J-PAL affiliates awarded 2024 Nobel Prize in Economics

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2024 was awarded jointly to J-PAL affiliate Daron Acemoglu, Simon Johnson, and J-PAL affiliate James A. Robinson "for studies of how institutions are formed and affect prosperity."

From NobelPrize.org:

The richest 20 per cent of the world’s countries are now around 30 times richer than the poorest 20 per cent. Moreover, the income gap between the richest and poorest countries is persistent; although the poorest countries have become richer, they are not catching up with the most prosperous. Why? This year’s laureates have found new and convincing evidence for one explanation for this persistent gap – differences in a society’s institutions.

Providing evidence for this is no easy task. A correlation between the institutions in a society and its prosperity does not necessarily mean that one is the cause of the other. Rich countries differ from poor ones in many ways – not just in their institutions – so there could be other reasons for both their prosperity and their types of institutions. Perhaps prosperity affects a society’s institutions, rather than vice-versa. To arrive at their answer, the laureates used an innovative empirical approach.

Acemoglu, Johnson and Robinson examined Europeans’ colonisation of large parts of the globe. One important explanation for the current differences in prosperity is the political and economic systems that the colonisers introduced, or chose to retain, from the sixteenth century onwards. The laureates demonstrated that this led to a reversal of fortune. The places that were, relatively speaking, the richest at their time of colonisation are now among the poorest. In addition, they used mortality figures for the colonisers, among other things, and found a relationship – the higher mortality among the colonisers, the lower today’s GDP per capita. Why is this? The answer is settler mortality – how ‘dangerous’ it was to colonise an area – affected the types of institutions that were established.

The laureates have also developed an innovative theoretical framework that explains why some societies become stuck in a trap with what the laureates call extractive institutions, and why escaping from this trap is so difficult. However, they also show that change is possible and that new institutions can be formed. In some circumstances, a country can break free of its inherited institutions to establish democracy and the rule of law. In the long run, these changes also lead to reduced poverty.

Read more about the laureates' groundbreaking work.