William Easterly

New York University | NYU · Department of Economics

We study the instability of hyper-specialization of exports at the 4-digit level in 1998–2010. (1) Specializations are surprisingly un-stable. Export ranks are not persistent, and new top products and destinations replace old ones. Measurement error is unlikely to be the main or only determinant of this pattern. (2) Source country factors are not t...

Although a large literature argues that European settlement outside of Europe during colonization had an enduring effect on economic development, researchers have been unable to assess these predictions directly because of an absence of data on colonial European settlement. We construct a new database on the European share of the population during...

I respond to the three excellent reviewers, who have covered well some of the most difficult issues raised by the arguments in The Tyranny of Experts. These include the good intentions of aid officials supporting autocrats, the role of Western history and current Western travails in the debate on freedom, distinguishing good and bad experts, advoca...

Acemoglu, Johnson, and Robinson’s (2001) seminal article argues property-rights institutions powerfully affect national income, using estimated mortality rates of early European settlers to instrument capital expropriation risk. However, 36 of the 64 countries in the sample are assigned mortality rates from other countries, often based on mistaken...

The United States’ wars in Afghanistan and Iraq have revived again the phenomenon of “regime change” that was thought to have died with the Cold War. We study Cold War “regime changes” for insight, although of course they do not extrapolate exactly to modern events. The recent declassification of Cold War documents now makes it possible to develop...

A large literature suggests that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes. This literature has had a serious gap: no direct measure of colonial European settlement. In this paper, we (1) construct a new database on the European share of the population during the early st...

Jeffrey Sachs is the economics profession’s leading advocate of mega-reform. Whether it is stabilization of hyperinflation in Bolivia, shock therapy to leap from Communism to capitalism in Poland and Russia, or a “Big Push” to end world poverty, Sachs’ recommendation throughout his career has been to do it fast, do it big, do it comprehensively, an...

Foreign aid critics, supporters, recipients and donors have produced eloquent rhetoric on the need for better aid practices – has this translated into reality? This paper attempts to monitor the best and worst of aid practices among bilateral, multilateral, and UN agencies. We create aid practice measures based on aid transparency, specialization,...

No abstract available.

No abstract available.

We establish the following stylized facts: (1) Exports are characterized by Big Hits, (2) the Big Hits change from one period to the next, and (3) these changes are not explained by global factors like global commodity prices. These conclusions are robust to excluding extractable products (oil and minerals) and other commodities. Moreover, African...

Evidence from the International Crime Victimization Survey and the World Business Environment Survey suggests that actual corruption experience is a weak predictor of reported corruption perception, and that some of the factors commonly found to "reduce" corruption, such as economic development, democratic institutions or Protestant traditions, sys...

We assemble a dataset on technology adoption in 1000 bc, 0 ad, and 1500 AD for the predecessors to today's nation states. Technological differences are surprisingly persistent over long periods of time. Our most interesting, strong, and robust results are for the association of 1500 AD technology with per capita income and technology adoption today...

We exploit the recent declassification of CIA documents and examine whether there is evidence of US power being used to influence countries' decisions regarding international trade. We measure US influence using a newly constructed annual panel of CIA interventions aimed at installing and supporting leaders during the Cold War. Our presumption is t...

‘Globalization’ is a word that gets both its proponents and opponents very agitated. But what exactly is it? What is the globalization debate really about?

We investigate the historical origins of mistrust within Africa. Combining contemporary household survey data with historic data on slave shipments by ethnic group, we show that individuals whose ancestors were heavily raided during the slave trade today exhibit less trust in neighbors, relatives, and their local government. We confirm that the rel...

Credit default swaps (CDS) which constitute up to 98% of credit derivatives have had a unique, endemic and pernicious role to play in the current financial crisis. However, there are few in depth empirical studies of the financial network interconnections among banks and between banks and nonbanks involved as CDS protection buyers and protection se...

Us poor neoclassical economists. Two decades after the fall of the Berlin Wall, which to the naked eye seemed to demonstrate the victory of free market economies over planned economies, we find ourselves beleaguered at every turn. The free market was already in full retreat in Latin America, Africa, the Middle East, the former Soviet Union, and par...

The authors systematically document remarkably high degrees of concentration in manufacturing exports for a sample of 151 countries over a range of 3,000 products. For every country manufacturing exports are dominated by a few"big hits"which account for most of the export value and where the"hit"includes both finding the right product and finding t...

We assemble a dataset on technology adoption in 1000 BC, 0 AD, and 1500 AD for the predecessors to today's nation states. We find that this very old history of technology adoption is surprisingly significant for today's national development outcomes. Our strong and robust results are for 1500 AD determining per capita income today. We find technolo...

In the new millennium, the Western aid effort towards Africa has surged due to writings by well-known economists, a celebrity mass advocacy campaign, and decisions by Western leaders to make Africa a major foreign policy priority. This survey contrasts the predominant "transformational" approach (West saves Africa) to occasional swings to a "margin...

Do superpower interventions to install and prop up political leaders in other countries subsequently result in more or less democracy, and does this effect vary depending on whether the intervening superpower is democratic or authoritarian? While democracy may be expected to decline contemporaneously with superpower interference, the effect on demo...

This is our reply to Brendan Beare's comment on our paper. While we find his criticism to be both valid and helpful, a modified version of our original model still confirms that a low elasticity of substitution between capital and labor doomed the Soviet strategy of extensive growth through capital accumulation.

This is our reply to Brendan Beare’s comment on our paper. While we find his criticism to be both valid and helpful, a modified version of our original model still confirms that a low elasticity of substitution between capital and labor doomed the Soviet strategy of extensive growth through capital accumulation.

When growth-promoting spending is cut so much that the present value of future government revenues falls by more than the immediate improvement in the cash deficit, fiscal adjustment becomes like walking up the down escalator. Although short-term cash flows matter, too tight a focus on them encourages governments to invest too little. Cash-flow tar...

We build upon recent literature to do several exercises to assess benefits and costs of the brain drain to Africa. Contrary to a lot of the worries expressed in the media and in aid agencies, the brain drain is probably a net benefit to the source countries. We make several arguments: (1) the African brain drain is not large enough to have much eff...

A large research program in economics has established a persuasive link between institutions and economic development. But what does this imply for development policymaking? Can a political leader or aid agency seeking to promote development readily change institutions? This article starts off wildly general, and then moves to specifics.

This paper does not address the issue of aid effectiveness—that is, the extent to which foreign aid dollars actually achieve their goals—but on "best practices" in the way in which official aid is given, an important component of the wider debate. First we discuss best practice for an ideal aid agency and the difficulties that aid agencies face bec...

The passion that surrounds the vague term ‘globalization’ is best seen as a proxy for the long-standing debate about free-market capitalism. The zero-sum mindset, the difference between Pareto superiority and common norms of fairness, and the belief that all outcomes are caused by an intentional agent often cause communication problems between non-...

A Planner vs. Searcher paradigm is used to illustrate the lack of positive progress in aid to African agriculture. Planners announce good intentions, raise expectations, but take on no responsibility in meeting them; they determine what to supply, apply global blueprints but lack knowledge of the basics. Searchers find out what the reality is at bo...

Those involved in the millennium development goal (MDG) campaign routinely state “Africa will miss all the MDGs.” This paper argues that a series of arbitrary choices made in defining “success” or “failure” as achieving numerical targets for the MDGs made attainment of the MDGs less likely in Africa than in other regions even when its progress was...

Consistent with the provocative hypothesis of Engerman and Sokoloff [Engermann, Stanley and Kenneth Sokoloff (1997), “Factor Endowments, Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States,” in Stephen Haber, ed. How Latin America Fell Behind, Stanford CA: Stanford Universit...

The record of the aid agencies over time seems to indicate weak evidence of progress in response to learning from experience, new knowledge, or changes in political climate. The few positive results are an increased sensitivity to per capita income of the recipient (although it happened long ago), a decline in the share of food aid, and a decline i...

A review of Helen Epstein's book, "The invisible cure: Africa, the West, and the fight against AIDS."

Development assistance is the combination of money, advice, and conditions from rich nations and international financial institutions like the World Bank and International Monetary Fund designed to achieve economic development in poor nations. This article argues that development assistance was based on three assumptions that, with the benefit of h...

The past quarter-century (not to mention the past half-century) has been a humbling one for advisors striving to discover the secrets to development success. This chapter argues that there are three facts that should prove particularly humbling: (1) the failure of structural adjustment and shock therapy, (2) the rarity of “miracles”, and (3) the ho...

We assemble a dataset on technology adoption in 1000 B.C., 0 A.D., and 1500 A.D. for the predecessors to today's nation states. We find that this very old history of technology adoption is surprisingly significant for today's national development outcomes. Although our strongest results are for 1500 A.D., we find that even technology as old as 1000...

Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how artificial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one m...

Much of the current popular debate about foreign aid is based on the assumption that the poorest countries are in a poverty trap. The usual mechanisms suggested to explain the poverty trap are inadequate saving and increasing returns to investment, and foreign aid is offered as a way to escape poverty traps. How do these explanations for low growth...

Jeffrey Sachs's new book (The End of Poverty: Economic Possibilities for Our Time, Penguin Press: New York, 2005) advocates a "Big Push" featuring large increases in aid to finance a package of complementary investments in order to end world poverty. These recommendations are remarkably similar to those first made in the 1950s and 1960s in developm...

We present evidence that measures of "social cohesion," such as income inequality and ethnic fractionalization, endogenously determine institutional quality, which in turn causally determines growth. Copyright 2006 Blackwell Publishing Ltd.

The IMF uses its well-known "financial programming" model to derive monetary and fiscal programs to achieve desired macroeconomic targets in countries undergoing crises or receiving debt relief. Financial programming is based on monetary, balance of payments, and fiscal accounting identities. This paper considers under what conditions financial pro...

Using a newly assembled dataset spanning from 1820 to 1998, we study the relationship between the occurrence and magnitude of episodes of mass killing and the levels of development and democracy across countries and over time. Mass killings appear to be more likely at intermediate levels of income and less likely at very high levels of democracy. H...

The classic narrative of economic development—poor countries are caught in poverty traps, out of which they need a Big Push involving increased investment, leading to a takeoff in per capita income—has been very influential in foreign aid debates since the 1950s. This was the original justification for foreign aid. The narrative lost credibility fo...

Only for the recipients of foreign aid is something akin to central planning seen as a way to achieve prosperity. The end of poverty is achieved with free markets and democracy—where decentralized “searchers” look for ways to meet individual needs—not Poverty Reduction Strategy Papers (PRSPs) to achieve Millennium Development Goals (MDGs). The PRSP...

Much of the current popular debate about foreign aid is based on the assumption that the poorest countries are in a poverty trap. The usual mechanisms suggested to explain the poverty trap are inadequate saving and increasing returns to investment, and foreign aid is offered as a way to escape poverty traps. How do these explanations for low growth...

Consistent with the provocative hypothesis of Engerman and Sokoloff 1997 and Sokoloff and Engerman 2000, this paper confirms with cross-country data that agricultural endowments predict inequality and inequality predicts development. The use of agricultural endowments - specifically the abundance of land suitable for growing wheat relative to that...

The classic narrative of economic development -- poor countries are caught in poverty traps, out of which they need a Big Push involving increased aid and investment, leading to a takeoff in per capita income -- has been very influential in development economics since the 1950s. This was the original justification for foreign aid. The narrative los...

Analysis of adjustment loans often overlooks their repetition to the same country. Repetition changes the nature of the selection problem. None of the top 20 recipients of repeated adjustment lending over 1980–99 were able to achieve reasonable growth and contain all policy distortions. About half of the adjustment loan recipients show severe macro...

Recent decades have seen a considerable expansion of global trade and a simultaneous decline in inflation volatility. This paper investigates whether greater openness to trade helps achieve inflation stability. Using panel data for a sample of developing and industrial countries over the period 1961-2000, we document a negative and statistically si...

The new growth literature, using both endogenous growth and neoclassical models, has generated strong claims for the effect of national policies on economic growth. Empirical work on policies and growth has tended to confirm these claims. This paper casts doubt on this claim for strong effects of national policies, pointing out that such effects ar...

In an extraordinarily influential paper, Craig Burnside and David Dollar (2000, p. 847) find that "... aid has a positive impact on growth in developing countries with good fiscal, mone- tary, and trade policies but has little effect in the presence of poor policies." This finding has enormous policy implications. The Burnside and Dollar (2000, hen...

The Harrod-Domar growth model supposedly died long ago. But still today, economists in the International Financial Institutions apply the Harrod-Domar model to calculate short-run investment requirements for a target growth rate. They then calculate a "Financing Gap" between the required investment and available resources and often fill the "Financ...

This paper attempts to set forth a framework for thinking about growth volatility which is general enough to incorporate the important structural, institutional, and policy variations among countries which might account for differences in their macroeconomic performance. And it focuses particularly on the role of the financial sector. The paper is...

Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effect...

Using polling data for 31869 households in 38 countries and allowing for country effects, we show that the poor are more likely than the rich to mention inflation as a top national concern. This result survives several robustness checks. We also find direct measures of improvements in well-being of the poor -- the change in their share in national...

The Burnside and Dollar (2000) finding that aid raises growth in a good policy environment has had an important influence on policy and academic debates. We conduct a data gathering exercise that updates their data from 1970–93 to 1970–97, as well as filling in missing data for the original period 1970–93. We find that the BD finding is not robust...

We provide new measures of ethnic, linguistic, and religious fractionalization for about 190 countries. These measures are more comprehensive than those previously used in the economics literature and we compare our new variables with those previously used. We also revisit the question of the effects of ethnic, linguistic, and religious heterogenei...

This article analyzes the productivity of economy-wide investment across countries and tries to obtain some insight into the underlying process generating the aggregate results through a case study of the evolution of the manufacturing sector in Tanzania. We find that low investment has not been the major constraint on development in Africa. In Sec...

The widely publicized finding that "aid promotes growth in a good policy environment" is not robust to the inclusion of new data or alternative definitions of "aid," "policy" or "growth." The idea that "aid buys growth" is on shaky ground theoretically and empirically. It doesn't help that aid agencies face poor incentives to deliver results and un...

We provide new measures of ethnic, linguistic, and religious fractionalization for about 190 countries. These measures are more comprehensive than those previously used in the economics literature and we compare our new variables with those previously used. We also revisit the question of the effects of ethnic, linguistic, and religious heterogenei...

Economia 4.1 (2003) 1-53 The North American Free Trade Agreement (NAFTA) was formally implemented on 1January 1994 by the United States, Canada, and Mexico. This treaty instantly gained global notoriety following the initiation of formal negotiations in 1991, not only because the initiative represented one of the most comprehensive trade agreements...

The paper first reviews the meaning and causes of globalization. It indicates that globalization is not a new phenomenon in history, but the current phase seems to have new elements that did not exist previously. Regarding the consequences of the various aspects of globalization at the national level, it is shown that there can be both positive and...

Well-meaning national and international bureaucracies dispense foreign aid under conditions in which bureaucracy fails. The environment that created aid bureaucracies led those organizations to (a) define their output as money disbursed rather than service delivered, (b) produce many low-return observable outputs (glossy reports and "frameworks") a...

There is a long-standing literature that shows that fiscal adjustment is often implemented through cuts in public investment, including infrastructure (Roubini and Sachs, 1989; Hicks, 1991; De Haan et al. 1996). In this respect, the present paper aims to provide a comprehensive overview of the evolution of infrastructure stocks, quality and spendin...

The paradox of debt is that heavily indebted poor countries (HIPCs) became heavily indebted after two decades of debt relief efforts. Average policies in HIPCs 1980–97 were worse than other less-developed countries (LDCs), controlling for income. Terms of trade and wars do not show a different trend in HIPCs than in non-HIPC LDCs. Financing HIPCs s...

Does economic development depend on geographic endowments like temperate instead of tropical location, the ecological conditions shaping diseases, or an environment good for grains or certain cash crops? Or do these endowments of tropics, germs, and crops affect economic development only through institutions or policies? We test the endowment, inst...

The tragedy of foreign aid is not that it didn't work; it was never really tried. A group of well-meaning national and international bureaucracies dispensed foreign aid under conditions in which bureaucracy does not work well. The hostile environment under which such aid agencies functioned induced them to organize a cartel that increased inefficie...

Abstract Ethiopia has had fairly rapid growth since the current reformist regime took power. However, part of that growth consisted of recovery from the disasters of the previous government,and the civil war. Th e permanent component,of per capita growth under the reformist government,in the 1992-2001 period is estimated at about 1.1 percent per an...

Does economic development depend on geographic endowments like temperate instead of tropical location, the ecological conditions shaping diseases, or an environment good for grains or certain cash crops? Or do these endowments of tropics, germs, and crops affect economic development only through institutions or policies? We test the endowment, inst...

This paper analyses, in a simple two-region model, the undertaking of noxious facilities when the central government has limited prerogatives. The central government decides whether to construct a noxious facility in one of the regions, and how to …nance it. We study this problem under both full and asymmetric information on the damage caused by th...

Many analysts decry the lack of sufficient investment in Africa, implying that investment in Africa is ‘too low’. We find no evidence that private and public capital are productive in Africa, either in the cross‐country data or in micro‐data from Tanzania. In this restricted sense, investment in Africa is too high rather than too low.

The article documents five stylized facts of economic growth. (1) The "residual" (total factor productivity, tfp) rather than factor accumulation accounts for most of the income and growth differences across countries. (2) Income diverges over the long run. (3) Factor accumulation is persistent while growth is not, and the growth path of countries...

I document in this paper a puzzle thathas not received previous attention in the literature. In 1980–98,median per capita income growth in developing countries was 0.0percent, as compared to 2.5 percent in 1960–79. Yet I documentin this paper that variables that are standard in growth regressions—policieslike financial depth and real overvaluation,...

Structural adjustment - as measured by the number of adjustment loans from the IMF, and the World Bank - reduces the growth elasticity of poverty reduction. The author finds no evidence for structural adjustment having a direct effect on growth. The poor benefit less from output expansion in countries with many adjustment loans, than they do in cou...

High-quality institutions-reflected in such factors as rule of law, bureaucratic quality, freedom from government expropriation, and freedom from government repudiation of contracts-mitigate the adverse economic effects of ethnic fractionalization identified by Easterly and Levine (1997) and others. Ethnic diversity has a more adverse effect on eco...

The worldwide growth slowdown after 1975 was a major negative fiscal shock; lower growth lowers the present value of tax revenues and primary surpluses and thus makes a given level of debt more burdensome. Most countries failed to adjust to the negative fiscal consequences of the growth implosion and so public debt to GDP ratios exploded. The growt...

We find evidence for the crisis-induces-reform hypothesis at extreme values of the inflation rate and the black market premium. Episodes of extremely high inflation or black market premiums are followed by periods of better performance than episodes of moderately high inflation or black market premiums. We fail to find similar evidence of the crisi...

I document in this paper a puzzle that has not received previous attention in the literature. In 1980-98, median per capita income growth in developing countries was 0.0 percent, as compared to 2.5 percent in 1960-79. Yet I document in this paper that variables that are standard in growth regressions - policies like financial depth and real overval...

A middle class consensus is defined as a high share of income for the middle class and a low degree of ethnic divisions. The paper links a middle class consensus to resource endowments, along the lines of the provocative thesis of Engerman and Sokoloff (1997 and 2000). This paper exploits this association using tropical resource endowments as instr...

Using polling data for 31,869 households in 38 countries and allowing for country effects, we show that the poor are more likely than the rich to mention inflation as a top national concern. This result survives several robustness checks. We also find direct measures of improvements in well-being of the poor--the change in their share in national i...