Developing Work
Empowering refugees through cash and agriculture: A regression discontinuity design
Claire MacPherson & Olivier Sterck
Journal of Development Economics, forthcoming
Abstract:
Assistance to refugees is shifting from a humanitarian model, which focuses on protection, emergency relief, and shelter, to a development model promoting refugee self-reliance through income-generating activities, market development, and cash transfers. Evidence on the effects of this paradigm shift is limited. Exploiting a regression discontinuity design, this paper tests whether the adoption of a development approach to refugee assistance in a new settlement in Kenya has a positive impact. We find that refugees benefiting from the new approach have better diets and perceive themselves as happier and more independent from humanitarian aid. We find no effect on assets and employment. These effects appear to be driven by the switch from food rations to cash transfers and by the wider promotion of small-scale agriculture. Our findings argue in favor of the development approach to refugee assistance, which is cheaper and leads to better outcomes.
Long-Term Effects of Equal Sharing: Evidence from Inheritance Rules for Land
Charlotte Bartels, Simon Jäger & Natalie Obergruber
NBER Working Paper, December 2020
Abstract:
What are the long-term economic effects of a more equal distribution of wealth? We exploit variation in historical inheritance rules for land traversing political, linguistic, geological, and religious borders in Germany. In some German areas, inherited land was to be shared or divided equally among children, while in others land was ruled to be indivisible. Using a geographic regression discontinuity design, we show that equal division of land led to a more equal distribution of land; other potential drivers of growth are smooth at the boundary and equal division areas were not historically more developed. Today, equal division areas feature higher average incomes and a right-shifted skill, income, and wealth distribution. Higher top incomes and top wealth in equal division areas coincide with higher education, and higher labor productivity. We show evidence consistent with the more even distribution of land leading to more innovative industrial by-employment during Germany’s transition from an agrarian to an industrial economy and, in the long-run, more entrepreneurship.
Foreign aid and the quality of economic institutions
Ratbek Dzhumashev & Abebe Hailemariam
European Journal of Political Economy, forthcoming
Abstract:
Identification of the causal effect that foreign aid has on the quality of institutions in recipient countries has been elusive in the aid effectiveness literature. The main reason is that aid is endogenous with respect to the development of institutions. Our paper examines the impact of foreign aid on economic freedom in the recipient countries at a disaggregated level using an innovative identifying strategy. To do so, we use recently innovated instruments for aid, exploiting the long lags between loan approval and disbursements by official creditors to developing countries. Using plausibly exogenous variations in predicted loan disbursements as instruments for actual aid, we find that foreign aid has a significant positive effect on the quality of economic institutions in recipient countries. The results are robust to alternative specifications and samples. By establishing the existence of a strong link between aid and the quality of economic institutions, we identify the main channel through which aid affects economic growth and development.
What Determines the Return to Bribery? Evidence from Corruption Cases Worldwide
Yan-Leung Cheung , Raghavendra Rau & Aris Stouraitis
Management Science, forthcoming
Abstract:
We analyze a hand-collected sample of bribery cases from around the world to describe how the payment of bribes affects shareholder value. The net present value of a bribe conditional on getting caught is close to zero for the median firm in our sample. However, controlling for industry, country, and firm characteristics, a $1 increase in the size of the bribe is associated with an ex ante $6–$9 increase in the value of the firm, suggesting a correlation between the size of bribes and the size of available benefits. Proxies for information disclosure appear significant in explaining these benefits with more disclosure associated with lower benefits. However, this result is driven by democratic countries where bribe-paying firms receive smaller benefits relative to the bribes they pay. Information disclosure is not significant in autocratic countries.
Should a Poverty-Averse Donor Always Reward Better Governance?
Francois Bourguignon & Jean-Philippe Platteau
Economic Journal, forthcoming
Abstract:
This paper revisits the inter-country aid allocation by a donor who must distribute a given aid amount and is sensitive to needs and governance considerations. Against conventional wisdom, if the donor has strong enough aversion to poverty, the share of a country whose governance has improved is reduced. Yet, the poor will still be better off. These results continue to hold when aid effectiveness depends on intrinsic governance and the volume of aid received, and when a more general dynamic specification is considered. Finally, using our approach, the allocation rules in international organizations appear as clearly privileging governance over needs.
The Hobbesian Bargain: State-Building, Fiscal Capacity, and Preferences for Redistribution in Fragile States
James Long & David Lopez
University of Washington Working Paper, January 2020
Abstract:
What explains citizens' preferences for redistribution in fragile states? We examine fiscal capacity in the context of modern state-building in Afghanistan. As emergent governments struggle to supply their end of an "Hobbesian bargain" by establishing political order after state collapse, we argue that citizens' expectations of the government's policy direction are conditioned by newly-functioning political institutions. Absent a demonstrated record of fiscal capacity on the part of the state, these expectations importantly shape citizens' redistributive demands. We test our argument using nation-wide survey data from Afghanistan and an exogenous source of variation in individuals' political inclusion to proxy for perceptions of government policy direction. Results show that individuals who gain greater political inclusion through shared loyalties with elected politicians in the new regime demonstrate less support for redistribution, while those who perceive rent-seeking in government service delivery are more likely to "spread the wealth around." Forms of quasi-voluntary compliance and risk aversion are two conditions that mediate preferences in favor of redistribution, conditional on a fragile state's demonstration of fiscal potential. Findings remain robust to numerous sensitivity analyses and alternative explanations. The analysis contributes to important theoretical and policy questions focused on the institutional components of state-building, fiscal institutions, and economic development.
It takes two: Experimental evidence on the determinants of technology diffusion
Morgan Hardy & Jamie McCasland
Journal of Development Economics, forthcoming
Abstract:
This paper reports on an experiment that brings insights from the literature on demand-side determinants of technology adoption to the study of peer-to-peer diffusion. We develop a custom weaving technique and randomly seed training into a real network of garment making firm owners in Ghana. Training leads to limited adoption among trainees, but little to no diffusion to non-trainees. In a second phase, we cross-randomize demand for the technique. Demand shocks increase adoption of the technology in both groups and diffusion to untrained firms, generated by a pattern in which trained firm owners teach approximately 400% more of their peers if they are randomly assigned to the demand intervention. We find no evidence that our main effects are driven by differences in ability (learning-by-doing) or other adoption-based mechanisms. Rather, our findings are most consistent with the demand intervention generating differential willingness to diffuse among potential teachers.
European Goods Market Integration in the Very Long Run: From the Black Death to the First World War
Giovanni Federico, Max-Stephan Schulze & Oliver Volckart
Journal of Economic History, forthcoming
Abstract:
This paper examines price convergence and changes in the efficiency of wheat markets, covering the period from the mid-fourteenth to the early twentieth century and most of Europe. The analysis is based on a new data set of prices from almost 600 markets. Unlike previous research, we find that convergence was a predominantly pre-modern phenomenon. It started in the late fifteenth century, advanced rapidly until the beginning of the seventeenth century when it temporarily stalled, resumed after the Thirty Years’ War, and accelerated after the Napoleonic Wars in response to trade liberalization. From the late 1840s, convergence petered out and turned into divergence after 1875 as policy decisions dominated technological change. Our results point to the ‘Little Divergence’ between North-Western Europe and the rest of the continent as starting about 1600. Long-term improvements in market efficiency began in the early sixteenth century, with advances over time being as uneven as in price convergence. We trace this to differential institutional change and the non-synchronous spread of modern media and systems of information transmission that affected the ability of merchants to react to news.
The Columbian Exchange and Conflict in Asia
Mark Dincecco, James Fenske & Anil Menon
University of Michigan Working Paper, December 2020
Abstract:
Difference in difference and event study analyses in a panel of Asian grid cells over nine centuries demonstrate that greater agricultural potential due to New World crops increased violent conflict after 1500. Rising caloric potential in a typical grid cell increased conflict by roughly its mean. The result holds across several New World crops and conflict types. It is largely driven by South Asia, a densely populated, diverse region with several competing historical states. The evidence supports a rapacity effect — increases in the gains from appropriation to Asian and non-Asian belligerents — as a mechanism. Population density, urbanization, and British imperialism significantly mediate the impact of the Columbian Exchange.
Safety at Sea during the Industrial Revolution
Morgan Kelly, Cormac Ó Gráda & Peter Solar
Journal of Economic History, forthcoming
Abstract:
Shipping, central to the rise of the Atlantic economies, was an extremely hazardous activity. Between the 1780s and 1820s, a safety revolution occurred that saw shipping losses and insurance rates on oceanic routes almost halved thanks to steady improvements in shipbuilding and navigation. Copper sheathing, iron reinforcing, and flush decks were the major innovations in shipbuilding. Navigation improved, not through chronometers, which remained too expensive and unreliable for general use, but through radically improved charts, accessible manuals of basic navigational techniques, and improved shore-based navigational aids.
The economics of street-level prostitution in Paris during the ‘Belle Epoque’ (1870-1914)
Alexandre Frondizi & Simon Porcher
Applied Economics, forthcoming
Abstract:
How can districts become completely embedded in informal economies despite harsh state regulation? In this paper, we use qualitative and quantitative data to explain the increasing number of ‘clandestine’ street-level prostitutes in a district of Paris during the Belle Epoque (1870–1914). Using an original dataset on street-level prostitutes, we describe the economics of street-level prostitution at the time: street prostitutes were young, unskilled and relatively well paid; they tended to work with pimps who were from the same area and clustered in neighbourhoods where they could compete with regulated brothels. Street prostitutes generated profits not only for themselves but also for a whole range of actors, thereby switching the whole local economy to this industry at the expense of the formal economy.
Resources, conflict, and economic development in Africa
Achyuta Adhvaryu et al.
Journal of Development Economics, forthcoming
Abstract:
Evidence suggests that natural resources have driven conflict and underdevelopment in modern Africa. We show that this relationship exists primarily when neighboring regions are resource-rich. When neighbors are resource-poor, own resources instead drive economic growth. To motivate the empirical study of this set of facts, we present a simple model of parties engaged in potential conflict over resources, revealing that economic prosperity is a function of equilibrium conflict prevalence, determined not just by a region's own resources but also by the resources of its neighbors. Structural estimates confirm the model's predictions, and reveal that conflict equilibria are more prevalent where institutional quality is worse.