NBER Working Papers by Murat Iyigun

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Working Papers

April 2004On the Efficacy of Reforms: Policy Tinkering, Institutional Change, and Entrepreneurship
with Dani Rodrik: w10455
We analyze the interplay of policy reform and entrepreneurship in a model where investment decisions and policy outcomes are both subject to uncertainty. The production costs of non-traditional activities are unknown and can only be discovered by entrepreneurs who make sunk investments. The policy maker has access to two strategies: policy tinkering,' which corresponds to a new draw from a pre-existing policy regime, and institutional reform,' which corresponds to a draw from a different regime and imposes an adjustment cost on incumbent firms. Tinkering and institutional reform both have their respective advantages. Institutional reforms work best in settings where entrepreneurial activity is weak, while it is likely to produce disappointing outcomes where the cost discovery process is v...

Published: Eicher, Theo S. and Cecilia Garcia-Penalosa (eds.) Institutions, Development, and Economic Growth CESifo Seminar Series. Cambridge and London: Cambridge University Press, 2006.

October 1993Population Increase, Extralegal Appropriation, and the End of Colonialism
with Herschel I. Grossman: w4488
Between 1946 and 1976, the European powers granted independence to all of their large colonies in Africa and Southeast Asia. This paper attempts to provide an economic explanation for this remarkable ending to the era of colonialism. The main theoretical innovation is to consider the effect of population increase on the allocation of time by the indigenous population between productive and subversive activities. The analysis suggests that the increase in population during the colonial period increased the potential return to extralegal appropriation of the profits of colonial companies until the colonies became a net burden on the metropolitan governments. The analysis also suggests that there was less subversive activity in colonies in which the market for indigenous labor was monopso...

Published: Economica, Vol. 64 (August 1997): 483-493.

August 1993The Profitabality of Colonialism
with Herschel I. Grossman: w4420
This paper develops an analytical framework for studying colonial investment from the perspective of neoclassical political economy. The distinguishing feature of colonial investment in this model is that the metropolitan government restricts the amount of investment in the colony in order to maximize the net profits earned in the colony. The model explicitly includes the threat of extralegal appropriative activities by the indigenous population in the colony. The analysis of this model identifies the conditions, where these conditions include both the technology of production and the technology of extralegal appropriation, that determine the profitability of colonialism. The analysis suggests why historically some countries but not others became colonies and why many colonies that were in...

Published: "The Profitability of Colonial Investment" Economics & Politics, vol. 7, November 1995, pp. 229-241.

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