Seminar 6 (Nov 23)

I. Can the whole world be as the Nordic countries?

1. Explain why Gorodnichenko and Roland (2017) claim that individualism is good for long run growth. Go on to explain how they test this empirically and how they can claim to find a causal relationship.
2. In a VOX EU piece, Acemoglu and co-authors claim that the real engine of growth in the world are cut-throat capitalist countries and that the Nordic model can only survive is someone else is doing the hard work (see also their published paper).
   Explain their veiew and discuss it critically
3. In a reply, Maliranta and co-authors claim that contrary to Acemoglu et al.'s claim, innovation rates are much higher in the Nordic countries than in most other places. Explain their criticism of Acemoglu et al.'s paper.
4. Discuss whether a Nordic style economic organization leads to more or less innovation, growth, and welfare than  a more conventional capitalist approach.

II. Complementary institutions

1. What do Barth and Moene (2016) mean by complementary institutions?
2. Explain the mechanisms through which a larger welfare state leads to higher wage compression
3. Explain the mechanisms through which wage compression leads to increased support for welfare spending. To what extent can this mechanism be combined with the fact that richer voters are less inclined to support the welfare state?
4. Barth and Moene's model can (in linear form) can be written as\(g_{it}=\alpha+\beta Ineq_{it}+\epsilon_{it} \\ Ineq_{it}=\gamma+\delta g_{it}+\nu_{it}\)
   1. Set the residuals to zero and solve the system of equations.
   2. A shock to wage formation can be modelled as a change in \(\gamma\). What is the effect of an equalizing shock, i.e. an decrease  in \(\gamma\)?
   3. What does it mean that the equality multiplier is 1.48?
5. What challenges do we encounter if we want to take this model to the data? How do Barth and Moene solve them?