, restarting the cycle.
    American Economic Review 01/2014; 104(4). · 2.69 Impact Factor
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    ABSTRACT: We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-type firms. On the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry.
    04/2013;
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    ABSTRACT: We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-type firms. 0n the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry.
    04/2013;
  • Daron Acemoglu, James A. Robinson
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    ABSTRACT: The standard approach to policy-making and advice in economics implicitly or explicitly ignores politics and political economy, and maintains that if possible, any market failure should be rapidly removed. This essay explains why this conclusion may be incorrect; because it ignores politics, this approach is oblivious to the impact of the removal of market failures on future political equilibria and economic efficiency, which can be deleterious. We first outline a simple framework for the study of the impact of current economic policies on future political equilibria— and indirectly on future economic outcomes. We then illustrate the mechanisms through which such impacts might operate using a series of examples. The main message is that sound economic policy should be based on a careful analysis of political economy and should factor in its influence on future political equilibria.
    Journal of Economic Perspectives 02/2013; · 4.21 Impact Factor
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    ABSTRACT: The lowest level of government in sub-Saharan Africa is often a cadre of chiefs who raise taxes, control the judicial system and allocate the most important scarce resource - land. Chiefs, empowered by colonial indirect rule, are often accused of using their power despotically and inhibiting rural development. Yet others view them as traditional representatives of rural people, and survey evidence suggests that they maintain widespread support. We use the colonial history of Sierra Leone to investigate the relationships between chiefs' power on economic development, peoples' attitudes and social capital. There, a chief must come from one of the ruling families recognized by British colonial authorities. Chiefs face less competition and fewer political constraints in chiefdoms with fewer ruling families. We show that places with fewer ruling families have significantly worse development outcomes today - in particular, lower rates of educational attainment, child health, and non-agricultural employment. But the institutions of chiefs' authority are also highly respected among villagers, and their chiefdoms have higher levels of "social capital," for example, greater popular participation in a variety of “civil society" organizations and forums that might be used to hold chiefs accountable. We argue that these results are difficult to reconcile with the standard principle-agent approach to politics and instead reflect the capture of civil society organizations by chiefs. Rather than acting as a vehicle for disciplining chiefs, these organizations have been structured by chiefs to control society.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
    01/2013;
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    ABSTRACT: We provide a framework for studying the relationship between the financial network architecture and the likelihood of systemic failures due to contagion of counterparty risk. We show that financial contagion exhibits a form of phase transition as interbank connections increase: as long as the magnitude and the number of negative shocks affecting financial institutions are sufficiently small, more “complete” interbank claims enhance the stability of the system. However, beyond a certain point, such interconnections start to serve as a mechanism for propagation of shocks and lead to a more fragile financial system. We also show that, under natural contracting assumptions, financial networks that emerge in equilibrium may be socially inefficient due to the presence of a network externality: even though banks take the effects of their lending, risk-taking and failure on their immediate creditors into account, they do not internalize the consequences of their actions on the rest of the network.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
    01/2013;
  • Econometrica 01/2013; 81(1):411-421. · 3.82 Impact Factor
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    ABSTRACT: To study the short-run and long-run implications on wage inequality, we introduce directed technical change into a Ricardian model of offshoring. A unique final good is produced by combining a skilled and an unskilled product, each produced from a continuum of intermediates (tasks). Some of these tasks can be transferred from a skill-abundant West to a skill-scarce East. Profit maximization determines both the extent of offshoring and technological progress. Offshoring induces skill-biased technical change because it increases the relative price of skill intensive products and induces technical change favoring unskilled workers because it expands the market size for technologies complementing unskilled labor. In the empirically more relevant case, starting from low levels, an increase in offshoring opportunities triggers a transition with falling real wages for unskilled workers in the West, skill-biased technical change and rising skill premia worldwide. However, when the extent of offshoring becomes sufficiently large, further increases in offshoring induce technical change now biased in favor of unskilled labor because offshoring closes the gap between unskilled wages in the West and the East, thus limiting the power of the price effect fueling skill-biased technical change. The unequalizing impact of offshoring is thus greatest at the beginning. Transitional dynamics reveal that offshoring and technical change are substitutes in the short run but complements in the long run. Finally, though offshoring improves the welfare of workers in the East, it may benefit or harm unskilled workers in the West depending on elasticities and the equilibrium growth rate.
    11/2012;
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    ABSTRACT: Because of their more limited inequality and more comprehensive social welfare systems, many perceive average welfare to be higher in Scandinavian societies than in the United States. Why then does the United States not adopt Scandinavian-style institutions? More generally, in an interdependent world, would we expect all countries to adopt the same institutions? To provide theoretical answers to this question, we develop a simple model of economic growth in a world in which all countries benefit and potentially contribute to advances in the world technology frontier. A greater gap of incomes between successful and unsuccessful entrepreneurs (thus greater inequality) increases entrepreneurial effort and hence a country’s contribution to the world technology frontier. We show that, under plausible assumptions, the world equilibrium is asymmetric: some countries will opt for a type of “cutthroat” capitalism that generates greater inequality and more innovation and will become the technology leaders, while others will free-ride on the cutthroat incentives of the leaders and choose a more cuddly form of capitalism. Paradoxically, those with cuddly reward structures, though poorer, may have higher welfare than cutthroat capitalists; but in the world equilibrium, it is not a best response for the cutthroat capitalists to switch to a more cuddly form of capitalism. We also show that domestic constraints from social democratic parties or unions may be beneficial for a country because they prevent cutthroat capitalism domestically, instead inducing other countries to play this role.
    08/2012;
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    Daron Acemoglu, Alexander Wolitzky
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    ABSTRACT: We propose a model of cycles of distrust and conflict. Overlapping generations of agents from two groups sequentially play coordination games under incomplete information about whether the other side consists of “extremists” who will never take the good/trusting action. Good actions may be mistakenly perceived as bad/distrusting actions. We also assume that there is limited information about the history of past actions, so that an agent is unable to ascertain exactly when and how a sequence of bad actions originated. Assuming that both sides are not extremists, spirals of distrust and conflict get started as a result of a misperception, and continue because the other side interprets the bad action as evidence that it is facing extremists. However, such spirals contain the seeds of their own dissolution: after a while, Bayesian agents correctly conclude that the probability of a spiral having started by mistake is sufficiently high, and bad actions are no longer interpreted as evidence of extremism. At this point, one party experiments with a good action, and the cycle restarts. We show how this mechanism can be useful in interpreting cycles of ethnic conflict and international war, and how it also emerges in models of political participation, dynamic inter-group trade, and communication - leading to cycles of political polarization, breakdown of trade, and breakdown of communication.
    07/2012;
  • DARON ACEMOGLU, JAMES A. ROBINSON
    New Perspectives Quarterly 07/2012; 29(3).
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    Daron Acemoglu, Martin Kaae Jensen
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    ABSTRACT: We consider infinite horizon economies populated by a continuum of agents who are subject to idiosyncratic shocks. This framework contains models of saving and capital accumulation with incomplete markets in the spirit of works by Bewley, Aiyagari, and Huggett, and models of entry, exit and industry dynamics in the spirit of Hopenhayn's work as special cases. Robust and easy-to-apply comparative statics results are established with respect to exogenous parameters as well as various kinds of changes in the Markov processes governing the law of motion of the idiosyncratic shocks. These results complement the existing literature which uses simulations and numerical analysis to study this class of models and are illustrated using a number of examples.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
    06/2012;
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    ABSTRACT: Slavery has been a major institution of labor coercion throughout history. Colonial societies used slavery intensively across the Americas, and slavery remained prevalent in most countries after independence from the European powers. We investigate the impact of slavery on long-run development in Colombia. Our identification strategy compares municipalities that had gold mines during the 17th and 18th centuries to neighboring municipalities without gold mines. Gold mining was a major source of demand for slave labor during colonial times, and all colonial gold mines are now depleted. We find that the historical presence of slavery is associated with increased poverty and reduced school enrollment, vaccination coverage and public good provision. We also find that slavery is associated with higher contemporary land inequality.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
    06/2012;
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    ABSTRACT: Robustness of routing policies for networks is a central problem which is gaining increased attention with a growing awareness to safeguard critical infrastructure networks against natural and man-induced disruptions. Routing under limited information and the possibility of cascades through the network adds serious challenges to this problem. This abstract considers the framework of dynamical networks introduced in our earlier work [1,2], where the network is modeled by a system of ordinary differential equations derived from mass conservation laws on directed acyclic graphs with a single origin-destination pair and a constant inflow at the origin. The rate of change of the particle density on each link of the network equals the difference between the inflow and the outflow on that link. The latter is modeled to depend on the current particle density on that link through a flow function. The novel modeling element in this paper is that every link is assumed to have finite capacity for particle density and that the flow function is modeled to be strictly increasing as density increases from zero up to the maximum density capacity, and is discontinuous at the maximum density capacity, with the flow function value being zero at that point. This feature, in particular, allows for the possibility of spill-backs in our model. In this paper, we present our results on resilience of such networks under distributed routing, towards perturbations that reduce link-wise flow functions.
    04/2012;
  • Daron Acemoglu
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    ABSTRACT: Following on Keynes’s Economic Possibilities for Our Grandchildren, this paper develops conjectures about the world we will leave to our grandchildren. It starts by outlining the 10 most important trends that have defined our economic, social, and political lives over the last 100 years. It then provides a framework for interpreting these trends, emphasizing the role of the expansion of political and civil rights and institutional changes in this process. It then uses this framework for extrapolating these 10 trends into the next 100 years.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
    04/2012;
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    Daron Acemoglu, David Autor
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    ABSTRACT: Goldin and Katz’s The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over the 20th century. This essay reviews the theoretical and conceptual underpinnings of this work and documents the success of Goldin and Katz’s framework in accounting for numerous broad labor market trends. The essay also considers areas where the framework falls short in explaining several key labor market puzzles of recent decades and argues that these shortcomings can potentially be overcome by relaxing the implicit equivalence drawn between workers’ skills and their job tasks in the conceptual framework on which Goldin and Katz build. The essay argues that allowing for a richer set of interactions between skills and technologies in accomplishing job tasks both augments and refines the predictions of Goldin and Katz’s approach and suggests an even more important role for human capital in economic growth than indicated by their analysis.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
    02/2012;
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    Daron Acemoglu, David Autor
    [Show abstract] [Hide abstract]
    ABSTRACT: Goldin and Katz’s The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over the 20th century. This essay reviews the theoretical and conceptual underpinnings of this work and documents the success of Goldin and Katz’s framework in accounting for numerous broad labor market trends. The essay also considers areas where the framework falls short in explaining several key labor market puzzles of recent decades and argues that these shortcomings can potentially be overcome by relaxing the implicit equivalence drawn between workers’ skills and their job tasks in the conceptual framework on which Goldin and Katz build. The essay argues that allowing for a richer set of interactions between skills and technologies in accomplishing job tasks both augments and refines the predictions of Goldin and Katz’s approach and suggests an even more important role for human capital in economic growth than indicated by their analysis.
    01/2012;
  • Daron Acemoglu, Ufuk Akcigit
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    ABSTRACT: To what extent and in what form should the intellectual property rights (IPR) of innovators be protected? Should a company with a large technology lead over its rivals receive the same IPR protection as a company with a more limited advantage? In this paper, we develop a dynamic framework for the study of the interactions between IPR and competition, in particular to understand the impact of such policies on future incentives. The economy consists of many industries and firms engaged in cumulative (step-by-step) innovation. IPR policy regulates whether followers in an industry can copy the technology of the leader. We prove the existence of a steady-state equilibrium and characterize some of its properties. We then quantitatively investigate the implications of different types of IPR policy on the equilibrium growth rate and welfare. The most important result from this exercise is that full patent protection is not optimal; instead, optimal policy involves state-dependent IPR protection, providing greater protection to technology leaders that are further ahead than those that are close to their followers. This is because of a trickle-down effect: providing greater protection to firms that are further ahead of their followers than a certain threshold increases the R&D incentives also for all technology leaders that are less advanced than this threshold. (JEL: 031, O34, 041, L16)
    Journal of the European Economic Association 01/2012; 10(1):1-42. · 1.36 Impact Factor

Publication Stats

20k Citations
273.85 Total Impact Points

Institutions

  • 1993–2013
    • Massachusetts Institute of Technology
      • Department of Economics
      Cambridge, Massachusetts, United States
  • 2012
    • Singapore Management University
      • School of Economics
      Singapore, Singapore
  • 2011
    • Tel Aviv University
      Tell Afif, Tel Aviv, Israel
    • University of Toronto
      • Department of Economics
      Toronto, Ontario, Canada
  • 2004–2011
    • Harvard University
      • • Department of Economics
      • • Department of Government
      • • Institute for Quantitative Social Science
      Cambridge, Massachusetts, United States
  • 2010
    • International Monetary Fund
      Washington, Washington, D.C., United States
    • University of Zurich
      Zürich, Zurich, Switzerland
  • 2009–2010
    • CUNY Graduate Center
      New York City, New York, United States
    • Yale University
      • Department of Economics
      New Haven, Connecticut, United States
    • Johns Hopkins University
      Baltimore, Maryland, United States
  • 1999–2009
    • Stockholm University
      • Institute for International Economic Studies (IIES)
      Tukholma, Stockholm, Sweden
    • Princeton University
      Princeton, New Jersey, United States
  • 2008
    • Texas A&M University
      • Department of Electrical and Computer Engineering
      College Station, TX, United States
    • Duke University
      Durham, North Carolina, United States
  • 2007
    • Wellesley College
      • Department of Economics
      Wellesley, MA, United States
  • 2006
    • Pennsylvania State University
      • Department of Economics
      University Park, MD, United States
    • New York State
      New York City, New York, United States
  • 2003–2006
    • University of California, Berkeley
      • Department of Economics
      Berkeley, CA, United States
    • Vanderbilt University
      • Department of Economics
      Nashville, MI, United States
    • University of Wisconsin, Madison
      • Department of Economics
      Madison, MS, United States
  • 1999–2003
    • Stanford University
      • Graduate School of Business
      Stanford, CA, United States