Epidemic disease and financial development
Jiafu An, Wenxuan Hou& Chen Lin
Journal of Financial Economics, forthcoming
We study the impact of an epidemic disease on modern financial development by exploiting geographic variations in the precolonial survival conditions of the TseTse fly, which transmits an epidemic disease that is harmful to humans and fatal to livestock in Africa. Using newly georeferenced data, we discover that firms and households in regions historically more exposed to the epidemic disease have less access to external financing today. Exploring the channels, we find that people in historically infested regions are less likely to trust others and financial institutions, to share credit information and to learn and adopt new financial technologies.
The Intergenerational Mortality Tradeoff of COVID-19 Lockdown Policies
Lin Ma et al.
NBER Working Paper, June 2021
In lower-income countries, the economic contractions that accompany lockdowns to contain the spread of COVID-19 can increase child mortality, counteracting the mortality reductions achieved by the lockdown. To formalize and quantify this effect, we build a macro-susceptible-infected-recovered model that features heterogeneous agents and a country-group-specific relationship between economic downturns and child mortality, and calibrate it to data for 85 countries across all income levels. We find that in low-income countries, a lockdown can potentially lead to 1.76 children's lives lost due to the economic contraction per COVID-19 fatality averted. The ratio stands at 0.59 and 0.06 in lower-middle and upper-middle income countries, respectively. As a result, in some countries lockdowns actually can produce net increases in mortality. The optimal lockdowns are shorter and milder in poorer countries than in rich ones, and never produce a net mortality increase.
Urbanisation and the Onset of Modern Economic Growth
Liam Brunt & Cecilia García-Peñalosa
Economic Journal, forthcoming
A large literature characterizes urbanisation as resulting from productivity growth attracting rural workers to cities. Incorporating economic geography elements into a growth model, we suggest that causation runs the other way: when rural workers move to cities, the resulting urbanisation produces technological change and productivity growth. Urban density leads to knowledge exchange and innovation, thus creating a positive feedback loop between city size and productivity that initiates sustained economic growth. This model is consistent with the fact that urbanisation rates in Western Europe, most notably England, reached unprecedented levels by the mid-18th century, the eve of the Industrial Revolution.
Socioeconomic development predicts a weaker contraceptive effect of breastfeeding
Nicolas Todd & Mathias Lerch
Proceedings of the National Academy of Sciences, 20 July 2021
The contraceptive effect of breastfeeding remains essential to controlling fertility in many developing regions of the world. The extent to which this negative effect of breastfeeding on ovarian activity is sensitive to ecological conditions, notably maternal energetic status, has remained controversial. We assess the relationship between breastfeeding duration and postpartum amenorrhea (the absence of menstruation following a birth) in 17 World Fertility Surveys and 284 Demographic Health Surveys conducted between 1975 and 2019 in 84 low- and middle-income countries. We then analyze the resumption of menses in women during unsupplemented lactation. We find that a sharp weakening of the breastfeeding-postpartum amenorrhea relationship has globally occurred over the time period analyzed. The slope of the breastfeeding-postpartum amenorrhea relationship is negatively associated with development: higher values of the Human Development Index, urbanization, access to electricity, easier access to water, and education are predictive of a weaker association between breastfeeding and postpartum amenorrhea. Low parity also predicts shorter postpartum amenorrhea. The association between exclusive breastfeeding and maintenance of amenorrhea in the early postpartum period is also found in rapid decline in Asia and in moderate decline in sub-Saharan Africa. These findings indicate that the effect of breastfeeding on ovarian function is partly mediated by external factors that likely include negative maternal energy balance and support the notion that prolonged breastfeeding significantly helps control fertility only under harsh environmental conditions.
Two Blades of Grass: The Impact of the Green Revolution
Douglas Gollin, Casper Worm Hansen & Asger Mose Wingender
Journal of Political Economy, forthcoming
We estimate the impact of the Green Revolution in the developing world by exploiting exogenous heterogeneity in the timing and extent of the benefits derived from high-yielding crop varieties (HYVs). We find that HYVs increased yields by 44% between 1965 and 2010, with further gains coming through reallocation of inputs. Higher yields increased income and reduced population growth. A 10-year delay of the Green Revolution would in 2010 have cost 17% of GDP (gross domestic product) per capita and added 223 million people to the developing-world population. The cumulative GDP loss over 45 years would have been US$83 trillion, corresponding to approximately one year of current global GDP.
Is a Corruption Crackdown Really Good for the Economy? Firm-Level Evidence from China
Zhiyuan Chen, Xin Jin & Xu Xu
Journal of Law, Economics, and Organization, July 2021, Pages 314-357
We study the impact of anticorruption efforts on firm performance, exploiting an unanticipated corruption crackdown in China's Heilongjiang province in 2004. We compare firms in the affected regions with those in other inland regions before and after the crackdown. Our main finding is an overall negative impact of the crackdown on firm productivity and entry rates. Furthermore, these negative impacts are mainly experienced by private and foreign firms, while state-owned firms are mostly unaffected. We present evidence concerning two potential explanations for our findings. First, the corruption crackdown may have limited bribery opportunities that helped private firms operate. Second, the corruption crackdown may have interfered with personal connections between private firms and government officials to a greater extent than institutional connections between state-owned firms and the government. Overall, our findings suggest that corruption crackdowns may not restore efficiency in the economy, but instead lead to worse economic outcomes, at least in the short run.
The Re-emergence of "Missing Women" in China
Erwin Bulte et al.
China Quarterly, forthcoming
Empirical evidence suggests that close to 100 million women are "missing" worldwide. We revisit the empirical evidence for China, the country with the most missing women. Nearly ten million girls born in the 1980s and 1990s who were "missing" according to earlier census data can be found again in the 2010 population census. We discuss two possible explanations for the re-emergence of these formerly missing girls: the delayed registration of girls owing to economic reasons, and the response to amendments to the Chinese Statistics Law in 2009 and policy changes in the 2010 population census. Using the most recent statistics, we document patterns of the underreporting of women over time and across regions as well as explore the basic determinants of underreporting of women. Important policy challenges remain. For the unregistered children, the lack of access to public services will increase their vulnerability and adversely affect their quality of life.
International student-migrant flows and growth in low- and middle-income countries: Brain gain or brain drain?
Jean Donovan Rasamoelison, Susan Averett & David Stifel
Applied Economics, July 2021, Pages 3913-3930
The number of students flowing from low-income countries to high-income countries has grown over the past several decades but is likely to fall substantially in the coming years due to the coronavirus pandemic. To gauge the potential impact of the coronavirus-induced reduction in the international flow of student migrants, we estimate the pre-pandemic effects of student migration from 122 low- and middle-income countries to French- and English-speaking high-income countries on the economic growth of the sending countries. Using region fixed-effects and instrumental-variables estimators to address the potential endogeneity of student-migrant flows, we find positive and statistically significant effects of student migration on per capita GDP in sending countries. These findings are robust to different time lags, and are increasing over time. Our results indicate that student migrants have a modest but meaningful impact on the short-run economic growth of their home countries. In terms of the mechanisms through which student-migrant flows can affect growth of the home countries, we find evidence of 'incentive effects' for students going to English-speaking countries, and evidence of student-migrant flows affecting interest in politics and democratic political systems in the sending countries.
Taxation, infrastructure, and firm performance in developing countries
Lisa Chauvet & Marin Ferry
Public Choice, June 2021, Pages 455-480
This paper investigates the relationship between taxation and firm performance in developing countries. Combining firm-level data from the World Bank Enterprise Surveys and tax data from the Government Revenue Dataset, our results suggest that taxation benefits firm growth in developing countries, especially in lower-income countries. This positive contribution of domestic revenue to firm performance seems to channel through the financing of the public infrastructure vital to firms operating in these countries. We also provide evidence that this positive effect disappears when corruption is too pervasive, and when the source of tax revenue reduces government accountability.
The Emergence of Mafia-like Business Systems in China
Meg Rithmire & Hao Chen
China Quarterly, forthcoming
A large body of literature on state-business relations in China has examined the political role of capitalists and collusion between the state and the private sector. This paper contributes to that literature and understanding of the internal differentiation among China's business elites by documenting the emergence of a particular kind of large, non-state business group that we argue is more akin to a mafia system than any standard definition of a firm. Drawing on large-N descriptive data as well as deep ethnographic and documentary research, we argue that mafia-like business systems share organizational principles (plunder and obfuscation) and means of growth and survival (relations of mutual endangerment and manipulation of the financial system). Understanding the particular moral economy that underlies mafia-like business systems and their interactions with the state challenges methodological foundations of research on China's political economy and helps to explain recent conflict between high-profile business people and the state.
The impact of past pandemics on economic and gender inequalities
Economics & Human Biology, forthcoming
This paper estimates how previous major pandemic events affected economic and gender inequalities in the short- to medium run. We consider the impact of six major pandemic episodes -- H3N2 Flu (1968), SARS (2003), H1N1 Swine Flu (2009), MERS (2012), Ebola (2014), and Zika (2016) -- on cross-country inequalities in samples of 46-167 countries observed over 1950-2019. Results show that the past pandemics have moderately increased income inequality in the affected countries in the period of four to five years after the pandemic's start. On the other hand, we do not find any robust negative impacts on wealth inequality. The results concerning gender inequality are less consistent, but we find some evidence of declining gender equality among the hardest hit countries. Moreover, the gender gap in unemployment grew within the four years after the onset of the pandemic.