At a Glance

Founded2004
Renewal dates2008, 2014
Members24
SupportersBMO Financial Group Maxine Granovsky and Ira Gluskin Jon and Laura Hantho Scotiabank (1 Anonymous Donor)
Disciplines
Economics; political science; economic and political history; social psychology; anthropology

CIFAR Contact

Rachel Parker, Senior Director, Research

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.

 

Contact the program’s senior director, Rachel Parker at rachel.parker@cifar.ca

READ 2016’s ANNUAL UPDATE 

 

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…

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Photo of Francesco Trebbi

Francesco Trebbi

Associate Program Director

Francesco Trebbi’s research focuses on political economy and macroeconomics, with an emphasis on monetary and fiscal policy. He has worked on topics ranging from institutional and political design to special…

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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

Fellow

University of British Columbia

Canada

Timothy Besley

Gluskin-Granovsky Fellow

London School of Economics & Political Science

United Kingdom

Matilde Bombardini

Fellow

University of British Columbia

Canada

Roland Bénabou

Senior Fellow

Princeton University

United States

Melissa Dell

Associate Fellow

Harvard University

United States

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

Thomas Fujiwara

Associate Fellow

Princeton University

United States

Avner Greif

Senior Fellow

Stanford University

United States

Elhanan Helpman

Distinguished Fellow

Harvard University

United States

Joseph Henrich

Senior Fellow

Harvard University

United States

Kim Hill

Senior Fellow

Arizona State University

United States

Matthew Jackson

Senior Fellow

Stanford University

United States

Ruixue Jia

Associate Fellow

University of California at San Diego

United States

M. Marit Rehavi

Fellow

University of British Columbia

Canada

Guido Tabellini

Senior Fellow

Bocconi University

Italy

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

Global Scholars

Natalie Bau

CIFAR Azrieli Global Scholar

University of Toronto

Canada

Raul Sanchez de la sierra

CIFAR Azrieli Global Scholar

University of California at Berkeley

United States

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