WFP Donates Food to Victims of "Hanna" Storm in Haiti

Political Economy and Development Cooperation

Successful economic development requires a complex interplay of people, firms, and institutions. In our research, we explore how this interplay is affected by formal institutions, social norms and preferences, and international cooperation.

First, we study how the institutional environment in which individuals live influences their choices and shapes the economy. We do so, for example, by investigating the role of public officials in forming state capacity and providing government services. 

Second, economic development is determined by informal rules, norms, and the preferences of agents. As part of this research area, we study questions such as how ethnic diversity influences economic development or what role social networks play in explaining the economic behavior of agents.

Third, we study how international cooperation shapes – and is shaped by – the behavior of economic agents and institutions. Much of our research in this area has long focused on foreign aid. One serious shortcoming common to most previous studies is that they were based on highly aggregated aid flows and broadly defined outcome variables. That conceals significant differences across specific aid categories and the targeted performance indicators. Likewise, the cross-country studies still dominating the empirical literature on foreign aid usually lump together very heterogenous developing economies, thereby rendering proper inference difficult.

Across our research on the three topics, we seek to overcome shortcomings in the existing literature by using detailed data and novel empirical approaches in our current work.

  • Employing more disaggregated data allows studying transmission mechanisms to arrive at a more nuanced picture. Often this can help explain previous puzzling results of more aggregate approaches and adds statistical power to analyses.  
  • Geo-coded data, i.e., data that come with GPS coordinates, can help estimate effects more precisely than traditional macro approaches that only use national data. For example, combining data on aid project locations and geo-tagged household survey data allows understanding cause and effect relationships.
  • Cross-disciplinary research can improve our understanding and empirical modelling by adding important aspects such as the role of local institutional differences and political economy considerations.
  • Data shortages can be overcome by generating new data. By exploiting information from remote-sensing (e.g., satellites), online social networks or original data collected from surveys, we can approach research questions in new ways.

Selected external project partners

Axel Dreher (University of Heidelberg), Mauro Lanati (Migration Policy Centre, Florence), Bradley Parks (AIDDATA, William & Mary College, Williamsburg)