Daron Acemoglu

Massachusetts Institute of Technology, Cambridge, Massachusetts, United States

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Publications (381)433.78 Total impact

  • Daron Acemoglu
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    ABSTRACT: This study revisits the important ideas proposed by Atkinson and Stiglitz's seminal 1969 paper on technological change. After linking these ideas to the induced innovation literature of the 1960s and the more recent directed technological change literature, it explains how these three complementary but different approaches are useful in the study of a range of current research areas – though they may also yield different answers to important questions. It concludes by highlighting several important areas where these ideas can be fruitfully applied in future work.
    The Economic Journal 03/2015; 125(583). DOI:10.1111/ecoj.12227 · 1.95 Impact Factor
  • D. Acemoglu, P. Aghion, D. Hemous
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    ABSTRACT: A key question in the economics of climate change is the importance of global policy coordination in reducing carbon emissions. In this paper, we study this question using a two-country (North-South) extension of Acemoglu et al. (2012) which introduces directed technical change into a general equilibrium model of climate change. We find that, first, the optimal policy necessarily requires global policy coordination, with the implementation of research subsidies and carbon taxes in both North and South. Second, under certain circumstances, appropriately chosen environmental regulations in the North alone can prevent the worst environmental disasters. In particular, such disasters can be prevented by a combination of carbon taxes and clean research subsidies under the restrictive conditions that (a) the two inputs are substitutable in both countries; (b) there is no international trade between the North and the South; and (c) the South imitates technologies invented in the North. Third, international trade between the North and the South typically makes it more difficult to prevent environmental disasters through unilateral policies in the North, because environmental regulation in the North may induce full specialization by the South in dirty input production, as imitation of clean technologies by the South then ceases to be profitable. Hence, given current circumstances, global policy coordination is highly desirable.
    Oxford Review of Economic Policy 02/2015; 30(3):513-530. DOI:10.1093/oxrep/gru031 · 0.78 Impact Factor
  • Daron Acemoglu, James A. Robinson
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    ABSTRACT: Thomas Piketty's (2013) book, Capital in the 21st Century, follows in the tradition of the great classical economists, like Marx and Ricardo, in formulating general laws of capitalism to diagnose and predict the dynamics of inequality. We argue that general economic laws are unhelpful as a guide to understanding the past or predicting the future because they ignore the central role of political and economic institutions, as well as the endogenous evolution of technology, in shaping the distribution of resources in society. We use regression evidence to show that the main economic force emphasized in Piketty's book, the gap between the interest rate and the growth rate, does not appear to explain historical patterns of inequality (especially, the share of income accruing to the upper tail of the distribution). We then use the histories of inequality of South Africa and Sweden to illustrate that inequality dynamics cannot be understood without embedding economic factors in the context of economic and political institutions, and also that the focus on the share of top incomes can give a misleading characterization of the true nature of inequality.
    Journal of Economic Perspectives 02/2015; 29(1):3-28. DOI:10.1257/jep.29.1.3 · 4.21 Impact Factor
  • Source
    Daron Acemoglu, Mit Simon, Johnson Mit
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    ABSTRACT: In Acemoglu and Johnson (2006, 2007), we used the "international epidemiological tran-sition"— a wave of global health innovations and improvements that began in the 1940s— to construct an instrument that can help estimate the e¤ect of life expectancy on economic per-formance. This identi…cation strategy exploited the di¤erential e¤ect of these global health interventions on countries with high levels of mortality from the a¤ected diseases. Using this strategy, we found that the instrumented changes in life expectancy have a large e¤ect on pop-ulation: a 1% increase in life expectancy leads to an increase in population of about 1.7-2%. Life expectancy has a much smaller e¤ect on total GDP. Consequently, there is no evidence that this large exogenous increase in life expectancy led to a signi…cant increase in per capita income. Bloom, Canning, and Fink (2009) argue that the Acemoglu and Johnson regressions are misspeci…ed because they do not take account of potential convergence in income per capita. Their critique is incorrect for three reasons. First, both in our published paper (2007) and, at greater length, in the NBER working paper version (2006), we addressed this issue and showed that our results are robust to various di¤erent speci…cations that allow for convergence e¤ects. Second, the speci…cations used by Bloom, Canning, and Fink do not follow from the standard model incorporating mean reversion (i.e., convergence) in income. Third, using additional checks for convergence e¤ects, we …nd no evidence that incorporating such e¤ects has any impact on our previous …ndings. In addition, there is a logical inconsistency between the Bloom, Canning, and Fink second stage and their instrument strategy.
    SSRN Electronic Journal 12/2014; 122(6). DOI:10.2139/ssrn.2424034
  • Daron Acemoglu, William B. Hawkins
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    ABSTRACT: We present a generalization of the standard random-search model of unemployment in which firms hire multiple workers and in which the hiring process is time-consuming as well as costly. We follow Stole and Zwiebel (1996a, 1996b) and assume that wages are determined by continuous bargaining between the firm and its employees. The model generates a nontrivial dispersion of firm sizes; when firms' production technologies exhibit decreasing returns to labor, it also generates wage dispersion, even when all firms and all workers are ex ante identical. We characterize the steady-state equilibrium and show that, with a suitably chosen distribution of ex ante heterogeneity across firms, it is consistent with several important stylized facts about the joint distribution of firm size, firm growth, and wages in the U.S. economy. We also conduct a numerical investigation of the out-of-steady-state dynamics of our model. We find that the responses of unemployment and of the vacancy-to-unemployment ratio to a shock to labor productivity can be somewhat more persistent than in the Mortensen–Pissarides benchmark where each firm employs a single worker.
    Theoretical Economics 09/2014; 9(3). DOI:10.3982/TE1061 · 0.87 Impact Factor
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    ABSTRACT: In this paper we revisit the relationship between institutions, human capital and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about 4 to 5 times greater than that implied by micro (Mincerian) estimates, found in some of the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically-determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, while the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of these polities.
    SSRN Electronic Journal 08/2014; 6(1). DOI:10.2139/ssrn.2392106
  • 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 05/2014; 104(5). DOI:10.1257/aer.104.5.523 · 2.69 Impact Factor
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    ABSTRACT: We study the simultaneous evolution of the opinion profile and network topology of a system of N agents. Based on the opinion profile at any given time, agents probabilistically decide which other agents to form links with. The probability of a link being formed with another agent depends on both similarity of their opinions and the popularity of that agent. Agents then average their opinion with the opinions of the agents they have formed links with, giving rise to a new opinion profile that determines-in a probabilistic fashion- the network topology for the next time step. Thus both opinions and network structure exhibit a strong correlation over time. Despite this correlation, we show that this system converges to a consensus in opinion. We provide simulations of convergence times and the limiting opinion profile as a function of the parameters of the system.
    ICASSP 2014 - 2014 IEEE International Conference on Acoustics, Speech and Signal Processing (ICASSP); 05/2014
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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 05/2014; 104(5). DOI:10.1257/aer.104.5.394 · 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 04/2014; 104(4). DOI:10.1257/aer.104.4.1350 · 2.69 Impact Factor
  • Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik
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    ABSTRACT: This paper argues that openness to new, unconventional and disruptive ideas has a first-order impact on creative innovations— innovations that break new ground in terms of knowledge creation. After presenting a motivating model focusing on the choice between incremental and radical innovation, and on how managers of different ages and human capital are sorted across different types of firms, we provide cross-country, firm-level and patent-level evidence consistent with this pattern. Our measures of creative innovations proxy for innovation quality (average number of citations per patent) and creativity (fraction of superstar innovators, the likelihood of a very high number of citations, and generality of patents). Our main proxy for openness to disruption is manager age. This variable is based on the idea that only companies or societies open to such disruption will allow the young to rise up within the hierarchy. Using this proxy at the country, firm or patent level, we present robust evidence that openness to disruption is associated with more creative innovations.
    SSRN Electronic Journal 01/2014; DOI:10.2139/ssrn.2392109
  • Daron Acemoglu, Matthew O. Jackson
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    ABSTRACT: We examine the interplay between social norms and the enforcement of laws. Agents choose a behavior (e.g., tax evasion, production of low-quality products, corruption, substance abuse, etc.) and then are randomly matched with another agent. An agent's payoff decreases with the mismatch between her behavior and her partner's, as well as average behavior in society. A law is an upper bound (cap) on behavior and a law-breaker, when detected, pays a fine and has her behavior forced down to the level of the law. Law-breaking depends on social norms because detection relies, at least in part, on private cooperation and whistle-blowing. Law-abiding agents have an incentive to whistle-blow because this reduces the mismatch with their partner's behavior as well as the overall negative externality. When laws are in conflict with norms so that many agents are breaking the law, each agent anticipates little whistle-blowing and is more likely to also break the law. Tighter laws (banning more behaviors) have counteracting effects, reducing behavior among law-abiding individuals but inducing more law-breaking. Greater fines for law-breaking and better public enforcement reduce the number of law-breakers and behavior among law-abiding agents, but increase levels of law breaking among law-breakers (who effectively choose their behavior targeting other high-behavior law-breakers). Within a dynamic version of the model, we show that laws that are in strong conflict with prevailing social norms may backfire, while gradual tightening of laws can be more effective by changing social norms.
    SSRN Electronic Journal 01/2014; DOI:10.2139/ssrn.2443427
  • Daron Acemoglu, Matthew O. Jackson
    [Show abstract] [Hide abstract]
    ABSTRACT: We examine the interplay between social norms and the enforcement of laws. Agents choose a behavior (e.g., tax evasion, production of low-quality products, corruption, substance abuse, etc.) and then are randomly matched with another agent. An agent's payoff decreases with the mismatch between her behavior and her partner's, as well as average behavior in society. A law is an upper bound (cap) on behavior and a law-breaker, when detected, pays a fine and has her behavior forced down to the level of the law. Law-breaking depends on social norms because detection relies, at least in part, on private cooperation and whistle-blowing. Law-abiding agents have an incentive to whistle-blow because this reduces the mismatch with their partner's behavior as well as the overall negative externality. When laws are in conflict with norms so that many agents are breaking the law, each agent anticipates little whistle-blowing and is more likely to also break the law. Tighter laws (banning more behaviors) have counteracting effects, reducing behavior among law-abiding individuals but inducing more law-breaking. Greater fines for law breaking and better public enforcement reduce the number of law-breakers and behavior among law-abiding agents, but increase levels of law breaking among law-breakers (who effectively choose their behavior targeting other high-behavior law-breakers). Within a dynamic version of the model, we show that laws that are in strong conflict with prevailing social norms may back re, while gradual tightening of laws can be more effective by changing social norms.
    SSRN Electronic Journal 01/2014; DOI:10.2139/ssrn.2475920
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    ABSTRACT: We provide evidence that democracy has a significant and robust positive effect on GDP. Our empirical strategy relies on a dichotomous measure of democracy coded from several sources to reduce measurement error and controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy on economic growth. Our baseline results use a linear model for GDP dynamics estimated using either a standard within estimator or various different Generalized Method of Moments estimators, and show that democratizations increase GDP per capita by about 20% in the long run. These results are confirmed when we use a semiparametric propensity score matching estimator to control for GDP dynamics. We also obtain similar results using regional waves of democratizations and reversals to instrument for country democracy. Our results suggest that democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest. We find little support for the view that democracy is a constraint on economic growth for less developed economies.
    SSRN Electronic Journal 01/2014; DOI:10.2139/ssrn.2411791
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    ABSTRACT: Crowdsourcing is an emerging technology where innovation and production are sourced out to the public through an open call. At the center of crowdsourcing is a resource allocation problem: there is an abundance of workers but a scarcity of high skills, and an easy task assigned to a high-skill worker is a waste of resources. This problem is complicated by the fact that the exact difficulties of innovation tasks may not be known in advance, so tasks that require high-skill labor cannot be identified and allocated ahead of time. We show that the solution to this problem takes the form of a skill hierarchy, where tasks are first attempted by low-skill labor, and high skill workers only engage with a task if less skilled workers are unable to finish it. This hierarchy can be constructed and implemented in a decentralized manner even though neither the difficulties of the tasks nor the skills of the candidate workers are known. We provide a dynamic pricing mechanism that achieves this implementation by inducing workers to self-select into different layers. The mechanism is simple: each time a task is attempted and not finished, its price (reward upon completion) goes up.
    SSRN Electronic Journal 01/2014; DOI:10.2139/ssrn.2382917
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    ABSTRACT: We study the direct and spillover effects of local state capacity using the network of Colombian municipalities. We model the determination of local and national state capacity as a network game in which each municipality, anticipating the choices and spillovers created by other municipalities and the decisions of the national government, invests in local state capacity and the national government chooses the presence of the national state across municipalities to maximize its own payoff. We then estimate the parameters of this model using reduced-form instrumental variables techniques and structurally (using GMM, simulated GMM or maximum likelihood). To do so we exploit both the structure of the network of municipalities, which determines which municipalities create spillovers on others, and the historical roots of local state capacity as the source of exogenous variation. These historical instruments are related to the presence of colonial royal roads and local presence of the colonial state in the 18th century, factors which we argue are unrelated to current provision of public goods and prosperity except through their impact on their own and neighbors’ local state capacity. Our estimates of the effects of state presence on prosperity are large and also indicate that state capacity decisions are strategic complements across municipalities. As a result, we find that bringing all municipalities below median state capacity to the median, without taking into account equilibrium responses of other municipalities, would increase the median fraction of the population above poverty from 57% to 60%. Approximately 57% of this is due to direct effects and 43% to spillovers. However, if we take the equilibrium response of other municipalities into account, the median would instead increase to 68%, a sizable change driven by equilibrium network effects.
    SSRN Electronic Journal 01/2014; DOI:10.2139/ssrn.2382859
  • Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik
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    ABSTRACT: This paper argues that openness to new, unconventional and disruptive ideas has a first-order impact on creative innovations - innovations that break new ground in terms of knowledge creation. After presenting a motivating model focusing on the choice between incremental and radical innovation, and on how managers of different ages and human capital are sorted across different types of firms, we provide cross-country, firm-level and patent-level evidence consistent with this pattern. Our measures of creative innovations proxy for innovation quality (average number of citations per patent) and creativity (fraction of superstar innovators, the likelihood of a very high number of citations, and generality of patents). Our main proxy for openness to disruption is manager age. This variable is based on the idea that only companies or societies open to such disruption will allow the young to rise up within the hierarchy. Using this proxy at the country, firm or patent level, we present robust evidence that openness to disruption is associated with more creative innovations.
    SSRN Electronic Journal 01/2014; DOI:10.2139/ssrn.2390176
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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.
    SSRN Electronic Journal 04/2013; DOI:10.2139/ssrn.2251936
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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.
    SSRN Electronic Journal 04/2013; DOI:10.2139/ssrn.2251247
  • Daron Acemoglu
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    ABSTRACT: A central theme of this article is that economics instructors should spend more time teaching about economic growth and development at the undergraduate level because the topic is of interest to students, is less abstract than other macroeconomic topics, and is the focus of exciting research in economics. Facts and data can be presented to describe the economic growth problem facing nations, both rich and poor. Instructors can then use key elements of the Solow growth model and discuss the importance of technology to explain economic growth to students. Recent research in economics can be used in the classroom to discuss the reasons why some countries are rich and others are poor.
    The Journal of Economic Education 04/2013; 44(2). DOI:10.1080/00220485.2013.770344 · 0.25 Impact Factor

Publication Stats

27k Citations
433.78 Total Impact Points

Institutions

  • 1993–2015
    • 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
  • 2009–2011
    • Harvard University
      • Department of Economics
      Cambridge, Massachusetts, United States
    • Tufts University
      Бостон, Georgia, United States
    • Stockholm University
      Tukholma, Stockholm, Sweden
    • Johns Hopkins University
      Baltimore, Maryland, United States
  • 2010
    • International Monetary Fund
      Washington, Washington, D.C., United States
    • Yale University
      New Haven, Connecticut, United States
  • 2009–2010
    • CUNY Graduate Center
      New York City, New York, United States
  • 2008
    • Duke University
      Durham, North Carolina, United States
    • Texas A&M University
      • Department of Electrical and Computer Engineering
      College Station, TX, United States
  • 2007
    • Wellesley College
      • Department of Economics
      Wellesley, MA, United States
  • 2006
    • New York State
      New York City, New York, United States
    • University of California, Berkeley
      • Department of Economics
      Berkeley, CA, United States
  • 2003
    • Stanford University
      • Graduate School of Business
      Stanford, CA, United States
    • Vanderbilt University
      • Department of Economics
      Nashville, MI, United States
    • University of Wisconsin, Madison
      • Department of Economics
      Madison, MS, United States