Developmentally Challenged
State versus Market: China's Infrastructure Investment
Shuoge Qian, Hong Ru & Wei Xiong
NBER Working Paper, April 2025
Abstract:
Amid rising global interest in state interventions, this paper examines how China’s infrastructure investments -- a key macroeconomic policy tool -- affect firm productivity. We focus on a policy that encourages regional governments to improve market conditions for private enterprises. Our analysis shows that a better market environment amplifies infrastructure investment spillovers. However, the overall impact remains neutral or negative despite greater gains in industries with improved market access. These findings highlight the complex interplay between state intervention and market forces, raising concerns about the effectiveness of infrastructure investments in sustaining growth, especially in regions with weak market institutions.
No Country for Dying Firms: Evidence from India
Shoumitro Chatterjee et al.
NBER Working Paper, May 2025
Abstract:
This paper identifies exit barriers as a new reason for India’s underdeveloped manufacturing sector. These barriers not only deter entry but also trap resources in unproductive firms. We document that Indian institutions generate such barriers and provide causal evidence of their effects. Using a dynamic model that separately identifies direct exit barriers from labor and capital adjustment costs, we find that exit barriers are quantitatively significant, particularly in low-performing states and labor-intensive industries. Our analysis yields three findings. First, reducing firing costs raises value added but reduces employment, whereas relaxing direct exit barriers increases both. Second, simultaneous reform of labor firing costs and direct exit barriers yields synergies. Third, sequencing matters: addressing direct exit barriers before labor firing costs preserves employment while improving efficiency. Finally, we show that exit subsidies are more effective at raising value added, while entry subsidies are more effective at increasing employment.
Reassessing World Bank conditionality: Beyond count measures
Jacob Winter et al.
Political Science Research and Methods, forthcoming
Abstract:
Many studies argue that the World Bank grants favorable loan conditions to allies of its powerful principals. These studies typically use the count of conditions as a proxy for how demanding loans are on borrowers, even though some conditions are more difficult to comply with than others. We propose a new operationalization: a measure of conditionality stringency in Bank loans constructed using Latent Semantic Scaling. Using this new measure, we find little evidence of a generalizable influence of powerful principals. Instead, the stringency of loan conditions is associated with bureaucratic assessments of risk. To facilitate future research, we provide a new dataset of World Bank loan condition texts and our measure of text stringency for all loans in the dataset.
From Connections to Merit: Anti-Corruption Reform and Occupational Mobility in China's Civil Service
Geer Ang et al.
Economic Journal, forthcoming
Abstract:
In China, employment in civil service is perceived as a primary path to leadership roles in government. This paper examines the role of family background in shaping the choice to enter civil service and investigates the impact of the 2012 anti-corruption campaign on this process. We find that college graduates with cadre parents are more likely to work as a civil servant. However, using a difference-in-differences approach, we show an 18% decline in this occupational persistence post-campaign. Evidence suggests that reduced use of parental social networks may drive this change. Furthermore, the campaign appears to have improved civil servants’ quality.
Limits to the power of economic elites?: Wealth, authority, and inequality in eastern English villages, c. 1350–c. 1550
Spike Gibbs
Economic History Review, forthcoming
Abstract:
This article investigates the impact of local political institutions on inequality in eastern England between c. 1350 and c. 1550. Specifically, it examines the extent to which wealthier individuals controlled local governance structures in the form of manor courts through linking the identities of individuals who served as manorial officials with the rent payments made by tenants as a measure of landed wealth. This provides two key findings. Firstly, there was no straightforward relationship between political power and landed wealth, with many villages witnessing no correlation between higher rent payments and officeholding. Secondly, even the communities which were marked by a clear relationship between wealth and officeholding were not those characterized by higher levels of overall inequality, suggesting that elite control of local political structures did not necessarily increase inequality. The findings highlight both practical limitations which prevented local elites dominating political power structures and the continuing importance of non-economic status markers and cultures of community-building in preventing political rent-seeking by wealthy elites. They support recent calls to better consider the equalizing impacts of communal structures in explaining patterns of pre-industrial inequality, but also models that highlight the growth of state-level institutions in explaining growing patterns of inequality in the early modern era.
Heterogeneous effects of economic freedom on human capital in developing countries
Issa Dianda, Patrice Rélouendé Zidouemba & Djakaria Tou
Journal of Institutional Economics, May 2025
Abstract:
This study examines the heterogeneous effects of economic freedom on human capital accumulation across 83 developing countries between 2000 and 2018. Employing a range of econometric techniques including quantiles via moments regression, the analysis explores both average and distributional impacts of economic freedom on human capital, disaggregated by gender and employment status. The findings reveal that economic freedom positively influences human capital development, with stronger effects in countries with lower human capital levels. Among the five dimensions of economic freedom, freedom to trade internationally, legal systems, and property rights are most strongly associated with human capital accumulation. The results also indicate that women and employed individuals benefit more from economic freedom, highlighting its potential to reduce gender disparities and enhance labour productivity. These findings underscore the importance of institutional reforms promoting economic freedom as a pathway to human capital development in developing economies.
The shadow of slavery on industrial innovation: Evidence from the US South
Yeonha Jung & Chungeun Yoon
Journal of Comparative Economics, June 2025, Pages 511-533
Abstract:
The abolition of American slavery was a profound shock to the southern economy, but little is known about its effect on industrial innovation. This study hypothesizes that historical slave concentration was followed by a slowdown in industrial innovation after the Civil War, due to technical change biased toward unskilled labor. Moreover, given the shifts in labor market conditions in the postbellum South, we propose that this relationship became evident after Reconstruction. County-level evidence supports this hypothesis; counties where slavery was more prevalent in 1860 experienced a relative decline in manufacturing patents in the post-Reconstruction period. The role of technical change as a mechanism is supported in two dimensions. First, the reduction in innovation was more pronounced in low-skill industries, which were better suited to unskill-biased technical change. Second, the return to literacy in the industrial sector decreased with the historical prevalence of slavery, a finding that suggests a decline in skill demand.
Leviathans and Liberation: Did Whaling Contribute to the Decline of Slavery?
Topher McDougal & Austin Choi-Fitzpatrick
International Social Science Journal, forthcoming
Abstract:
We test the hypothesis slavery started declining in the United States not due to fossil fuel-driven industrialization but the exploitation of the bioenergy reserves of the world's largest animals. We predict the population in slavery in US states from 1790 to 1840 as a function of the recorded whaling harvest. We find strong evidence across all models, controlling for various economic and political changes, state-specific idiosyncrasies and endogeneity. Historical records suggest whaling revenues directly supported a growing abolitionist movement and underwrote manumissions. We argue the economic engine of whaling and the abolitionist movement it facilitated were deeply intertwined.
Market Access and Migration: Evidence from the Panama Canal Opening During the First Great Migration
Sebastian Galiani, Luis Felipe Jaramillo & Mateo Uribe-Castro
University of Maryland Working Paper, March 2025
Abstract:
This paper examines the influence of transportation infrastructure on migration decisions in the context of the Great Migration in the United States. Focusing on the opening of the Panama Canal in 1920, we isolate the effect of improved economic opportunities from reduced migration costs. Using full-count Census data, we find that Southern-born African American migrants preferred areas with enhanced market access, leading to higher inflows after 1920. The study highlights the interplay between migrant networks and labor markets in shaping migration patterns. Our findings underscore the significance of local market conditions induced by improvements in local market access in influencing migration decisions during the Great Migration.