Politics through the Lens of Economics

Term paper guideline

December 11, 2018

Masayuki Kudamatsu

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Road Map

Grading policy

Submission deadline

What you should write

Data on economic performance

Data on economic institutions

Data on political institutions

Beyond Data

How to structure your paper

Grading Policy

Term Paper (79%)

Participation in

Online Discussion

(21%)

S A B C F
90 or above 80-89 70-79 60-69 Less than 60

Grades matter for your future

Historically,

college grades do not count at all

for job hunting in Japan

Not any more!

就活生が後悔する?「成績重視」の逆回転

日本経済新聞  May 16, 2018  

Also, your GPA does matter for studying abroad

Email a PDF copy to kudamatsu@osipp.osaka-u.ac.jp by

9 am on

Wednesday 13 February

Last class

Exam period

22 January

29 January - 8 February

For your information: 

Submission Deadline

because I have to submit your grades by 20 Feb...

Road Map

Grading policy

Submission deadline

What you should write

Data on economic performance

Data on economic institutions

Data on political institutions

Beyond Data

How to structure your paper

Pick a country

And discuss whether 

Theory of Why Nations Fail can

explain economic performances

of the country of your choice

Term Paper

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Theory of Why Nations Fail

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

So you need to know that in the country of your choice...

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

Are political institutions

inclusive

or

extractive?

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

So you need to know that in the country of your choice...

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

Are economic institutions

inclusive

or

extractive?

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

So you need to know that in the country of your choice...

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

Is the economy

growing

or

stagnated?

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

If it turns out, for example, ...

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

The theory fails

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

If it turns out, for example, ...

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

The theory fails

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Evidence is consistent with the theory if

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

It would be nicer if you find

evidence for causality as well

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Evidence is consistent with the theory if

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

It would be nicer if you find

evidence for causality as well

So you need to find information on these three:

Economic Institutions

Economic Performance

Political Institutions

Road Map

Grading policy

Submission deadline

What you should write

Data on economic performance

Data on economic institutions

Data on political institutions

Beyond Data

How to structure your paper

Measure of economic performance

GDP per capita

Average annual income of a person living in the country

For detail, pick any introductory textbook on macroeconomics such as Jones (2017), Mankiw (2018), Acemoglu et al. (2018)

Data source for GDP per capita

Published by the World Bank

1. Click the link above

2. Click

3. Type "GDP per capita"

Which should you choose?

Then you'll see this:

You need to understand "current", "constant", and "PPP"

GDP in current $ (aka. nominal GDP)

"Current" doesn't take into account inflation

Economic growth typically comes with inflation

Ignoring inflation will overrepresent economic growth

100 yen in 1960 = 568.29 yen in 2018 (source: InflationTool.com)

e.g.

Some poor countries suffer from hyperinflation

e.g.

1,000,000% in Venezuela in 2018 (source: Reuters)

GDP in constant $ (aka. real GDP)

"Constant" does take into account inflation

GDP

(constant 2010 $)

GDP

(current $)

Inflation rate

since 2010

=

PPP (Short for "Purchasing Power Parity")

Used for international comparison

Foreign exchange rate

Many services (e.g. haircut) are not exported or imported

Investors speculate in the currency market

Japanese yen appreciates

whenever the world economy becomes uncertain

e.g.

price level difference across countries

\neq
\neq

PPP (cont.)

PPP is the "real" exchange rate

e.g.

Very simple version of PPP: the Big Mac index

Image source: The Economist

WDI's PPP is based on

cross-country price surveys by International Comparison Program

Then which indicator should you use?

Then which indicator should you use?

GDP in constant values for tracking over time

(US$ is easier for foreigners to interpret)

Then which indicator should you use?

GDP in PPP for comparing to other countries

(Use constant value if tracking multiple countries over time)

Create a graph

Once you choose the indicator, click it.

Then click "DataBank" on the lower right. 

Select "Country" and "Time". Click "Chart" on top right

WDI dates back to 1960 at most

Historical GDP data

Maddison Project Database

provides the best estimates of historical GDP data

Subnational GDP data

Road Map

Grading policy

Submission deadline

What you should write

Data on economic performance

Data on economic institutions

Data on political institutions

Beyond Data

How to structure your paper

economic institutions
Secure
for everyone
Property rights Insecure
for majority of people
Free Occupational
choice
Forced labor
Free Entry of new businesses Prevented by monopolies
Unbiased System of laws Biased for
the powerful/rich
Promoted Public service provision Discouraged

Economic Institutions

Inclusive

Extractive

Property rights

Secure for everyone

Insecure for

majority of people

Occupational choice

Free

Forced labor

Entry of

new businesses

Free

Prevented by

monopolies

System of laws

Unbiased

Biased for

the powerful / rich

Public service provision

Provided

Limited

How to measure economic institutions?

Economic Institutions

Inclusive

Extractive

Property rights

Secure for everyone

Insecure for

majority of people

Occupational choice

Free

Forced labor

Entry of

new businesses

Free

Prevented by

monopolies

System of laws

Unbiased

Biased for

the powerful / rich

Public service provision

Provided

Limited

How to measure economic institutions?

For this aspect of institutions, there is a famous dataset

Conducted by World Bank (annually since 2004)

Law firms are surveyed to collect cross-country data on

Operates in the largest business city

100% domestically owned

10-50 employees

etc.

Business environments for a hypothetical, identical firm

Among 11 indicators, the following is relevant to us

Starting a business

# of procedures

# of days

Amount of fees

Amount of minimum capital

Doing Business surveys (cont.)

to register business

Examples of procedures to set up a firm

Source: Table 1 of Djankov et al. (2002)

Doing Business surveys (cont.)

Policy-makers in developing countries want to be ranked high

to attract foreign investment

In 2014

India's Prime Minister

Narendra Modi publicly

said he would aim 50th

e.g.

Image source: Scroll.in

Doing Business surveys (cont.)

Limitations

Doesn't measure the actual enforcement

Hypothetical firm may be irrelevant for a country

See Besley (2015) for more detail

Doing Business surveys (cont.)

How to obtain data

Click the blue "Select an economy" button

Search for your country

Road Map

Grading policy

Submission deadline

What you should write

Data on economic performance

Data on economic institutions

Data on political institutions

Beyond Data

How to structure your paper

Inclusive

Extractive

Both

Plurality

and

Centralized

State

Either

Absolutist

or

Lack of

Centralization

How to measure political institutions?

We need to measure the degrees of:

(1) plurality

(2) centralization

Measurement of plurality

Executive constraints from Polity IV dataset

"Extent of institutional constraints on the decision-making powers of the chief executive" (Polity IV Project: Data User's Manual, p. 62)

Known to positively affect GDP per capita (Acemoglu & Johnson (2005))

Takes the integer values from 1 to 7

See pp. 63-66 of Polity IV Project: Data User's Manual 

for what each value represents

See the column entitled "exconst"

If your country has values of -66, -77, -88:

See p. 17 of Polity IV Project: Data User's Manual 

Measurement of centralization

Tax revenue as % of GDP (cf. Lecture 3)

Positively associated with GDP per capita

Source: Figure 6a of Besley and Persson (2013)

Plurality and Centralization go hand in hand

Source: Daron Acemoglu (2013) "State Building: A Political Economy Perspective" Slides for Nemmers Prize Lecture, p. 15

Road Map

Grading policy

Submission deadline

What you should write

Data on economic performance

Data on economic institutions

Data on political institutions

Beyond Data

How to structure your paper

Beyond data

Collect documents on institutions & episodes

Find books & articles from:

References in Wikipedia (e.g. Japan)

When you read these documents

Have the theory of Why Nations Fail in your mind

Interpret facts and the series of events

with the theoretical framework of Why Nations Fail

Economic Institutions

Economic Performance

Political Institutions

Causes of income inequality

across countries

Economics as a tool to

understand politics & economy

Value of a theory

to see the world

With this book, we will learn 3 things:

1

2

3

The aim for writing this term paper:

Learn the value of a theory to see the world

Road Map

Grading policy

Submission deadline

What you should write

Data on economic performance

Data on economic institutions

Data on political institutions

Beyond Data

How to structure your paper

To avoid the writer's block

First, write down everything in your head

At this stage, don't worry about grammar, logical consistency, when to create a new paragraph, etc.

It's like brain-storming. Get your ideas out.

Then, draw a bubble diagram to organize what you've written down

Finally, write down the outline of your paper

See next slide for an example

This is what I've written to organize paragraphs on Zimbabwe in Chapter 13 of Why Nations Fail

First paragraph

Clearly state your conclusion

The theory of Why Nations Fail does explain Japan's economic growth after WWII. However, it does not fully account for economic stagnation in Japan since the 1990s.

e.g.

This way, while the reader (me) goes through your paper, he can understand why you mention this and that.

It's pain for the reader to read many sentences without knowing what you want to say

From second paragraph onwards

The first sentence(s) should be a summary of the paragraph

The same reason: it's pain for the reader to read a paragraph without knowing what you want to say

"Singapore, the consistently high-achiever in PISA, now does even better: it is the top-performing country in each subject area. The average pupil's maths score of 564 suggests Singaporean teens are roughly three years ahead of their American peers, with a score of 470."

"Other East Asian countries also score highly across most domains, as they have done since PISA was launched 15 year ago. Japan and South Korea, as well as cities such as Hong Kong and Macao, both autonomous territories of China, and Taipei, the capital of Taiwan, all have above-average results in science and maths."

See how the first sentence summarizes the whole paragraph

"PISA has flaws. It is one of many standardised tests, and tests are not all there is to learning. But it matters. It is the most influential research report in education for good reason. It offers informed guidance on what policymakers should do to fix their school systems. Just as importantly, it tells them what not to do."

Sometimes, the summary spreads across the first couple of sentences.

Last paragraph

Restate your conclusion

The reader may forget what he/she read at the beginning

Mention limitations in your argument

Be honest. 

No argument is perfect. People appreciate your ability to be aware of caveats.

Don't forget citations

(i.e. sources of information)

Finally...

Don't be a politician in other words...

Two types of citation & Why important

The reader can check if your evidence is credible.

Data sources

Someone else's argument

The reader can tell whether it is your original argument or not

How to cite a source of information

Author(s)

Title

Publication (magazine, newspaper, book publisher, website, etc.)

Year of publication

Crucial for the reader to know if information may be out-dated

For more detail, look at MIT Library's guideline

How to cite a source of information (cont.)

Method 1: Add a footnote

Around 35-50% of Japanese citizens do not support any particular political parties since the late 1990s. 

1

1

田中愛治「無党派層のこれまでと現在」nippon.com, 18 July, 2012. www.nippon.com/ja/in-depth/a01104/

How to cite a source of information (cont.)

Around 35-50% of Japanese citizens do not support any particular political parties since the late 1990s (田中 2012). 

田中愛治 (2012)「無党派層のこれまでと現在」nippon.com, 18 July, 2012. www.nippon.com/ja/in-depth/a01104/

References 

Then add a list of references at the end of the paper

Good luck!

Term Paper Guideline for Politics through the Lens of Economics (2018)

By Masayuki Kudamatsu

Term Paper Guideline for Politics through the Lens of Economics (2018)

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