On Monday, the Nobel Prize in Economics was awarded to Turkish-American Daron Acemoglu, and British-Americans Simon Johnson and James Robinson, for their groundbreaking research on wealth inequality between nations.
The trio’s work, which explores the impact of political and economic systems imposed by European colonizers, revealed a critical link between societal institutions and prosperity, according to the Nobel committee.
“One of the greatest challenges of our time is reducing the vast disparities in income between countries,” said Jakob Svensson, chair of the Committee for the Prize in Economic Sciences, in a statement. He emphasized that the laureates’ research highlights the crucial role of societal institutions in fostering prosperity and addressing these income disparities.
Daron Acemoglu, 57, and Simon Johnson, 61, both serve as professors at the Massachusetts Institute of Technology (MIT), while James Robinson, 64, is a professor at the University of Chicago.
The Nobel jury praised their contributions for demonstrating how political and economic institutions are key to understanding why some countries succeed economically while others remain trapped in poverty. According to the committee, their work offers valuable insights into the root causes of inequality between nations.
Jan Teorell, a professor of political science and a member of the Nobel committee, further explained during a press conference, “While poorer countries are getting wealthier, the gap between them and richer nations is not closing fast enough.” He attributed a significant portion of this persistent income gap to differences in the political and economic structures of societies, as demonstrated by the laureates’ research.
‘Inclusive Institutions’
The committee’s statement explaining the prize cited an example from the laureates’ research, focusing on the divided city of Nogales, which straddles the U.S.-Mexico border. The residents on the U.S. side of Nogales generally enjoy better living standards. According to the Royal Swedish Academy of Sciences, this discrepancy is not due to geography or culture, but rather to institutional differences.
In the U.S., the economic and political systems grant residents of Nogales greater opportunities to choose their education and career paths, along with broad political rights. Meanwhile, across the border in Mexico, residents are subject to different economic conditions, and the political system provides less opportunity for them to influence laws or improve their lives.
This research underscores how economic prosperity is closely tied to the strength and inclusivity of a nation’s institutions. The laureates have also provided an explanation for why certain countries find themselves caught in a cycle of “low economic growth”—a situation often perpetuated by weak or extractive institutions.
Daron Acemoglu expressed his delight upon receiving the award. Speaking from Athens, he told reporters that their work strongly supports the idea that democracy plays a pivotal role in economic development. “Our research shows that countries transitioning from non-democratic regimes to democratic ones experience faster economic growth,” Acemoglu said. “And it’s a substantial gain.”
Acemoglu is known for his influential publications, including the bestselling book Why Nations Fail: The Origins of Power, Prosperity, and Poverty. His work, alongside that of Johnson and Robinson, has shaped our understanding of the critical role that institutions play in determining the wealth and well-being of nations.
The trio’s research has had a profound impact on both the academic community and policymakers. By illuminating the importance of inclusive political and economic institutions, they have provided a framework for addressing global inequality. Their findings suggest that reforms aimed at strengthening democratic governance and improving institutional quality can help lift nations out of poverty and narrow the income gap between countries.
The Nobel committee’s decision to award the prize to Acemoglu, Johnson, and Robinson reflects the growing recognition of the role that institutional factors play in shaping economic outcomes. Their work continues to inspire economists, political scientists, and development experts who are focused on tackling the complex challenge of global inequality.
