At a Glance

Founded2004
Renewal dates2008, 2014
Members24
SupportersIra Gluskin and Maxine Granovsky Gluskin Charitable Foundation Stephen Lister and Molly Rundle Scotiabank Anonymous Donor
Disciplines
Economics; political science; economic and political history; social psychology; anthropology

Why are some countries rich and others poor?

Throughout history economies around the world have developed with varying degrees of success.  How well they perform over time is influenced to a large degree by systems of governance, such as the political institutions, laws and even cultural norms that guide the exchange of wealth and power in society. The relations run both ways: as countries develop, this also brings about change in their institutions.

CIFAR’s program on Institutions, Organizations & Growth aims to move beyond the limits of traditional economic approaches and provide new frameworks for understanding why some nations succeed economically while others continually fail; why institutions that foster wealth and well-being in one culture, location, or historical period may be less effective in another; and what policies will create the greatest potential for progress.

CIFAR researchers are concerned with the way in which social order arises, or not, at different levels of society, from families and groups, to regions and nation states, to the level of the world community. Their emphasis is on formal institutions like political systems and informal institutions like norm systems. Their broad framework of social order and institutions makes a new analysis possible on many of the timeless problems facing societies, such as why some countries, societies and states are:

  • rich while others are poor,
  • equal while others are unequal,
  • democratic while others are autocratic,
  • strong while others are weak, and
  • peaceful while others are violent.

Our unique approach

Since the launch in 2004, researchers of the program have been at the forefront of integrating the role of political institutions and the ways in which society is organized into a framework for understanding prospects for economic growth and development.

Today, they continue to break new ground by uniquely combining and cultivating insights from across a broad range of disciplines – economics, political science, sociology, anthropology, psychology and history – into a fully integrated social science with a unique lens on social order. By tackling the role that social order plays in shaping the economic well-being of a nation, IOG researchers aim to shed light on how to best address some of the toughest issues facing the world today, from poverty and inequality to instability and violence.  Members draw on a broad range of methods and approaches, including theoretical modeling, statistical analysis of large data sets, experimental methods (in laboratory and field), and archival analysis of original historical data.  Bringing complementary approaches to bear on the same research question is creating knowledge greater than the sum of its parts.

In going forward, the program will tackle three major analytical challenges:

  • the interaction between formal and informal institutions and rules;
  • the interplay between the de facto power of individuals and social organizations, the economic structure of a nation, and the de jure power of the state and its institutions; and
  • the international dimension, including how economic and political decision in one country shape the trajectory of others, and how the interests of countries dynamically interact within international organizations.

Why this matters

With momentous political, social and economic shifts transforming nations around the world, real understanding of development success and failure has never been more urgent or more possible. The large body of research produced by members contributes significantly to a new understanding that institutions are not static entities, but dynamic forces with the power to affect citizens, communities and global development and be shaped by them in turn.

The work of CIFAR researchers can prospectively help poor nations grow out of poverty and provide insights that will guide international institutions, like the World Bank and the International Monetary Fund, to function in a better way.  Members are regularly sought after for advice by world leaders, in Europe, Asia, and North America.  Their work is affecting national and international policy on a variety of issues, from improving economic development and foreign aid, to managing political corruption and violent conflicts.

Close up of the US Supreme Court building, with the inscription Equal Justice Under Law.
The program examines the importance of institutions of all kinds, include government, economic, and social. CC-BY-SA-3.0/Matt H. Wade

In depth

The program’s objective is to develop an integrated approach to the study of institutional dynamics that shape economic growth.  Over its first 10 years, this program has been at the forefront of linking the political and social structures of a country to its economic prospects and demonstrating that there is no one solution for all, that each country’s economy responds differently to institutional and organization structures because of its unique historical context.

Program members explore formal rules that characterize institutions as well as informal rules, and how actual modes of behavior respond to these rules. This is because institutions shape individual incentives not only through formal and legal provisions, but also through informal norms, habits and expectations.  For example, the different approaches to the role of the state in the United States and Europe is deeply rooted in social order that has evolved over centuries and explains why policies such as Scandinavian style redistributive intervention, or a nationalized health‐care system, are unacceptable to many in the United States.

The members have produced a large number of papers and books covering a range of themes that investigate how economic progress is impacted by such variables as the effects of democratic governance, the impact of political instability, the nature of electoral processes, the role of regime structure and state capacity.  Notable co-authorships among members include an investigation of the role of coercive labour institutions on trade in the Americas (Greif and Trefler), the historic evolution of female property rights throughout the world (Anderson and Greif); the efficiency underpinnings of non-profit organizations (Besley and Francois); the drivers behind development clusters in the form of rich countries with strong states and peaceful societies (Besley and Persson); economic causes and consequences of guerilla insurgencies (Trebbi and Weese); the frequency and impact of female chiefdoms in Africa (Anderson and Robinson); and an investigation on the impact of outsourcing (Trefler and Helpman).

PETER BRUEGEL: DEATH. Triumph of Death; tempera on panel, c1562, by Peter Bruegel the Elder.
In Why Nations Fail, Senior Fellow Daron Acemoglu explores the role political and economic institutions, which can be heavily influenced by critical historical junctures like the plague. Illustration, The Triumph of Death by Brueghel the Elder

A major outcome of the program was the 2012 book, Why Nations Fail: Origins of Power, Poverty and Prosperity, co-authored by CIFAR Senior Fellow Daron Acemoglu and former CIFAR Senior Fellow James A. Robinson.  The book received critical acclaim for establishing a provocative new theory that delineates the difference between exclusive and inclusive institutions, which offers an explanation of why countries with similar natural resources follow such differing arcs of economic and political development. The authors argue that above all else, political institutions – not culture, religion or natural resources – determine the wealth of nations, and the more inclusive and democratic, the greater are the prospects for prosperity.

Armed conflict is one of the most important obstacles to economic development in the poorest countries, with many poor countries experiencing ongoing political violence since they became independent after 1945. CIFAR Senior Fellow James Fearon has produced the first empirical assessment of how much continuity there is in these places over the last 200 years. His main finding is that conflict persists in certain countries, but not in the way which is commonly assumed. While places that housed colonial or imperial wars in the 19th century have seen significantly more civil wars post-independence after 1945, there is no evidence that this reflects the same ethnic groups fighting each other in both periods.

Program members have also developed empirical studies to assess how institutions and organizations influence economic outcomes. For instance, Senior Fellow Joseph Henrich used laboratory and field experiments to show that people in societies with institutions capable of meeting basic needs were likely to divide up money in an impartial way, while those living in societies without reliable institutions favored members of their local community.

In addition to their theoretical and analytical work, CIFAR Fellows have been invited to comment on key policy decisions through consultations with or presentations to government officials in Canada, the United States, the European Union, Puerto Rico, Brazil and Pakistan. In December 2013, for example, CIFAR Co-Director Torsten Persson and Senior Fellows Daron Acemoglu and Philippe Aghion met with senior Chinese officials to give advice on the importance of institutional reform for sustained economic growth.

Selected books and papers

Daron Acemoglu and Jim Robinson, Why Nations Fail: The Origins of Power, Prosperity and Poverty, Crown Business, 2012.

Philippe Aghion and Peter Howitt, The Economics of Growth, MIT Press, 2008.

George Akerlof and Rachel Kranton, Identity Economics, Princeton University Press, 2010.

Siwan Anderson and Debraj Ray, “Missing Women: Age and Disease,” Review of Economic Studies 77, 1262–1300, 2010.

Roland Bénabou and Jean Tirole, “Incentives and Prosocial Behavior.” American Economic Review 96, 1652-1678, 2006.

Tim Besley and Torsten Persson, Pillars of Prosperity: The Political Economics of Development Clusters, Princeton University Press, 2011.

Avner Greif, Institutions and the Path to the Modern Economy: Lessons from Medieval Trade, Cambridge University Press, 2006.

Elhanan Helpman, editor, Institutions and Economic Performance, Harvard University Press, 2008.

Matt Jackson, Social and Economic Networks, Princeton University Press, 2008.

Guido Tabellini, “Culture and Institutions: Economic Development in the Regions of Europe”, Journal of the European Economic Association 8, 677-716, 2010.

 

Fellows & Advisors

Photo of Torsten Persson

Torsten Persson

Program Director

Torsten Persson's research focuses on the politics of economic policymaking. He is an expert on how income distribution influences economic growth and how policy is created in federations. Persson’s most…

Read More >

Fellows

Daron Acemoglu

Senior Fellow

Massachusetts Institute of Technology

United States

Philippe Aghion

Senior Fellow

Collège de France

France

George Akerlof

Senior Fellow

Georgetown University

United States

Siwan Anderson

Associate Fellow

University of British Columbia

Canada

Roland Benabou

Associate Fellow

Princeton University

United States

Timothy Besley

Gluskin-Granovsky Fellow

London School of Economics & Political Science

United Kingdom

Matilde Bombardini

Fellow

University of British Columbia

Canada

Daniel Diermeier

Senior Fellow

University of Chicago

United States

Mauricio Drelichman

Fellow

University of British Columbia

Canada

James Fearon

Senior Fellow

Stanford University

United States

Patrick Francois

Senior Fellow

University of British Columbia

Canada

Avner Greif

Senior Fellow

Stanford University

United States

Elhanan Helpman

Distinguished Fellow

Harvard University

United States

Joseph Henrich

Senior Fellow

Harvard University

United States

Matthew Jackson

Senior Fellow

Stanford University

United States

M. Marit Rehavi

Fellow

University of British Columbia

Canada

Guido Tabellini

Senior Fellow

Bocconi University

Italy

Francesco Trebbi

Fellow

University of British Columbia

Canada

Daniel Trefler

Senior Fellow

University of Toronto

Canada

Advisors

Robert Boyd

Advisor

Arizona State University

United States

Joel Mokyr

Advisory Committee Chair

Northwestern University

United States

Roger B. Myerson

Advisor

University of Chicago

United States

Kenneth Shepsle

Advisor

Harvard University

United States

Program Timeline

Program launches

CIFAR launches the Institutions, Organizations & Growth (IOG) program, which

First study to show economic damage of caste system

CIFAR Associate Siwan Anderson (University of British Columbia) sheds new

Game theory tracks the rise and fall of institutions

CIFAR Senior Fellow Avner Greif (Stanford University) uses game theory

New model shows foreign intervention ends civil wars

CIFAR Senior Fellow James Fearon (Stanford University) and David Laitin

The growth of states is tied to legal capacity

In his presidential address to the Econometric Society, CIFAR Senior

Research finds inequality leads to many female deaths

In some developing countries, there are vastly more men than

Firms in competitive industries lobby together, analysis finds

CIFAR Fellows Matilde Bombardini and Francesco Trebbi (University of British

Guido Tabellini advises European Union on debt crisis

CIFAR Senior Fellow Guido Tabellini (Universita Bocconi) advises the European

Book Why Nations Fail argues institutions drive nations' wealth

CIFAR Senior Fellows Daron Acemoglu (Massachusetts Institute of Technology) and

Elhanan Helpman

2004

Program launches

CIFAR launches the Institutions, Organizations & Growth (IOG) program, which takes an integrated approach to the question of what makes some countries rich and others poor, examining the effects of institutions and organizations on economic growth. The program, led by CIFAR Senior Fellow Elhanan Helpman (Harvard University), is composed of internationally distinguished researchers from Canada, the United States, the United Kingdom, Europe and Israel. Their collective expertise spans a wide range of subjects within the fields of economics, history, anthropology and political science.

Credit: Credit: The Philosophy of Photography/Flickr

Residents of a village near Madurai, Tamil Nadu, India

2005

First study to show economic damage of caste system

CIFAR Associate Siwan Anderson (University of British Columbia) sheds new light on social segregation as an impediment to economic success. She compares outcomes between two types of villages in a poor region of rural India and finds that low caste households living in predominantly low-caste villages have much higher income than low-caste families living among those of a higher caste. This is the first study to quantify the economic losses that occur due to the break-down of trade across social groups. The final paper is published in the American Economic Journal in 2011.

Credit: Credit: American Economic Journal

Relationship between GDP growth and average tariffs

2005

Good institutions offset high tariffs: landmark study

In the first systematic study into the structure of tariffs and economic growth, CIFAR Senior Fellow Daniel Trefler (University of Toronto) and CIFAR Scholar Nathan Nunn (University of British Columbia) support their prediction that a country with good institutions will tolerate high average tariffs if they are biased towards skill-intensive industries. The researchers interpret their findings to mean that countries grow faster if they choose carefully which industries to protect with high tariffs and limit lobbying.

Credit: Credit: Universitätsbibliothek Salzburg

Map of Europe circa 1570

2005

Statistical analysis finds prosperity in long distance trade

CIFAR Senior Fellows Daron Acemoglu (Massachusetts Institute of Technology) and James Robinson (Harvard University) introduce statistical analysis into the study of how long distance trade impacted institutional development and economic growth. They show that after the discovery of America, European countries that had access to the Atlantic Ocean, and used it to trade, developed good institutions sooner and prospered as a result.

Credit:
Credit: Cambridge University Press

Cover image of Institutions and the Path to the Modern Economy by CIFAR Senior Fellow Avner Greif

2006

Game theory tracks the rise and fall of institutions

CIFAR Senior Fellow Avner Greif (Stanford University) uses game theory — the study of strategic decision making by intelligent individuals — to study economic history. He shows how strategic interactions between economic and political actors can explain the emergence of institutions and their decline.

Credit:
Credit: International Monetary Fund

Cover of the World Economic Outlook

2006

Innovative ideas on development reach global institutions

New thinking on more effective approaches to international development leads CIFAR Senior Fellow James Robinson (Harvard University) to influence public policy decision making. Robinson serves as academic advisor to the World Bank on their World Development Report and on their Governance Report on Bolivia, and advises the International Monetary Fund on their World Economic Outlook. He also serves on a team from the Center for International Development at Harvard, advising the government of South Africa on their growth strategy.

Credit:
Credit: UN Photo / Wolfgang Grebien

UNDOF peacekeepers patrol Golan Heights

2007

New model shows foreign intervention ends civil wars

CIFAR Senior Fellow James Fearon (Stanford University) and David Laitin develop a model to study the economic factors that influence power shifts in civil wars. They show that civil conflicts tend to be "all or nothing" fights for control of central or regional governments that rely heavily on how much cost each side can tolerate to maintain the fighting. As a result, foreign intervention that cripples the military capability of one side tends to be the catalyst that terminates civil wars.

Credit:
Credit: Wikipedia Commons

The Royal Courts of Justice, London

2007

Strong institutions make R&D more productive

CIFAR Senior Fellow and Program Director Elhanan Helpman (Harvard University), jointly with David Coe and Alexander Hoffmaister from the International Monetary Fund, complete a study of the impact of R&D on productivity, looking at how institutions support this relationship. They find that countries with high-quality education systems and strong patent protection, and those where it is easy to do business, benefit more from their own R&D and that of their trade partners.

Credit:
Credit: American Economic Journal

Residuals of democracy

2007

Measurements find democracy bolsters economic growth

CIFAR Senior Fellows Torsten Persson (Stockholm University) and Guido Tabellini (University Bocconi) study the dynamics of economic and political change. They measure countries' democratic capital, based on history and geography, and compare it with changes to economic growth. Their findings show a virtuous circle: accumulation of physical and democratic capital reinforce each other, promoting economic development jointly with the consolidation of democracy.

Credit: Credit: Wikipedia Commons

A statue of Lady Justice

2008

The growth of states is tied to legal capacity

In his presidential address to the Econometric Society, CIFAR Senior Fellow Torsten Persson (Stockholm University) describes an ongoing research project about the growth of strong states that is at the heart of the Institutions, Organizations & Growth program. Later published as a paper co-authored with CIFAR Gluskin-Granovsky Fellow Timothy Besley (London School of Economics & Political Science), the address describes a new model of investing in state capacity, defined as improving a state's ability to implement a wide range of policies. It argues that states without this legal capacity could be more at risk of civil war and low economic growth, and that the model can help explain why some states stay weak and poor while others grow quickly, getting rich in the process.

Cover from CIFAR Reach magazine, winter 2009

2009

Research finds inequality leads to many female deaths

In some developing countries, there are vastly more men than women, and gender bias at birth as well as mistreatment are commonly cited as explanations. However, using data from United Nations and the World Health Organization, CIFAR Associate Siwan Anderson (University of British Columbia) discovers that a large number of missing women in India and China died as adults. Anderson builds a picture of the diseases and injuries that killed women in these countries at various stages of life — including childbirth and cardiovascular disease — many of which are preventable. She also discovers that an overwhelming proportion of all female deaths are the results of inequality.

Credit:
Credit: Wikipedia Commons

Typical voting booth at a Canadian Federal election polling station

2009

Theory argues that voters perpetuate partisanship

CIFAR Associate Anke Kessler (Simon Fraser University) develops a novel theory for why political leaders continue to promote a specific ideology despite evidence suggesting they should revise their view. As she shows, the fact that voters expect both policies and a politician's interests to be ideologically based could be causing politicians to act partisan in the first place.

Credit:
Credit: Boone Valley Lumber

Lumber with the IPPC export stamp designating readiness for international trade

2010

Firms in competitive industries lobby together, analysis finds

CIFAR Fellows Matilde Bombardini and Francesco Trebbi (University of British Columbia) study what factors influence the trade lobbying efforts of firms in various industries. They find that firms with less direct competition tend to lobby alone for tariffs directly affecting their products; and, with higher tariffs and little competition, they have more opportunity to raise prices and thereby increase their profits. However, firms in highly competitive industries can’t benefit from operating independently, since they can lose market share if they raise prices. Instead, competitive firms need to work as a collective and lobby together; for example, through a trade association, which will pursue protection for the entire industry. The researchers find that industries that have more lobbying done through trade associations are more successful in obtaining higher tariffs.

Credit:
Credit: Wikipedia Commons

The gold Florentine florin and Ming Dynasty coins were in circulation from 1300 to 1600

2010

Study explains the divergence between China and Europe

CIFAR Senior Fellows Avner Greif (Stanford University) and Guido Tabellini (Universita Bocconi) make a research breakthrough in understanding one of our biggest historical puzzles — the divergence of China and Europe — during which the latter emerged much wealthier and more powerful. They study how different social structures have enforced cooperation in these societies over the last millenium by comparing Chinese clan structures and the cities of Medieval Europe. While Chinese clans were hierarchical groups that held morality and reputation high in importance, European cities relied more on formal enforcement to keep society running smoothly. The researchers argue that these differences took the two countries on diverging paths of cultural and institutional growth. Today, they write, the influences of clan and Medieval city life live on through distinct differences in how business is done in these two countries, including notions of trust and kinship in economic transactions.

Credit:
Credit: Wikipedia Commons

European parliament building in Strasbourg, France

2011

Guido Tabellini advises European Union on debt crisis

CIFAR Senior Fellow Guido Tabellini (Universita Bocconi) advises the European Union policy-makers on the European sovereign debt crisis. He argues that Eurozone leaders must agree to create European-level institutions to monitor national budget and banking policies and draw a line between solvent and insolvent Eurozone nations before the markets do it for them.

Credit:
Credit: Reuters

Popular Democratic Party supporters at rally during election campaign in Puerto Rico

2011

Public audits only reduce corruption in the short-term

CIFAR Fellow Gustavo J. Bobonis (University of Toronto) studies whether local governance improves if voters are informed about politicians' activities. In Puerto Rico, the Office of the Comptroller audits municipalities and then makes the method and results available to the media. The study found that audit reports released before an election reduced corruption and increased incumbent mayors accountability. But the effects didn't last in the terms that followed. The disappointing conclusion is that audits have only short-lived effects on political corruption; their impacts dissipate in the long run.

Credit:
Credit: whynationsfail.com

Cover of Why Nations Fail by CIFAR Senior Fellow Daron Acemoglu and James A. Robinson

2012

Book Why Nations Fail argues institutions drive nations' wealth

CIFAR Senior Fellows Daron Acemoglu (Massachusetts Institute of Technology) and James Robinson’s (Harvard University) book, Why Nations Fail, challenges past arguments that culture, geography or natural resources are the primary factors that make countries rich or poor, arguing instead that institutions matter most. Based on 15 years of original research, Acemoglu and Robinson argue that nations must not nurture extractive political and economic institutions that give power to a small elite at the expense of the majority. They marshal extraordinary historical evidence from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, North America and elsewhere to build a new theory of political economy with great relevance for the big questions of today.

For more information, watch CIFAR Senior Fellow Daron Acemoglu debate some of the leading questions of our day with award-winning The Globe and Mail journalist, Doug Saunders.

Ideas Related to Institutions, Organizations & Growth

Institutions, Organizations & Growth | News

Besley named to UK infrastructure commission

Tim Besley, Gluskin-Granovsky Fellow in the program in Institutions, Organizations & Growth, has been appointed to the UK’s National Infrastructure...

Institutions, Organizations & Growth | Announcement

Joel Mokyr awarded Balzan Prize for Economic History

The International Balzan Prize Foundation has awarded CIFAR Advisory Committee Chair Joel Mokyr (Northwestern University) the 2015 Balzan Prize for...

Institutions, Organizations & Growth | News

African ‘big men’ share the power

There’s a deeply entrenched caricature of the African dictator: an egomaniacal bully who imposes his ethnic interests on everyone else....

Institutions, Organizations & Growth | Feature

Inequality and the problem with general laws of capitalism

The French economist Thomas Piketty scored an unlikely best-seller in 2013 with his book Capital in the Twenty-First Century, which...