Theory, General Equilibrium and Political Economy in Development Economics /

Acemoglu, Daron.

Theory, General Equilibrium and Political Economy in Development Economics / Daron Acemoglu. - Cambridge, Mass. National Bureau of Economic Research 2010. - 1 online resource: illustrations (black and white); - NBER working paper series no. w15944 . - Working Paper Series (National Bureau of Economic Research) no. w15944. .

April 2010.

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.




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