Advancement
Timur Kuran & Jared Rubin
Economic Journal, forthcoming
Abstract:
In advanced economies interest rates vary inversely with the borrower's socio-economic status, which itself depends inversely on default risk. These relationships depend on the impartiality of the law. Where the law is markedly biased in favour of certain groups, the latter will pay a surcharge for capital. Legal power, as measured by privileges before the law, thus undermines financial power, the capacity to borrow cheaply. Developing this argument, this paper also tests it through judicial records from Ottoman Istanbul, 1602-1799. Three privileged Ottoman groups — men, Muslims, and titled elites — all paid relatively high interest rates conditional on various loan characteristics.
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Law and Social Capital: Evidence from the Code Napoleon in Germany
Johannes Buggle
European Economic Review, August 2016, Pages 148–175
Abstract:
I test whether legal institutions crowd-in social cooperation in the long-run, using the introduction of the Code Napoleon in parts of 19th century Germany as a historical experiment. I find that the application of the Code Napoleon is associated with higher levels of trust and cooperation today. This finding is robust to an identification strategy that uses only individuals located around a discontinuity in the number of years the Code Civil was used. Results from a falsification test that moves this discontinuity artificially, as well as the comparison of pre-treatment characteristics support the interpretation of a causal effect. In addition, regions around the discontinuity are similar in post-treatment economic development and inequality. On the contrary, the positive social consequences of the Code Civil manifest themselves in less political fraud in elections from 1871 to 1900, and in more “bridging” social capital in the 1920's.
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Agricultural Labor Intensity and the Origins of Work Ethics
Vasiliki Fouka & Alain Schlaepfer
Stanford Working Paper, September 2015
Abstract:
This study examines the historical determinants of differences in attitudes towards work across societies today. Our hypothesis is that a society’s work ethic depends on the role that labor has played in it historically, as an input in agricultural production: societies that have for centuries depended on the cultivation of crops with a high equilibrium labor to land ratio will work longer hours and develop a preference for working hard. We formalize this prediction in the context of a model of endogenous preference formation, with altruistic parents that can invest in reducing their offsprings’ disutility from work. To empirically found our model, we construct an index of potential agricultural labor intensity, that captures the suitability of a location for the cultivation of crops with a high estimated labor share in their production. We find that this index positively predicts the number of desired work hours and the importance placed on work in contemporary European regions. We find support for the hypothesis of cultural transmission, by examining the correlation between potential labor intensity in the parents’ country of origin and hours worked by children of European immigrants in the US.
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Early Childhood Human Capital and Development
Todd Schoellman
American Economic Journal: Macroeconomics, July 2016, Pages 145-174
Abstract:
A growing literature stresses the importance of early childhood human capital. I ask whether variation in early childhood investments can help explain cross-country income differences. I provide new empirical evidence: the adult outcomes of refugees are independent of age at arrival to the United States up to age six, despite dramatic improvements in income and environment upon arrival. A standard model is consistent with this finding if parents but not country are important for early childhood development. This finding limits the mechanisms for generating cross-country early childhood human capital differences. I also provide suggestive evidence on parental inputs.
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Democracy and growth: Evidence from a machine learning indicator
Klaus Gründler & Tommy Krieger
European Journal of Political Economy, forthcoming
Abstract:
We present a novel approach for measuring democracy based on Support Vector Machines, a mathematical algorithm for pattern recognition. The Support Vector Machines Democracy Index (SVMDI) is continuous on the [0,1] interval and enables very detailed and sensitive measurement of democracy for 185 countries in the period between 1981 and 2011. Application of the SVMDI yields results which highlight a robust positive relationship between democracy and economic growth. We argue that the ambiguity in recent studies mainly originates from the lack of sensitivity of traditional democracy indicators. Analyzing transmission channels through which democracy exerts its influence on growth, we conclude that democratic countries feature better educated populations, higher investment shares, and lower fertility rates, but not necessarily higher levels of redistribution.
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Factor endowments, the rule of law and structural inequality
Daniel Bennett & Boris Nikolaev
Journal of Institutional Economics, forthcoming
Abstract:
This paper provides an empirical test of the Engerman–Sokoloff hypothesis that factor endowments influenced the development of the rule of law, which in turn has perpetuated income inequality. Using a measure of the suitability of land for growing wheat relative to sugarcane as an instrument for the rule of law, as measured by area 2 of the Economic Freedom of the World index, we estimate the potential causal impact of the rule of law on the long-run net income inequality. Conditioning on geography, ethnolinguistic fractionalization and legal tradition, the rule of law exerts a negative impact on inequality that is both economically and statistically significant. The results are robust to additional control variables, two alternative measures of the rule of law, an alternative instrumental variable and the exclusion of strategic country samples and outliers.
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MNCs, Rents, and Corruption: Evidence from China
Boliang Zhu
American Journal of Political Science, forthcoming
Abstract:
How does multinational corporation (MNC) activity affect corruption in developing countries? The existing literature tends to suggest that economic integration helps reduce corruption, as it increases market competition and efficiency and promotes the diffusion of good governance. In this article, I argue that such a generalization oversimplifies the consequences of MNC activity in host countries. The entry and presence of MNCs may contribute to rent creation in developing countries, thereby leading to a high level of corruption. To test this argument, I conduct a case study on China and draw from original data of filed corruption cases to construct measures of corruption. I find that provinces with more MNC activity are strongly associated with more corruption. The results are robust and consistent when possible endogeneity, law enforcement, and alternative measures of corruption are considered. This finding has important implications for domestic governance in developing countries.
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Alisha Holland
American Political Science Review, forthcoming
Abstract:
Particularly in developing countries, there is a gap between written law and behavior. Comparative research emphasizes that laws go unenforced due to resource constraints or inadequate control of the bureaucracy. I instead introduce the concept of forbearance, or the intentional and revocable nonenforcement of law, and argue that politicians often withhold sanctions to maximize votes as well as rents. Drawing on tools from price theory and distributive politics, I present several methods to separate situations when politicians are unable versus unwilling to enforce the law. I demonstrate the identification strategies with original data on the enforcement of laws against street vending and squatting in urban Latin America. In contexts of inadequate social policy, politicians use forbearance to mobilize voters and signal their distributive commitments. These illustrations thus suggest the rich, and largely neglected, distributive politics behind apparent institutional weakness.
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Remi Jedwab, Noel Johnson & Mark Koyama
George Mason University Working Paper, June 2016
Abstract:
The Black Death killed about 40% of Europe’s population between 1347-1352. Historical studies suggest that this mortality shock played a major role in shifting Europe onto a path to sustained economic growth. Using a novel dataset that provides information on spatial variation in plague mortality at the city level, as well as a range of controls and various identification strategies based on the spread of the epidemic, we explore the short-run and long-run impact of the Black Death on city growth. We find evidence for aggregate convergence. On average, cities recovered their pre-plague population within two centuries. However, there was considerable heterogeneity in the response to the shock, hence local divergence. The Black Death led to an urban reset: cities with better geographical and non-geographical endowments did relatively well, while other cities collapsed. In particular, our results emphasize the importance of trading networks in explaining urban recovery. Furthermore, the Black Death led to the creation of new cities in areas that were relatively less urbanized before it hit. Our analysis thus suggests that the Black Death may have permanently affected the spatial distribution and aggregate level of economic activity, potentially contributing to long-run growth in Europe.
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Speed or Greed? High Wages and Corruption Among Public Servants
Doron Navot, Yaniv Reingewertz & Nissim Cohen
Administration & Society, July 2016, Pages 580-601
Abstract:
Scholars maintain that higher wages for public servants would make the public sector more efficient and reduce the abuse of power. This article challenges this idea and suggests that higher wages may actually increase public corruption. We argue that increasing pecuniary incentives for public service might lead public employees to advance their own self-interests and encourage justifications for accepting bribes. We test our theory empirically using 18,800 observations from 58 countries taken from the sixth wave of the World Values Survey. The findings confirm our theory and suggest a positive association between public servants’ wages and the toleration of corruption.
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Paul Van Lange, Maria Rinderu & Brad Bushman
Behavioral and Brain Sciences, forthcoming
Abstract:
Worldwide there are substantial differences within and between countries in aggression and violence. Although there are various exceptions, a general rule is that aggression and violence increase as one moves closer to the equator, which suggests the important role of climate differences. While this pattern is robust, theoretical explanations for these large differences in aggression and violence within countries and around the world are lacking. Most extant explanations focus on the influence of average temperature as a factor that triggers aggression (The General Aggression Model), or the notion that warm temperature allows for more social interaction situations (Routine Activity Theory) in which aggression is likely to unfold. We propose a new model of CLimate, Aggression, and Self-control in Humans (CLASH) that seeks to understand differences within and between countries in aggression and violence in terms of differences in climate. Lower temperatures, and especially larger degrees of seasonal variation in climate, calls for individuals and groups to adopt a slower life history strategy, and exert more focus on the future (versus present), and a stronger focus on self-control. The CLASH model further outlines that slow life strategy, future orientation, and strong self-control are important determinants of inhibiting aggression and violence. We also discuss how CLASH is different from other recently developed models that emphasize climate differences for understanding conflict. We conclude by discussing the theoretical and societal importance of climate in shaping individual and societal differences in aggression and violence.
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Patrick Wallis, Justin Colson & David Chilosi
London School of Economics Working Paper, June 2016
Abstract:
Accounts of structural change in the pre-modern British economy vary substantially. We present the first time series of male labour sectoral shares before 1800, using a large sample of probate and apprenticeship data to produce national and county-level estimates. England experienced a rapid decline in the agricultural share between the early seventeenth and the beginning of the eighteenth centuries, associated with rising agricultural and especially industrial productivity; Wales saw only limited changes. Our results provide further evidence of early structural change, highlighting the significance of the mid-seventeenth century as a turning point in English economic development.
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Anonymity, efficiency wages and technological progress
Stephen Broadberry, Sayantan Ghosal & Eugenio Proto
Journal of Development Economics, forthcoming
Abstract:
Although the industrial revolution is often characterized as the culmination of a process of commercialisation, the precise nature of such a link remains unclear. This paper provides an analysis of one such link: the role of commercialisation in raising wages as impersonal labour market transactions replace personalized customary relations. In the presence of an aggregate capital externality, we show that the resulting shift in relative factor prices will, under certain conditions, lead to higher capital-intensity in the production technology and hence, a faster rate of technological progress. We provide historical evidence using European data to show that England was among the most urbanized and the highest wage countries at the onset of the industrial revolution. The model highlights the effects of changes in the availability of information, typical of a modernising country, on efficiency wages and technological progress.
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Fabian Wahl
Regional Science and Urban Economics, September 2016, Pages 50–60
Abstract:
This study establishes a link between medieval trade, agglomeration and contemporary regional development in ten European countries. It documents a statistically and economically significant positive relationship between prominent involvement in medieval trade and regional economic development today. The analysis indicates that a long-lasting effect of medieval trade on contemporary regional development is transmitted via its effect on agglomeration and industry concentration. Further empirical analyses show that medieval trade positively influenced city development both during the medieval period and in the long run; they also reveal a robust connection between medieval city growth and contemporary regional agglomeration and industry concentration. This research thus highlights the long-run importance of medieval trade in shaping the development of cities as well as the contemporary spatial distribution of economic activity throughout Europe.
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Size Matters: The Effect of the Size of Ethnic Groups on Development
Arcangelo Dimico
Oxford Bulletin of Economics and Statistics, forthcoming
Abstract:
The share of ethnic groups is one of the most important features of African politics. It affects civil wars, representation in government positions, distributive and allocative policies. In this paper, we use the partition of ethnic groups as a natural experiment in order to estimate the effect of the share of these ethnic groups on development. We show that larger groups have an advantage in terms of development and that the partition in itself does not matter for development. This result is explained by the fact that the partition matters only when the resulting groups are relatively small, since their lack of political representation may weaken support for institutions, may bias policies and the provision of ethnic/regional public goods.
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The great divergence and the economics of printing
Luis Angeles
Economic History Review, forthcoming
Abstract:
While China's invention of printing took place several centuries ahead of Europe's, it was in Europe where the more advanced printing technology of movable type took hold and where book production reached far higher levels. This article explores the extent to which China's complex logographic writing system explains these different outcomes. Using an economic analysis, I show how China's preference for block printing technology over movable type can be justified as the rational choice of commercial producers. In addition to this, model simulations also predict that movable type would be used in China under some specific circumstances which closely match the historical record. On the other hand, the use of block printing would not have led to larger printing costs in China, and as such should not be regarded as the reason behind China's modest level of book production when compared to Europe's.
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Paul Glewwe, Albert Park & Meng Zhao
Journal of Development Economics, September 2016, Pages 170–182
Abstract:
About 10% of primary school students in developing countries have poor vision, but very few of them wear glasses. Almost no research examines the impact of poor vision on school performance, and simple OLS estimates could be biased because studying harder may adversely affects one's vision. This paper presents results from a randomized trial in Western China that offered free eyeglasses to rural primary school students. Our preferred estimates, which exclude township pairs for which students in the control township were mistakenly provided eyeglasses, indicate that wearing eyeglasses for one academic year increased the average test scores of students with poor vision by 0.16 to 0.22 standard deviations, equivalent to 0.3 to 0.5 additional years of schooling. These estimates are averages across the two counties where the intervention was conducted. We also find that the benefits are greater for under-performing students. A simple cost-benefit analysis suggests very high economic returns to wearing eyeglasses, raising the question of why such investments are not made by most families. We find that girls are more likely to refuse free eyeglasses, and that parental lack of awareness of vision problems, mothers' education, and economic factors (expenditures per capita and price) significantly affect whether children wear eyeglasses in the absence of the intervention.
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Carenza Lewis
Antiquity, June 2016, Pages 777-797
Abstract:
The Black Death swept across Europe and Asia in the fourteenth century, killing millions and devastating communities. Recent re-evaluations of source data, the discovery of new plague cemeteries and advances in genotyping have caused scholars to reconsider the extent of the devastation and to revise estimated mortality rates upwards. But what was the true impact of this catastrophic episode? Systematic test-pitting can reveal changes in medieval demography that can be both quantified and mapped at a range of scales. Comparing the relative amounts of high medieval (copious) to late medieval (much scarcer) pottery suggests that the pottery-using population across eastern England was around 45% lower in the centuries after the Black Death than before, and such comparison identifies exactly where this contraction was the most and least severely felt.