Introduction

In this assignment, you will demonstrate your ability to understand and conduct an instrumental variables analysis by replicating the main analysis from the article “The Colonial Origins of Comparative Development: An Empirical Investigation” (Acemoglu et al., American Economic Review, 2001). Acemoglu, Johnson, and Robinson won the 2024 Nobel prize in economics for their work on this article and related ones on institutions.

See also, for example, “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution” (Acemoglu et al., Quarterly Journal of Economics, 2002).

Abstract

Formalities

Your assignment should be a maximum of 14,400 characters.*
* excluding your code, tables, table notes, figure notes, and bibliography

All of the requirements below are standard in basically all working papers in political science and for submission to journals, so please stick to the following conventions:

  • 12-point font
  • 1 inch margins
  • Double-spaced
  • No Table of Contents
  • 14,400 characters maximum
    • Excluding your code, tables, table notes, figure notes, bibliography

If you write your assignment in LaTeX (e.g. Overleaf) it’s therefore:

  • \documentclass[12pt, A4]{article}
  • \usepackage[margin = 1in]{geometry}
  • \doublespacing after your \begin{document}

If you want to use the Overleaf template that I use for my own academic manuscripts, you can find it here.

Expectations

The technical side of your assignment should, of course, be well-executed. But make sure to focus a lot of your energy on the structure and clarity of your writing. The reason that students often do not receive the grade that they might hope for is because the written part of their assignment is unclear. A few points:

  • When discussing a method or test used in the article, explain it in plain non-technical language before turning to any abstract or technical language
  • When discussing a statistical test, provide the theoretical or substantive reason why it is being used (again, in plain, non-technical, non-abstract language)
  • Even if your audience understands the technical side of things, you always want to give a reader some intuition behind what you’re doing

Instructions

Data: Assignment_2A_Data.zip

Codebook (for the variables you will use only):

shortnam: Country abbreviation
baseco: Whether observations is part of authors’ “Base sample”
avexpr: Average expropriation risk, 1985–1995
logpgp95: Log GDP per capita PPP, 1995
loghjypl: Log output per worker in 1988
logem4: Log of settler mortality
lat_abst: Country’s latitude
asia: Country is in Asia
africa: Country is in Africa
other: Continent is not Asia, Africa, or America
rich4: Country is in neo-Europe

Your assignment must proceed as follows:

  1. Read the article: “The Colonial Origins of Comparative Development: An Empirical Investigation”.

Now, do the following in your written assignment and your accompanying R code:

Introduction

  1. Briefly introduce the article that you are replicating:
    - Introduce the topic
    - Introduce the research question
    - Introduce the hypothesis or hypotheses

Research design

  1. Explain the authors’ research design:
    - The empirical strategy and data
    - The identifying assumptions
    • How does their research design allow them to estimate a causal effect and what are the potential threats to causal inference?
    • It should be clear from this section that you know how an instrumental variables research design works

Analysis

  • Note: Results from the replication data will be slightly different from those in the article (e.g. sample sizes or regression estimates very slightly from those in the article). If you end up with any big differences, you probably did something wrong.
  • Suggestion: use read_dta() from the haven R library to load in each of the three datasets at the top of your code. So maybe you have datasets loaded that you call T1, T2, and T4, which are the data loaded from maketable1.dta, maketable2.dta, and maketable4.dta respectively.
  1. Replicate Figure 1 from the article using the data in maketable1.dta.
    - Explain what the figure is showing and why it matters.
    - Note: Graph only the countries in the base sample (n = 64), even if in the text it says that there are 75 countries in that figure.
    - Your figure might look something like this, but make it look however you want:
    Example figure
  2. Replicate Figure 2 using the data in maketable1.dta.
    - Briefly explain its purpose.
    - Your figure might look something like this, but make it look however you want:
    Example figure
  3. Replicate Figure 3 using the data in maketable1.dta.
    - Explain its purpose briefly (it will go hand-in-hand with results in Panel B of Table 4 below).
    - Your figure might look something like this, but make it look however you want:
    Example figure
  4. Replicate Panel A and Panel B from Table 4 (not Panel C) using the data in maketable4.dta.
    - You can separate Panels A and B into 2 tables in your written assignment if you wish, or have it in two panels in the same table as the authors do.
    - For Models (7) and (8) you will need to construct your “other continent” variable, because it’s not already in the dataset. Construct a binary variable other that is defined as 1 if the variable shortnam is “AUS”, “MLT”, or “NZL”; and is a 0 otherwise.
    - Explain the results in both Panel A and Panel B in Table 4. It will likely be better to explain the results in Panel B first (the “first-stage”), and then explain the results in Panel A.
    - Include the F-statistics in Panel B, and remark on what they show.
    - Note that you will need to manually input a row of F-statistics for the models here.

Discussion

  1. Explain the overall findings of the article. One paragraph should suffice.
  2. Discuss the benefits and drawbacks of the research design as it is applied in the article.

Now that your assigment is done, let’s see what academic economists think of Acemoglu et al. (2001)…

This section is for context only; you don’t need to address it in your assignment.

Recently, academic economists were surveyed about whether they believe the findings in Acemoglu et al. (2001) and whether they think the instrument is valid. The results are below. They show that the vast majority of economists believe the theoretical claim that institutions are extremely important for economic success. But as for the validity of the instrument and the empirics in the paper, ¯\(ツ)/¯.

Economist survey

Submission instructions

  1. Formatting requirements!

    • 12-point font
    • 1 inch margins
    • Double-spaced
    • No Table of Contents
    • 14,400 characters maximum
      • Excluding your code, tables, table notes, figure notes, bibliography

  2. Your code should be commented so that it is clear to me that you know what each piece of code does. You don’t need to be excessive, but comment your code in a way that you think is reasonable.

  3. If you are in a group, only one of you needs to submit the assignment. Just ensure that all of your student IDs are on the title page.

  4. Submit your assignment and R code separately. Please send your assignment as a PDF and use an equivalent file name across the files:

    • Assignment_2A.pdf
    • Assignment_2A.R

  5. Submit through Absalon under “Assignment 2A”.