Developing History
Comparative European Institutions and the Little Divergence, 1385–1800
António Henriques & Nuno Palma
Journal of Economic Growth, June 2023, Pages 259–294
Abstract:
Why did the countries that first benefited from access to the New World -- Castile and Portugal -- decline relative to their followers, especially England and the Netherlands? The dominant narrative is that worse initial institutions at the time of the opening of the Atlantic trade explain the Iberian divergence. In this paper, we build a new dataset which allows for a comparison of institutional quality over time. We consider the frequency and nature of parliamentary meetings, the frequency and intensity of extraordinary taxation and coin debasement, and real interest rates together with spreads for public debt. We find no evidence that the political institutions of Portugal and Spain were worse until the English Civil War.
Economic Consequences of Kinship: Evidence From U.S. Bans on Cousin Marriage
Arkadev Ghosh, Sam Il Myoung Hwang & Munir Squires
Quarterly Journal of Economics, forthcoming
Abstract:
Close-kin marriage, by sustaining tightly knit family structures, may impede development. We find support for this hypothesis using U.S. state bans on cousin marriage. Our measure of cousin marriage comes from the excess frequency of same-surname marriages, a method borrowed from population genetics that we apply to millions of marriage records from the eighteenth to the twentieth century. Using census data, we first show that married cousins are more rural and have lower-paying occupations. We then turn to an event study analysis to understand how cousin marriage bans affected outcomes for treated birth cohorts. We find that these bans led individuals from families with high rates of cousin marriage to migrate off farms and into urban areas. They also gradually shift to higher-paying occupations. We also observe increased dispersion, with individuals from these families living in a wider range of locations and adopting more diverse occupations. Our findings suggest that these changes were driven by the social and cultural effects of dispersed family ties rather than genetics. Notably, the bans also caused more people to live in institutional settings for the elderly, infirm, or destitute, suggesting weaker support from kin.
The Neoclassical Growth of China
Jesús Fernández-Villaverde, Lee Ohanian & Wen Yao
NBER Working Paper, June 2023
Abstract:
This paper studies China's four-fold increase in per capita GDP relative to the U.S. between 1995 and 2019. First, we argue that China's growth pattern is very similar to that of several other East Asia economies that initially grew very quickly. Second, we show that a minimalist Ramsey-Cass-Koopmans model with a parsimonious TFP catch-up process can account for China's growth path and the growth paths of other East Asia economies at a similar stage of development. The growth paths of other East Asia economies and the model predictions suggest that China's growth will substantially slow, so much so that we find the U.S. growth rate will likely be higher than China's by 2043. We also find that China's income per capita will level off at roughly 44% of the U.S. level around 2100.
Human capital investment under exit options: Evidence from a natural quasi-experiment
Satish Chand & Michael Clemens
Journal of Development Economics, June 2023
Abstract:
Groups historically subject to discrimination, such as Jews, could exhibit high investment in education because discrimination spurred emigration -- and emigration was facilitated by skill. If emigration is uncertain, the skill investment induced by discrimination could more-than-offset the mechanical reduction in skill stocks at the origin. That is, in theory, the exit option could raise skills at the origin net of departures. Tests of these theories are rare. We examine a natural quasi-experiment in the Republic of Fiji, where a sharp and unexpected rise in discriminatory policy by a dominant ethnic group caused both mass emigration and mass skill investment by the other major ethnic group. We find that the net effect on skills within Fiji was positive: the human capital of the discriminated group remaining in Fiji would have been lower if there had been no emigration option. We test a variety of alternative models for the net increase in skills and find that the emigration option was a necessary causal mechanism.
Institutions and Global Crop Yields
David Wuepper et al.
NBER Working Paper, July 2023
Abstract:
We estimate annual discontinuities in remotely-sensed crop yields at all international land borders and link them to changes in the economic freedom index by the Fraser Institute, a country-level measure of institutional quality. Each point of the ten-point index increases the discontinuity by 2.2% over the next five years, highlighting that institutional reforms have the potential to close some of the observed crop yield gap. Three subcategories are consistently significant: credit market regulation, inflation, and the top marginal tax rate. We present suggestive evidence that higher average yields are achieved through increased use of irrigation and mechanization. Yield variability remains unchanged, and reforms lead to cropland expansion through deforestation.
Government finance and imposition of serfdom after the Black Death
Margaret Peters
European Review of Economic History, May 2023, Pages 149–173
Abstract:
After the Black Death, serfdom disappeared in Western Europe while making a resurgence in Eastern Europe. What explains this difference? I argue that serfdom was against the interests of the sovereign and was only imposed when the nobility, who needed serfdom to maintain their economic and political standing, had leverage to impose their will. The nobility gained this power through financing the state. Using data from the fourteenth through the eighteenth centuries, I show that serfdom was imposed and strengthened in areas where sovereigns had few other resources to finance the state.
The Model T
Shari Eli, Joshua Hausman & Paul Rhode
NBER Working Paper, July 2023
Abstract:
We ask (1) why the United States adopted the car more quickly than other countries before 1929, and (2) why in the United States the car changed from a luxury to a mass market good between 1909 and 1919. We argue that the answer is in part the success of the Model T in the United States and its relative lack of success abroad. Mass production of the Model T began in 1913; by 1917, more than 40 percent of cars on the road were Model Ts. Cross-state and cross-county evidence suggest that the Model T opened up a new market for cars among farmers and in poorer areas of the country. Tariffs and difficulties producing outside Detroit made the U.S. success of the Model T difficult to replicate abroad, even in Canada.
You reap what you know: Appropriability and the origin of European states
Thilo Huning & Fabian Wahl
European Journal of Political Economy, forthcoming
Abstract:
Geography provides some states with a higher level of soil quality than others, and in addition has allowed some historical states to appropriate agricultural output at lower costs. To test this empirically, we propose a new measure of appropriability: caloric observability. The idea behind this measure is that geography induces variation between states because their signals about agricultural output differ in precision. Caloric observability is robustly and significantly correlated with proxies of government success on three levels: Data on all European states 1300–1700, our new data set on the Holy Roman Empire 1150–1789, and a municipality-level data set of 1545 Duchy of Württemberg.
China's Macroeconomic Development: The Role of Gradualist Reforms
Kaiji Chen & Tao Zha
NBER Working Paper, June 2023
Abstract:
This paper reviews recent literature on China's macroeconomic development, emphasizing the critical role of the gradualist approach over the past four decades. Beyond China's structural transformation, we explore various aspects such as high saving rates, the housing boom, an expanding current account surplus, and rising inequality. We propose a unifying framework that encapsulates key development stages, contrasting gradualism with a laissez-faire counterfactual. Our analysis illustrates how China's gradual policy reforms, amidst highly imperfect financial markets, have effectively helped spur GDP growth throughout its macroeconomic evolution. We highlight the tradeoffs between accelerating GDP growth and safeguarding China's long-term financial stability.
Divergence before the division: The colonial origins of separate development paths in Korea
Martin Andersson, Montserrat López Jerez & Luka Miladinovic
Journal of Institutional Economics, forthcoming
Abstract:
This study revisits the question of what impact Japanese colonialism had on the long-term economic development of North and South Korea. Factor endowments, economic activity and economic performance are compared between the regions that later became parts of North and South Korea, respectively. The study finds that important elements of the economic history of the peninsula have not been sufficiently acknowledged in much of the influential literature that uses Korea as an illustration of theoretical claims of the root causes of development. In particular, the fact that the economic divergence of northern and southern regions could be traced back to different colonial treatments -- especially after mid-1920s -- has often been overlooked when analysing the divergent post-partition development trajectories. The study suggests, based on a sectoral similarities analysis, that the initial dissimilar economic performance of North and South can at least partially be found in differences in political economy and economic trajectories preceding the partition.
Return on Returns: Building Scientific Capacity in AIDS Endemic Countries
Caroline Fry & Ina Ganguli
NBER Working Paper, June 2023
Abstract:
We estimate spillovers from public funding for health research in the context of the NIH's Fogarty International Center's AIDS International Training and Research Program, which aims to strengthen scientific capacity in AIDS endemic countries by providing African researchers with training opportunities in the U.S. We use an event study difference-and-differences framework with information on scientists who participated in the program and the outcomes of African scientists working in the same scientific fields at their home institutions. Compared to control groups of similar scientists, our results show that scientists exposed to a returned trainee increase their publication output, particularly those with international coauthors. They also increase their grant funding and publish more HIV and WHO policy documents, showing that the Fogarty program impacted health policy related to the HIV/AIDS epidemic in African countries.
A global map of amenities: Public goods, ethnic divisions and decentralization
André Seidel
Journal of Development Economics, forthcoming
Abstract:
I analyze the effects of ethnic divisions on the provision of public goods in countries throughout the world. Using OpenStreetMap data, I construct a new, global dataset that pinpoints locations of public amenities, such as schools, hospitals, and libraries. I devise two new proxies to address the variability in the completeness of such data. I find that more autonomous subnational regions with a high degree of ethnic fractionalization provide significantly fewer productive public goods. Therefore, decentralization can decrease the provision of local public goods in areas characterized by higher levels of ethnic heterogeneity than those that prevail nationwide.