In simpler times
Ineke Maas & Marco van Leeuwen
American Journal of Sociology, November 2016, Pages 838-885
Abstract:
Do the observed increases in intergenerational mobility in European societies in recent decades have their origin in 19th-century industrialization, as is posited by the industrialization thesis? Using over 600,000 marriage records and an internationally and historically comparative measure of occupational class, the authors study total and relative intergenerational mobility of men in Britain, Finland, France, Germany, Hungary, the Netherlands, and Sweden between 1800 and 1914. For these countries together and for most countries separately the preindustrial period was characterized by stable or decreasing total and relative mobility, whereas a trend toward greater mobility took place during industrialization, lending qualified support to the industrialization thesis.
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Coal Smoke and the Costs of the Industrial Revolution
Walker Hanlon
NBER Working Paper, December 2016
Abstract:
While the Industrial Revolution brought economic growth, there is a long debate in economics over the costs of the pollution externalities that accompanied early industrialization. To help settle this debate, this paper introduces a new theoretically-grounded strategy for estimating the impact of industrial pollution on local economic development and applies this approach to data from British cities for 1851-1911. I show that local industrial coal use substantially reduced long-run city employment growth over this period. Moreover, a counterfactual analysis suggests that plausible improvements in coal use efficiency would have led to substantially higher urbanization rates in Britain by 1911.
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Does Foreign Aid Target the Poorest?
Ryan Briggs
International Organization, January 2017, Pages 187-206
Abstract:
To examine the extent to which foreign aid reaches people at different levels of wealth in Africa, I use household surveys to measure the subnational distribution of a country's population by wealth quintiles and match this information to data on the location of aid projects from two multilateral donors. Within countries, aid disproportionately flows to regions with more of the richest people. Aid does not favor regions with more of the poorest people. These findings violate the stated preferences of the multilateral donors under study, suggesting that the donors either cannot or are not willing to exercise control over the location of aid projects within countries. The results also suggest that aid is not being allocated effectively to alleviate extreme poverty.
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Derek Headey
World Bank Economic Review, forthcoming
Abstract:
Do higher food prices help or hinder poverty reduction? Despite much debate, existing research has almost solely relied on simulation models to address this question. In this article World Bank poverty estimates are used to systematically test the relationship between changes in poverty and exogenous changes in real domestic food prices. We uncover indicative evidence that increases in food prices are associated with reductions in poverty, not increases. We empirically explain this result in terms of relatively strong agricultural supply and wage responses to food price increases, and the fact that the majority of the world’s poor still heavily rely on agriculture or agriculture-related activities to earn a living.
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Romel Mostafa & Steven Klepper
Management Science, forthcoming
Abstract:
We explore how the establishment of an industry pioneer through foreign seeding of industry knowledge can subsequently catalyze the growth of a developing country’s industry by involuntarily propagating the knowledge to subsequent entrants. As industry knowledge has tacit elements, we focus on mechanisms that enable experienced workers from the pioneer to seed the knowledge to new entrants. We examine the relationship between entrants’ characteristics and the mechanisms exploited to access the industry knowledge, and the impact of the mechanisms exploited on firm performance. Empirical findings from two historical episodes in the Bangladesh garment industry suggest that industry knowledge seeding was essential for the initial establishment and subsequent expansion of the industry. Our paper highlights the role of experienced workers’ mobility in building new firm capabilities and provides novel insights into industrialization in developing economies.
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Cross-Country Differences in the Optimal Allocation of Talent and Technology
Tommaso Porzio
University of California Working Paper, December 2016
Abstract:
I model an economy inhabited by heterogeneous individuals that form teams and choose an appropriate production technology. The model characterizes how the technological environments shapes the equilibrium assignment of individuals into teams. I apply the theoretical insights to study cross-country differences in the allocation of talent and technology. Their low endowment of technology, coupled with the possibility of importing advanced one from the frontier, leads poor countries to a different economic structure, with stronger concentration of talent and larger cross-sectional productivity dispersion. As a result, the efficient equilibrium in poor countries displays economic features, such as larger cross-sectional productivity dispersion, that are often cited as evidence of misallocation. Micro data from countries of all income levels documents cross-country differences in the allocation of talent that support the theoretical predictions. A quantitative version of the model suggests that a sizable fraction of the larger productivity dispersion documented in poor countries is due to differences in the efficient allocation.
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The long-run poverty and gender impacts of mobile money
Tavneet Suri & William Jack
Science, 9 December 2016, Pages 1288-1292
Abstract:
Mobile money, a service that allows monetary value to be stored on a mobile phone and sent to other users via text messages, has been adopted by the vast majority of Kenyan households. We estimate that access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty. The impacts, which are more pronounced for female-headed households, appear to be driven by changes in financial behavior — in particular, increased financial resilience and saving — and labor market outcomes, such as occupational choice, especially for women, who moved out of agriculture and into business. Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labor, resulting in a meaningful reduction of poverty in Kenya.
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The Political Economy of Financial Systems: Evidence from Suffrage Reforms in the Last Two Centuries
Hans Degryse, Thomas Lambert & Armin Schwienbacher
Economic Journal, forthcoming
Abstract:
Voting rights were initially limited to wealthy elites providing political support for stock markets. The franchise expansion induces the median voter to provide political support for banking development, as this new electorate has lower financial holdings and benefits less from the riskiness and financial returns from stock markets. Our panel data evidence covering the years 1830–1999 shows that tighter restrictions on the voting franchise induce greater stock market development, whereas a broader voting franchise is more conducive to the banking sector, consistent with Perotti and von Thadden (2006). The results are robust to controlling for other institutional arrangements and endogeneity.
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1688 and all that: Property rights, the Glorious Revolution and the rise of British capitalism
Geoffrey Hodgson
Journal of Institutional Economics, forthcoming
Abstract:
In a seminal 1989 article, Douglass North and Barry Weingast argued that by making the monarch more answerable to Parliament, the Glorious Revolution of 1688 helped to secure property rights in England and stimulate the rise of capitalism. Similarly, Daron Acemoglu, Simon Johnson, and James Robinson later wrote that in the English Middle Ages there was a ‘lack of property rights for landowners, merchants and proto-industrialists’ and the ‘strengthening’ of property rights in the late 17th century ‘spurred a process of financial and commercial expansion’. There are several problems with these arguments. Property rights in England were relatively secure from the 13th century. A major developmental problem was not the security of rights but their feudal nature, including widespread ‘entails’ and ‘strict settlements’. 1688 had no obvious direct effect on property rights. Given these criticisms, what changes promoted the rise of capitalism? A more plausible answer is found by addressing the post-1688 Financial and Administrative Revolutions, which were pressured by the enhanced needs of war and Britain's expanding global role. Guided by a more powerful Parliament, this new financial system stimulated reforms to landed property rights, the growth of collateralizable property and saleable debt, and thus enabled the Industrial Revolution.
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Malaria Suitability, Urbanization and Persistence: Evidence From China Over More Than 2000 Years
Matthias Flückiger & Markus Ludwig
European Economic Review, February 2017, Pages 146–160
Abstract:
We show that the climatic potential for Plasmodium falciparum malaria transmission constituted a locational fundamental that influenced the spatial distribution of urbanization since the early start of the southward expansion of the Han Chinese around 200 BCE. This effect is still detectable in today's distribution of urbanization and economic activity even though the risk of malaria falciparum has been successfully eliminated. We do not find any indication of convergence between high- and low malaria potential regions after eradication. Our identification strategy relies on a climate-based measure of Plasmodium falciparum malaria transmission intensity which is fitted to experimental data on mosquito and parasite development from laboratory studies. This measure is exogenous with respect to human population densities.
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Blood Rubber: The Effects of Labor Coercion on Institutions and Culture in the DRC
Sara Lowes & Eduardo Montero
Harvard Working Paper, January 2017
Abstract:
We examine how historical exposure to extractive institutions affects long-run development in the case of the Congo Free State (CFS). The CFS granted concessions to private companies that used violent tactics to collect rubber. Local chiefs were co-opted into supporting the rubber regime, and individuals struggled to fulfill mandated quotas as natural rubber became increasingly scarce. We use a geographic regression discontinuity design along the former concession boundaries to show that greater exposure to extractive institutions causes significantly worse education, wealth and health outcomes. We then use survey and experimental data collected along a former concession boundary to examine how the effects of extractive institutions persist through local institutional quality and cultural norms. Consistent with their historical co-option by the concession companies, we find that chiefs within the former concessions are of lower quality and less accountable to their constituents. However, we find that individuals within the concessions are more trusting and have stronger norms of redistribution. The results demonstrate how historical events of short duration can have long-lasting effects on institutions and cultural norms.
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Fragility of the provision of local public goods to private and collective risks
Juan-Camilo Cárdenas et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
Smallholder agricultural systems, strongly dependent on water resources and investments in shared infrastructure, make a significant contribution to food security in developing countries. These communities are being increasingly integrated into the global economy and are exposed to new global climate-related risks that may affect their willingness to cooperate in community-level collective action problems. We performed field experiments on public goods with private and collective risks in 118 small-scale rice-producing communities in four countries. Our results indicate that increasing the integration of those communities with the broader economic system is associated with lower investments in public goods when facing collective risks. These findings indicate that local public good provision may be negatively affected by collective risks, especially in communities more integrated with the market economy.
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Arnaud Costinot & Dave Donaldson
NBER Working Paper, December 2016
Abstract:
In this paper we develop a new approach to measuring the gains from economic integration based on a generalization of the Ricardian model in which heterogeneous factors of production are allocated to multiple sectors in multiple local markets based on comparative advantage. We implement this approach using data on crop markets in approximately 2,600 U.S. counties from 1880 to 1997. Central to our empirical analysis is the use of a novel agronomic data source on predicted output by crop for small spatial units. Crucially, this dataset contains information about the productivity of all units for all crops, not just those that are actually being grown — an essential input for measuring the gains from trade. Using this new approach we find substantial long-run gains from economic integration among US agricultural markets, benefits that are similar in magnitude to those due to productivity improvements over that same period.
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The Road to Bribery and Corruption: Slippery Slope or Steep Cliff?
Nils Köbis et al.
Psychological Science, forthcoming
Abstract:
Major forms of corruption constitute a strong threat to the functioning of societies. The most frequent explanation of how severe corruption emerges is the slippery-slope metaphor — the notion that corruption occurs gradually. While having widespread theoretical and intuitive appeal, this notion has barely been tested empirically. We used a recently developed paradigm to test whether severely corrupt acts happen gradually or abruptly. The results of four experimental studies revealed a higher likelihood of severe corruption when participants were directly given the opportunity to engage in it (abrupt) compared with when they had previously engaged in minor forms of corruption (gradual). Neither the size of the payoffs, which we kept constant, nor evaluations of the actions could account for these differences. Contrary to widely shared beliefs, sometimes the route to corruption leads over a steep cliff rather than a slippery slope.
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Reputational Consequences of Labor Coercion: Evidence from Assam's Tea Plantations
Bishnupriya Gupta & Anand Swamy
Journal of Development Economics, forthcoming
Abstract:
The right to coerce an employee is seen as advantageous to employers. However, if coercion gives employers a bad reputation, workers may be harder to recruit. We study a unique setting in Assam's tea plantations in the 19th century, where migrant workers were recruited under two different indentured contracts, one of which was more coercive, and gained notoriety in the national press and policy circles. Using newly collected panel data on annual migration flows to seven districts over the period 1883–1900, we find that the response of migration to increased demand for labor, proxied by a rising tea price, was lower for the contract that had a bad reputation. Workers migrated under the more coercive contract only when uninformed or misled about the terms of their employment. We identify the effect of information flow by distinguishing between recruiters with and without social connections with the workers.
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Japan's Ultimately Unaccursed Natural Resources-Financed Industrialization
Randall Morck & Masao Nakamura
NBER Working Paper, November 2016
Abstract:
Japan’s successful industrialization in the late 19th and early 20th century largely exhausted its then abundant natural resources. Rather than exemplifying rapid development in the absence of natural resources, Japan shows how laissez-faire government and successfully transplanted classical liberal institutions, including active stock markets, exorcised a natural resources curse that undermined its prior state-led industrialization strategy. Japan’s post-WWII reconstruction relied little on natural resources and more on bank financing and state direction, but was not an example of an initial industrialization.
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Language Policy and Human Development
David Laitin & Rajesh Ramachandran
American Political Science Review, August 2016, Pages 457–480
Abstract:
This article explores how language policy affects the socioeconomic development of nation states through two channels: the individual’s exposure to and (in reference to an individual’s mother tongue) linguistic distance from the official language. In a cross-country framework the article first establishes a robust and sizeable negative relationship between an official language that is distant from the local indigenous languages and proxies for human capital and health. To establish this relationship as causal, we instrument language choice with a measure of geographic distance from the origins of writing. Next, using individual level data from India and a set of 11 African countries, we provide microempirical support on the two channels — distance from and exposure to the official language — and their implications for educational, health, occupational and wealth outcomes. Finally, we suggest policy implications based on our findings.