Institutional Economics

Undergraduate course

School of Economics, Shandong University

Instructor: Chicheng MA

Email:macc@sdu.edu.cn

Class time: TBA

Office hours: by appointment

Course description:

This course introduces the classical theories of institutional economics and their applications in China studies. The topics of the theoretical part include transaction cost, property rights, contracts, culture, and the relationship between institutions and development. The topics regarding China studies focus on the evolution of land rights, village governance, economic transition and private businesses. As a result of taking this course students are expected to grasp the basic theories of intuitional economics and cultivate their intellectual horizons on institutional development of China.

Course materials:

The textbook isHandbook of New Institutional Economics,edited by Claude Menard and Mary M. Shirley, Springer, 2008. However, the lectures will also be based on a variety of other book chapters and articles as shown in the following Topics and Readings. The photocopies of the readings will be uploaded to the course website (www.course.sdu.edu.cn) as well as be sent to you by emails before each class.

Class Format:

Classes will be run in the forms of lectures and seminars. By seminars students are required to read the assigned materials before coming to class and to participate actively in class discussions.

Assessment:

The final grade is a combination of class participation (20%), précis (30%), and a final exam (50%).

Class Participation. It composes two parts. One is students’ performance in either raising questions or discussion in the class. The other is students’ presentations of their review report of the assigned articles, which will be held in the mid and the end of the semester, respectively. The specific instruction of the presentation will be announced later.

Précis. Each student will submit two précis during the semester. A précis refers to a summary that contains the essential details about theory, method, findings, and your own comments of an article in the reading list. For each article, a 2-page, single-spaced report usually suffices. The articles to be reviewed will be assigned later.

Final Exam. The questions will be based upon the required (with *’s) course materials.

Topics and Readings

1. Introduction to institutional economics

Textbook, Chapters 1 and 2.

2. Transaction Costs

Textbook, Chapter 3.

Coase, Ronald. 1937. “The Nature of the Firm.”Economica, 4 (16): 386–405.

Coase, Ronald. 1960. “The Problem of Social Cost.”Journal of Law and Economics, 3: 1-44.

Williamson, Oliver E. 1981. “The Economics of Organization: The Transaction Cost Approach.”American Journal of Sociology, 87(3), pp. 548-577.

Williamson, Oliver E. 1985.The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting.Preview to p. 25. New York: Free Press.

3. Property rights

Textbook, Chapter 22.

Besley, Timothy, and Maitreesh Ghatak. 2010. “Property Rights and Economic Development.” In Dani Rodrik and Mark Rosenzweig, eds,Handbook of Development Economics, Vol. 5, The Netherlands: North-Holland.

4. Contracts

Textbook, Chapters 17, 18, and 19.

MacLeod, W Bentley. 2007. “Reputations, Relationships, and Contract Enforcement.”Journal of Economic Literature, 45(3): 595-628.

5. Institution and development

Textbook, Chapters 21 and 25.

Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2004. “Institutions as the Fundamental Cause of Long-Run Growth.” NBER Working Paper 10481.

Sokoloff, Kenneth L. and Stanley L. Engerman. 2000. “History Lessons: Institutions, Factor Endowments, and Paths of Development in the New World.”Journal of Economic Perspectives, 14(3).

Acemoglu, Daron, and James A. Robinson. 2005.Economic Origins of Dictatorship and Democracy. Cambridge: Cambridge University Press.

6. Culture

Textbook, Chapter 27.

Guiso, L., P. Sapienza, and L. Zingales. 2006. “Does Culture Affect Economic Outcomes?”Journal of Economic Perspectives, 20: 23-48.

Putnam, Robert D. 1993.Making Democracy Work. Princeton, NJ: Princeton University Press.

Tabellini, G., 2010. “Culture and institutions: economic development in the regions of Europe.”Journal of the European Economic Association, 8: 677–716.

Barro, R. J. and R. M. McCleary. 2006. “Religion and Economy”,Journal of Economic Perspectives, 20: 49-72.

Becker, Sascha O., and Ludger Woessmann. 2009. “Was Weber Wrong? A Human Capital Theory of Protestant Economic History.”Quarterly Journal of Economics, 124(2): 531-596.

Bai, Ying, and James K. Kung. 2012. “Diffusing Knowledge While Spreading God’s Message: Protestantism and Economic Prosperity in China, 1840-1920.” Revise and resubmit,Journal of the European Economic Association.

7. Land property rights in rural China

Lin, Justin Yifu, 1992. “Rural Reforms and Agricultural Growth in China.”American Economic Review, 82 (1).

Kung, James K. 2002. “Choice of Land Tenure in China: The Case of a County with Quasi-private Property Rights.”Economic Development and Cultural Change, 50 (4): 793-817.

Kung, James K., and Ying Bai. “Induced Institutional Change or Transaction Costs? The Economic Logic of Land Reallocations in Chinese Agriculture.”Journal of Development Studies, 3: 1–19.

8. Village governance of China

Freedman, Maurice. 1970.Family and Kinship in Chinese Society. Stanford, Calif.: Stanford University Press.

Tsai, Lily. 2007. “Solidary Groups, Informal Accountability, and Local Public Goods Provision in Rural China.”American Political Science Review. 101 (2).

Martinez-Bravo, Monica, Gerard Padró-i-Miquel, Nancy Qian, and Yang Yao. 2012. “The Effects of Democratization on Public Goods and Redistribution: Evidence from China.” NBER Working Paper w18101.

9. Economic transition and private business

Xu, Chenggang. 2011. “The Fundamental Institutions of China’s Reforms and Development.”Journal of Economic Literature, 49(4).

Li, Hongbin, Lingsheng Meng, and Junsen Zhang. 2006. “Why Do Entrepreneurs Enter Politics? Evidence from China.”Economic Inquiry, 44(3).

Peng, Yusheng. 2004. “Kingship Networks and Entrepreneurship in China’s Transitional Economy.”American Journal of Sociology. 109 (5).

Roland, Gérard. 2000.Transition and Economics: Politics, Markets and Firms. MIT Press.