Emergent
Direct and Indirect Implications of Pathogen Prevalence for Scientific and Technological Innovation
Damian Murray
Journal of Cross-Cultural Psychology, July 2014, Pages 971-985
Abstract:
Rates of scientific and technological innovation vary widely across cultures, but why? Given the previously documented effects of disease threat on cultural values and traits that inhibit innovation, this variation may be due, at least in part, to regional variation in the prevalence of disease-causing pathogens. Five country-level measures of innovation were used to investigate this hypothesis. Preliminary results revealed that pathogen prevalence was significantly associated with all five measures of innovation. Further analyses revealed that pathogen prevalence significantly predicted innovation when statistically controlling for other purported causes of cross-cultural variation in innovation, such as education, wealth, and population structure. Finally, mediational analyses revealed that the effect of disease prevalence on innovation was mediated by levels of collectivism and conformity. These results demonstrate that the previously documented impact of disease threat on cultural value systems may have downstream consequences for scientific and technological innovation.
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Measuring institutional quality in ancient Athens
Andreas Bergh & Carl Hampus Lyttkens
Journal of Institutional Economics, June 2014, Pages 279-310
Abstract:
We use the Economic Freedom Index to characterize the institutions of the Athenian city-state in the fourth century BCE. It has been shown that ancient Greece witnessed improved living conditions for an extended period of time. Athens in the fourth century appears to have fared particularly well. We find that economic freedom in ancient Athens is on level with the highest ranked modern economies such as Hong Kong and Singapore. With the exception of the position of women and slaves, Athens scores high in almost every dimension of economic freedom. Trade is probably highly important even by current standards. As studies of contemporary societies suggest that institutional quality is probably an important determinant of economic growth, it may also have been one factor in the relative material success of the Athenians.
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State Capacity and Long-Run Economic Performance
Mark Dincecco & Gabriel Katz
Economic Journal, forthcoming
Abstract:
We present new evidence about the long-run relationship between state capacity-the fiscal and administrative power of states-and economic performance. Our database is novel and spans 11 European countries and 4 centuries from the Old Regime to World War I. We argue that national governments undertook two political transformations over this period: fiscal centralisation and limited government. We find a significant direct relationship between fiscal centralisation and economic growth. Furthermore, we find that an increase in the state's capacity to extract greater tax revenues was one mechanism through which both political transformations improved economic performance. Our analysis shows systematic evidence that state capacity is an important determinant of long-run economic growth.
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Size and Dynastic Decline: The Principal-Agent Problem in Late Imperial China, 1700–1850
Tuan-Hwee Sng
Explorations in Economic History, forthcoming
Abstract:
This paper argues that China’s size was one reason behind its relative decline in the nineteenth century. A ruler governing a large country faces severe agency problems. Given his monitoring difficulties, his agents have strong incentives to extort the taxpayers. This forces him to keep taxes low to prevent revolts. Economic expansion could aggravate corruption and cause further fiscal weakening. To support the model’s predictions, I show that the Chinese state taxed and administered sparingly, especially in regions far from Beijing. Furthermore, its fiscal capacity contracted steadily during the prosperous eighteenth century, sowing the seeds for the nineteenth-century crises.
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American Exceptionalism as a Problem in Global History
Robert Allen
Journal of Economic History, June 2014, Pages 309-350
Abstract:
The causes of the United States’ exceptional economic performance are investigated by comparing American wages and prices with wages and prices in Great Britain, Egypt, and India. American industrialization in the nineteenth century required tariff protection since the country's comparative advantage lay in agriculture. After 1895 surging American productivity shifted the country's comparative advantage to manufacturing. Egypt and India could not have industrialized by following American policies since their wages were so low and their energy costs so high that the modern technology that was cost effective in Britain and the United States would not have paid in their circumstances.
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The Legacy of Historical Conflict: Evidence from Africa
Timothy Besley & Marta Reynal-Querol
American Political Science Review, forthcoming
Abstract:
This article exploits variation between and within countries to examine the legacy of recorded conflicts in Africa in the precolonial period between 1400 and 1700. There are three main findings. First, we show that historical conflict is correlated with a greater prevalence of postcolonial conflict. Second, historical conflict is correlated with lower levels of trust, a stronger sense of ethnic identity, and a weaker sense of national identity across countries. Third, historical conflict is negatively correlated with subsequent patterns of development looking at the pattern across grid cells within countries.
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Playing Favorites: How Shared Beliefs Shape the IMF's Lending Decisions
Stephen Nelson
International Organization, May 2014, Pages 297-328
Abstract:
International organizations (IOs) suffuse world politics, but the International Monetary Fund (IMF) stands out as an unusually important IO. My research suggests that IMF lending is systematically biased. Preferential treatment is largely driven by the degree of similarity between beliefs held by IMF officials and key economic policy-makers in the borrowing country. This article describes the IMF's ideational culture as “neoliberal,” and assumes it to be stable during the observation window (1980–2000). The beliefs of top economic policy-makers in borrowing countries, however, vary in terms of their distance from IMF officials' beliefs. When fellow neoliberals control the top economic policy posts the distance between the means of the policy team's beliefs and the IMF narrows; consequently, IMF loans become less onerous, more generous, and less rigorously enforced. I gathered data on the number of conditions and the relative size of loans for 486 programs in the years between 1980 and 2000. I collected data on waivers, which allow countries that have missed binding conditions to continue to access funds, as an indicator for enforcement. I rely on indirect indicators, gleaned from a new data set that contains biographical details of more than 2,000 policy-makers in ninety developing countries, to construct a measure of the proportion of the top policy officials that are fellow neoliberals. The evidence from a battery of statistical tests reveals that as the proportion of neoliberals in the borrowing government increases, IMF deals get comparatively sweeter.
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The stained China miracle: Corruption, regulation, and firm performance
Ting Jiang & Huihua Nie
Economics Letters, forthcoming
Abstract:
Regional corruptness in China has a positive effect on the profitability of private firms, but not that of state-owned firms. A natural experiment of exogenous trade policy change suggests that corruption may help private firms circumvent government regulation.
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The Political Economy of Development in China and Vietnam
Edmund Malesky & Jonathan London
Annual Review of Political Science, 2014, Pages 395-419
Abstract:
Two theories predominate in discussions of why China and Vietnam have, over the past three decades, achieved such rapid economic growth. The first argues that their startling performance can be explained by economic factors associated with late industrialization. The second proposes that China and Vietnam represent novel models of political economic organization that need to be better studied and understood. In this essay we review the voluminous literature on the political economy of China and Vietnam, evaluating the critical debates over the economic benefits of decentralization, experimentation, and state-led development. Although the debate remains unsettled, analysis suggests that growth in the two countries was most robust during periods of state withdrawal from the economy and that current economic difficulties in both countries are now arising from the scale and character of the state's role in both economies.
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A History of Resistance to Privatization in Russia
Paul Castañeda Dower & Andrei Markevich
Journal of Comparative Economics, forthcoming
Abstract:
We investigate the connection between privatization in post-communist Russia and a mass privatization reform in Imperial Russia, the 1906 Stolypin land reform. Specifically, we relate historical measures of conflicts associated with the Stolypin reform to contemporary views on whether the privatization of the 1990’s should be revised. These historical measures could influence contemporary views in two ways: first, differences in privatization-related conflicts in the past could have directly altered attitudes towards privatization in the 1990s and, second, these differences could merely reflect pre-determined dissimilarities in preferences. We first show that historical measures of resistance to privatization are associated with views that favor state ownership. One standard deviation increase in the historical resistance to privatization explains a quarter of the negative sentiment toward private property today. We also find that negative experiences with the Stolypin reform are associated with views on the procedural unfairness of modern privatization reforms, suggesting that pre-determined preferences can not fully explain the weight of history.
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Hans-Bernd Schäfer & Alexander Wulf
Journal of Empirical Legal Studies, June 2014, Pages 266–300
Abstract:
Between the years 1200 and 1600, economic development in Catholic Europe gained momentum. By the end of this period, per-capita income levels were well above the income levels in all other regions of the world. We relate this unique development to the resurrection of Roman law, the rise of canon law, and the establishment of law as a scholarly and scientific discipline taught in universities. We test two competing hypotheses on the impact of these processes on economic growth in medieval Europe. The first conjecture is that the spread of substantive Roman law was conducive to the rise of commerce and economic growth. The second and competing conjecture is that growth occurred not as a result of the reception of substantive Roman law but because of the rational, scientific, and systemic features of Roman and canon law and the training of jurists in the newly established universities (Verwissenschaftlichung). This gave the law throughout Europe an innovative flexibility, which also influenced merchant law (lex mercatoria), and customary law. Using data on the population of more than 200 European cities as a proxy for per-capita income, we find that an important impact for economic development was not primarily the content of Roman law, but the rise of law faculties in universities and the emergence of a legal method developed by glossators and commentators in their interpretation and systematization of the sources of Roman law (Corpus Juris Civilis, Digests) and canon law. The endeavor to extract general normative conclusions from these sources led to abstraction, methodology, and the rise of law as a scholarly discipline. Wherever law faculties were founded anywhere in Europe, jurists learned new legal concepts and skills that were unknown before and conducive for doing business.
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Labour productivity and human capital in the European maritime sector of the eighteenth century
Jelle Van Lottum & Jan Luiten Van Zanden
Explorations in Economic History, forthcoming
Abstract:
Pre-modern growth was to a large extent dependent on processes of commercialization and specialization, based on cheap transport. Seminal interpretations of the process of economic growth before the Industrial Revolution have pointed to the strategic importance of the rise of the Atlantic economy and the growth of cities linked to this, but have not really explained why Europeans were so efficient in organizing large international networks of shipping and trade. Most studies concerning early modern shipping have focused on changes in ship design (capital investments) in explaining long-term performance of European shipping in the pre-1800 period; in this paper we argue that this is only part of the explanation. Human capital – the quality of the labour force employed on ships – mattered as well. We firstly demonstrate that levels of human capital on board European ships were relatively high, and secondly that there were powerful links between the level of labour productivity in shipping and the quality of the workforce. This suggests strongly that shipping was a ‘high tech’ industry not only employing high quality capital goods, but also, as a complementary input, high quality labour, which was required to operate the increasingly complex ships and their equipment.
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Was Weber Right? The Role of Urban Autonomy in Europe's Rise
David Stasavage
American Political Science Review, forthcoming
Abstract:
Do strong property rights institutions always help, or might they sometimes actually hinder development? Since Max Weber and before, scholars have claimed that the presence of politically autonomous cities, controlled by merchant oligarchies guaranteeing property rights, helped lead to Europe's rise. Yet others suggest that autonomous cities were a hindrance to growth because rule by merchant guilds resulted in restrictions that stifled innovation and trade. I present new evidence and a new interpretation that reconcile the two views of city autonomy. I show that politically autonomous cities initially had higher population growth rates than nonautonomous cities, but over time this situation reversed itself. My evidence also suggests why autonomous cities eventually disappeared as a form of political organization. Instead of military weakness, it may have been their political institutions that condemned them to become obsolete.
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Initial Endowments and Economic Reform in 27 Post-Socialist Countries
Ariel BenYishay & Pauline Grosjean
Journal of Comparative Economics, forthcoming
Abstract:
This study explores how initial endowments at the start of transition have shaped reform outcomes and reform trajectories in 27 former communist countries in Europe and Central Asia. Countries of the former Russian Empire that had a large resources sector at the start of transition underperformed other countries in terms of the speed and the depth of economic reforms. The effect is particularly strong for privatization, enterprise restructuring and competition policy. Within country, Ottoman or Russian provinces that had a large natural resources sector in 1989 have a lower share of entrepreneurs and of small and medium sized enterprises today and also experience endemic corruption. Our results indicate that the propensity, or ability, of special interest groups to capture the reform process that would erode their rents were facilitated by the quality of institutions whose foundations go back centuries; and that the effects on the local economy are real.
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Indirect Rule and State Weakness in Africa: Sierra Leone in Comparative Perspective
Daron Acemoglu et al.
NBER Working Paper, May 2014
Abstract:
A fundamental problem for economic development is that most poor countries have ‘weak states’ which are incapable or unwilling to provide basic public goods such as law enforcement, order, education and infrastructure. In Africa this is often attributed to the persistence of ‘indirect rule’ from the colonial period. In this paper we discuss the ways in which a state constructed on the basis of indirect rule is weak and the mechanisms via which this has persisted since independence in Sierra Leone. We also present a hypothesis as to why the extent to which indirect rule has persisted varies greatly within Africa, linking it to the presence or the absence of large centralized pre-colonial polities within modern countries. Countries which had such a polity, such as Ghana and Uganda, tended to abolish indirect rule since it excessively empowered traditional rulers at the expense of post-colonial elites. Our argument provides a new mechanism which can explain the positive correlation between pre-colonial political centralization and modern public goods and development outcomes.
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Poverty and Crime: Evidence from Rainfall and Trade Shocks in India
Lakshmi Iyer & Petia Topalova
Harvard Working Paper, April 2014
Abstract:
Does poverty lead to crime? We shed light on this question using two independent and exogenous shocks to household income in rural India: the dramatic reduction in import tariffs in the early 1990s and rainfall variations. We find that trade shocks, previously shown to raise relative poverty, also increased the incidence of violent crimes and property crimes. The relationship between trade shocks and crime is similar to the observed relationship between rainfall shocks and crime. Our results thus identify a causal effect of poverty on crime. They also lend credence to a large literature on the effects of weather shocks on crime and conflict, which has usually assumed that the income channel is the most relevant one.
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Markus Brueckner & Hannes Schwandt
Economic Journal, forthcoming
Abstract:
Do populations grow as countries become richer? In this paper we estimate the effects on population growth of shocks to national income that are plausibly exogenous and unlikely to be driven by technological change. For a panel of over 139 countries spanning the period 1960-2007 we interact changes in international oil prices with countries’ average net-export shares of oil in GDP. Controlling for country and time fixed effects, we find that this measure of oil price induced income growth is positively associated with population growth. The IV estimates indicate that a one percentage point increase in GDP per capita growth over a ten year period increases countries’ population growth by around 0.1 percentage points. Further, we find that this population effect results from both a positive effect on fertility and a negative effect on infant and child mortality.
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On the Distributive Costs of Drug-Related Homicides
Nicolás Ajzenman, Sebastian Galiani & Enrique Seira
NBER Working Paper, April 2014
Abstract:
Reliable estimates of the effects of violence on economic outcomes are scarce. We exploit the manyfold increase in homicides in 2008-2011 in Mexico resulting from its war on organized drug traffickers to estimate the effect of drug-related homicides on house prices. We use an unusually rich dataset that provides national coverage on house prices and homicides and exploit within-municipality variations. We find that the impact of violence on housing prices is borne entirely by the poor sectors of the population. An increase in homicides equivalent to one standard deviation leads to a 3% decrease in the price of low-income housing. In spite of this large burden on the poor, the willingness to pay in order to reverse the increase in drug-related crime is not high. We estimate it to be approximately 0.1% of Mexico’s GDP.
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Does the Quality of Electricity Matter? Evidence from Rural India
Ujjayant Chakravorty, Martino Pelli & Beyza Ural Marchand
Journal of Economic Behavior & Organization, forthcoming
Abstract:
This paper estimates the returns to household income due to improved access to electricity in rural India. We examine the effect of connecting a household to the grid and of the quality of electricity, defined as hours of daily supply. The analysis is based on two rounds of a representative panel of more than 10,000 households. We use the district-level density of transmission cables as instrument for the electrification status of the household. We find that a grid connection increases non-agricultural incomes of rural households by about 9 percent during the study period (1994-2005). However, a grid connection and a higher quality of electricity (in terms of fewer outages and more hours per day) increases non-agricultural incomes by about 28.6 percent in the same period.
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Philip Hoffman, Gilles Postel-Vinay & Jean-Laurent Rosenthal
Explorations in Economic History, forthcoming
Abstract:
Poorly developed financial markets are widely believed to block economic growth, because only modern financial intermediaries such as banks can mobilize large amounts of financial capital at low cost. This claim is supported by cross country regressions, but the regressions assume that credit intermediation is measured accurately before modern financial intermediaries arrive. If traditional intermediaries were mobilizing large amounts of financial capital before banks or other modern intermediaries appear, then the strength of the relationship between financial development and economic growth would be cast into doubt. Using an original panel data set from nineteenth-century France, we provide the first estimates of how much financial capital key traditional intermediaries (notaries) were mobilizing for an entire economy during its first century of economic growth, and we analyze the lending that the notaries made possible in French mortgage market. The amount of capital they mobilized turns out to be large. We then analyze the effect that financial deepening had on the notaries as banks spread and find that the banks’ and notaries’ services were in all likelihood complements. The implication is that the link between financial development and economic growth may therefore be weaker than is assumed.
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What is driving the 'African Growth Miracle'?
Margaret McMillan & Kenneth Harttgen
NBER Working Paper, April 2014
Abstract:
We show that much of Africa’s recent growth and poverty reduction can be traced to a substantive decline in the share of the labor force engaged in agriculture. This decline has been accompanied by a systematic increase in the productivity of the labor force, as it has moved from low productivity agriculture to higher productivity manufacturing and services. These declines have been more rapid in countries where the initial share of the labor force engaged in agriculture is the highest and where commodity price increases have been accompanied by improvements in the quality of governance.
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Income Shocks and HIV in Africa
Marshall Burke, Erick Gong & Kelly Jones
Economic Journal, forthcoming
Abstract:
We examine how variation in local economic conditions has shaped the AIDS epidemic in Africa. Using data from over 200,000 individuals across 19 countries, we match biomarker data on individuals’ serostatus to information on local rainfall shocks, a large source of income variation for rural households. We estimate infection rates in HIV-endemic rural areas increase by 11% for every recent drought, an effect that is statistically and economically significant. Income shocks explain up to 20% of variation in HIV prevalence across African countries, suggesting existing approaches to HIV prevention could be bolstered by helping households manage income risk better.
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Did China's Adoption of IFRS Attract More Foreign Institutional Investment?
Mark DeFond et al.
University of Southern California Working Paper, April 2014
Abstract:
We examine the impact of China’s IFRS adoption on foreign institutional investment. We find that foreign institutional investment does not increase after China’s IFRS adoption, and some evidence that it actually declines, particularly among firms with weaker incentives to credibly implement IFRS, or with greater ability to manipulate IFRS’s fair value provisions. We also find that the association between earnings and returns generally declines after IFRS adoption, consistent with reduced earnings quality. In addition, we find that foreign institutional investors’ returns decline after China’s IFRS adoption. Finally, the decline in foreign institutional investment is greater among investors from countries with weak institutions that have also adopted IFRS. Taken together, our evidence suggests that China’s weak institutional infrastructure impairs IFRS’s ability to improve financial reporting quality and increase foreign institutional investment.