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This lecture focuses on the impact of colonial settlement, health conditions, and institutions on African economic development. It discusses the research of Acemoglu, Johnson, and Robinson (2001) on the relationship between tropical disease, European settlement, government institutions, and economic growth. Methodological issues such as omitted variable bias and randomized experiments are also explored. Additionally, the lecture covers Miguel's study (2005) on the link between worms, education, health, and income. The consequences of worm infections, its transmission through poor hygiene, and cheap treatment options are highlighted. The lecture emphasizes the importance of considering omitted variable bias in OLS regression analysis.
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Economics 172Issues in African Economic Development Lecture 5 January 30, 2006
Outline: • Acemoglu, Johnson, and Robinson (2001) on colonial settlement, health, and institutions • Methodological issues: Omitted variable bias and randomized experiments • Miguel (2005) – worms and education Economics 172
Acemoglu, Johnson, Robinson (2001) Economics 172
Acemoglu, Johnson, Robinson (2001) • Their main argument: Less tropical disease More European settlement Better government institutions (e.g., rule of law) Faster economic growth Economics 172
Acemoglu, Johnson, Robinson (2001) • Concern: Omitted variable bias Economics 172
Acemoglu, Johnson, Robinson (2001) • Concern: Omitted variable bias 1. Tropical disease Economic performance today Economics 172
Acemoglu, Johnson, Robinson (2001) • Concern: Omitted variable bias 1. Tropical disease Economic performance today 2. “High potential” regions Economics 172
Miguel and Kremer (2004) • Education is a possible channel linking health, income Poor health Lower income Economics 172
Miguel and Kremer (2004) • Worms are among the world’s most prevalent diseases: Parasite # infections globally Hookworm 1.3 billion Roundworm 1.3 billion Whipworm 900 million Schistosomiasis 200 million • Health and nutrition consequences Economics 172
Miguel and Kremer (2004) • Transmission of worm infections is through poor hygiene and sanitation Economics 172
Miguel and Kremer (2004) • Transmission of worm infections is through poor hygiene and sanitation • Treatment is cheap (<US$1 per year) Economics 172
Omitted variable bias in OLS Economics 172
Omitted variable bias in OLS (1) Yi = a + bTi + cXi + ei Economics 172
Omitted variable bias in OLS (1) Yi = a + bTi + cXi + ei (2) E(Yi | T=1) – E(Yi | T=0) = [a + b + E(Xi | Ti=1) + E(ei | Ti=1)] – [a + 0 + E(Xi | Ti=0) + E(ei | Ti=0)] = b + c [E(Xi | Ti=1) – E(Xi | Ti=0)] Economics 172
Omitted variable bias in OLS Economics 172
For next time: Read Miguel (2005) Economics 172
Whiteboard #1 Economics 172
Whiteboard #2 Economics 172
Whiteboard #3 Economics 172
Whiteboard #4 Economics 172
Whiteboard #5 Economics 172
Map of Africa Economics 172