Nice places to live
Climate and the Emergence of Global Income Differences
Thomas Barnebeck Andersen, Carl-Johan Dalgaard & Pablo Selaya
Review of Economic Studies, forthcoming
Abstract:
The latitude gradient in comparative development is a striking fact: as one moves away from the equator, economic activity rises. While this regularity is well known, it is not well understood. Perhaps the strongest correlate of (absolute) latitude is the intensity of ultraviolet radiation (UV-R), which epidemiological research has shown to be a cause of a wide range of diseases. We establish that UV-R is strongly and negatively correlated with economic activity, both across and within countries. We propose and test a mechanism that links UV-R to current income differences via the impact of disease ecology on the timing of the take-off to sustained growth.
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Economic Development and the Demographics of Criminals in Victorian England
Chris Vickers & Nicolas Ziebarth
Journal of Law and Economics, February 2016, Pages 191-223
Abstract:
We use a data set consisting of felony trials in London from 1835 to 1913 to analyze changing demographic patterns in the commission of crimes. We find that the average age of offenders in London increased substantially more than can be explained through increases in longevity or jurisdictional changes. Moreover, this increase is larger for crimes committed for economic gain than for crimes of violence. We build a model to explain the increase in the number of older offenders. As industrialization proceeded, older workers increasingly found their human capital unsuitable to the technology level, which forced some into crime. We then complement this time-series analysis with cross-sectional data from England and Wales from 1870, 1883, and 1910. In the cross sections, areas with higher rates of urbanization and industrialization had higher average ages of criminals and disproportionately more criminals from medium-skilled, artisan occupations.
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Luigi Guiso, Paola Sapienza & Luigi Zingales
Journal of the European Economic Association, forthcoming
Abstract:
We study whether a positive historical shock can generate long-term persistence in development. We show that Italian cities that achieved self-government in the Middle Ages have a higher level of civic capital today than similar cities in the same area that did not. The size of this effect increases with the length of the period of independence and its intensity. This effect persists even after accounting for the fact that cities did not become independent randomly. We conjecture that the Middle-Age experience of self-government fostered self-efficacy beliefs — beliefs in one's own ability to complete tasks and reach goals — and this positive attitude, transmitted across generations, enhances civic capital today. Consistently, we find that fifth-graders in former free city-states exhibit stronger self-efficacy beliefs and that these beliefs are correlated with a higher level of civic capital.
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Women's Liberation as a Financial Innovation
Moshe Hazan, David Weiss & Hosny Zoabi
Tel Aviv University Working Paper, July 2016
Abstract:
Property rights are at the heart of capitalism's ability to efficiently allocate resources. Historically, married women have been one of the groups with the greatest legal disabilities in this regard, to the benefit of their husbands. Starting in the second half of the 19th century, common law countries, which were entirely dominated by men, gave married women property rights. Before this "women's liberation," married women were subject to the laws of coverture. Coverture had detailed laws as to which spouse had ownership and control over various aspects of property both before and after marriage. These laws created a strong disincentive for women to invest in financial assets, such as stocks, bonds, and even bank deposits. This paper develops a general equilibrium model with endogenous determination of women's rights in which these laws affect portfolio choices, leading to inefficient allocations. We show how technological advancement eventually leads to men granting rights, and in turn how these rights affect development. Exploiting cross-state variation in the timing of rights, we show that increases in non-agricultural TFP predict the granting of rights. The granting of rights in turn leads to a dynamic labor reallocation towards the non-agricultural sector, representing further development. Finally, we show that women's rights are associated with lower interest rates and greater financial intermediation, consistent with an increase in the supply of credit.
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The Origins and Long-Run Consequences of the Division of Labor
Emilio Depetris-Chauvin & Ömer Özak
Southern Methodist University Working Paper, August 2016
Abstract:
This research explores the deep historical roots and persistent effects of the division of labor in pre-modern societies. It advances the hypothesis, and establishes empirically that population diversity had a positive causal effect on the division of labor. Based on a novel ethnic level dataset combining geocoded ethnographic, linguistic and genetic data, this research exploits the exogenous variation in population diversity generated by historical migratory patterns to causally establish that higher levels of population diversity were conducive to economic specialization (of labor) and the emergence of trade-related institutions that, in turn, translated into differences in pre-modern comparative development. Additionally, this research provides suggestive evidence that regions historically inhabited by pre-modern societies with higher levels of economic specialization have higher levels of contemporary occupational heterogeneity, economic complexity and development.
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Pre-Colonial Institutions and Socioeconomic Development: The Case of Latin America
Luis Angeles & Aldo Elizalde
Journal of Development Economics, forthcoming
Abstract:
We study the effects of pre-colonial institutions on present-day socioeconomic outcomes for Latin America. Our thesis is that more advanced pre-colonial institutions relate to better socioeconomic outcomes today. We advance that pre-colonial institutions survived to our days thanks to the existence of largely self-governed Amerindian communities in rural Latin America. Amerindians groups with more advanced institutional capacity would have been able to organize and defend their interests in front of national governments; leading to better development outcomes for themselves and for the population at large. We test our thesis with a dataset of 324 sub-national administrative units covering all mainland Latin American countries. Our extensive range of controls covers factors such as climate, location, natural resources, colonial activities and pre-colonial characteristics - plus country fixed effects. Results strongly support our thesis.
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Unbundling the roles of human capital and institutions in economic development
Hugo Faria et al.
European Journal of Political Economy, forthcoming
Abstract:
This research uses predicted genetic diversity unadjusted for the ancestral composition of current populations, as a plausible source of exogenous variations for indicators of economic institutions. While genetic diversity has a robust, concave and significant effect on economic institutions, reduced-form regressions and numerous falsification tests ostensibly suggest that genetic diversity affects development only via indices of multidimensional measures of economic institutions. Second-stage results indicate that allowing for cognitive skills, latitude and ethno-diversity, economic institutions exert a positive and strongly statistically significant effect on development. These findings are robust to the inclusion of deep and proximate growth determinants, different measures of geography, institutions, and horse races between cognitive skills and economic freedom, as well as to the use of different estimators. Human capital, gauged by cognitive skills, in most specifications is not significant in the second stage; however, it is positive and a strong significant predictor of economic institutions in the first stage. The empirical evidence unveiled in this study lends credence to the primacy of economic institutions hypothesis to ignite long-term growth and highlights the crucial role of human capital in enhancing economic institutional quality.
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Land Reform and Violence: Evidence from Mexico
Tommy Murphy & Martín Rossi
Journal of Economic Behavior & Organization, November 2016, Pages 106–113
Abstract:
We document the connection between land reform and violent crime in Mexico using the counter-reform carried out in 1992 that liberalised the ejido sector. Using data at municipality level, we exploit the fact that municipalities have different exposure to the reform. We report a significant impact of the land reform on the number of murders: in those municipalities with a higher proportion of social land, and therefore more exposed to the land reform, the number of murders decreased more than in those municipalities less exposed to the land reform. Our results suggest that clearly specified and consistently enforced land rights reduce gains from violence, leading therefore to lower levels of violence, as measured by the number of murders.
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Does social diversity impede sound economic management? An empirical analysis, 1980–2012
Indra de Soysa & Krishna Chaitanya Vadlamannati
Social Science Research, forthcoming
Abstract:
Several celebrated scholars argue that diverse preferences and coordination failure due to ethnic and cultural diversity hamper the social cohesion necessary for good economic management, leading to development failure. Using several measures of diversity, we find that higher levels of ethno-linguistic and cultural fractionalization are conditioned positively on higher economic growth by an index of economic freedom, which is often heralded as a good measure of sound economic management. High diversity in turn is associated with higher levels of economic freedom. We do not find any evidence to suggest that high diversity hampers change towards greater economic freedom and institutions supporting liberal policies. The effect of diversity, moreover, is conditioned positively by higher democracy. Our results raise serious doubt about the centrality of social diversity for explaining economic failure, nor is there evidence to suggest that autocratic measures are required under conditions of social diversity to implement growth-promoting policies. This is good news because history and culture seems to matter less than rational agency for ensuring sound economic management.
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Axel Dreher, Vera Eichenauer & Kai Gehring
World Bank Economic Review, forthcoming
Abstract:
We investigate the effects of short-term political motivations on the effectiveness of foreign aid. Specifically, we test whether the effect of aid on economic growth is reduced by the share of years a country served on the United Nations Security Council (UNSC) in the period the aid is committed, which provides quasi-random variation in aid. Our results show that the effect of aid on growth is significantly lower when aid was committed during a country’s tenure on the UNSC. This holds when we restrict the sample to Africa, which follows the strictest norm of rotation on the UNSC and thus where UNSC membership can most reliably be regarded as exogenous. We derive two conclusions from this. First, short-term political favoritism reduces the effectiveness of aid. Second, results of studies using political interest variables as instruments for overall aid arguably estimate the effect of politically motivated aid and thus a lower bound for the effect of all aid.
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Health and hunger: Disease, energy needs, and the Indian calorie consumption puzzle
Josephine Duh & Dean Spears
Economic Journal, forthcoming
Abstract:
India's experience presents a puzzle at odds with a basic fact of household economics: amidst unprecedented economic growth, average per capita daily calorie consumption has declined in recent decades. Does an improving disease environment explain the calorie decline? A diminished burden of infectious disease could lower energy needs by increasing absorption and effective use of calories. We document a robust effect of disease exposure - measured as infant mortality and as poor sanitation - on calorie consumption. Similar effects are found using multiple datasets and empirical strategies. Disease can account for an important fraction (one-fifth or more) of India's calorie decline.
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Design and Evolution in Institutional Development: The Insignificance of the English Bill of Rights
Peter Murrell
Journal of Comparative Economics, forthcoming
Abstract:
This paper challenges a belief that is deeply embedded in mainstream economics — that 1688-1701 saw a fundamental transformation in England that sprang from changes in the highest-level institutions designed by those who understood how to effect productive reform. This is the design hypothesis. The alternative is that change occurred in many features of society over a long period and that the 1688-1701 reforms were just one element in a deep ongoing evolutionary process. The paper presents evidence of two distinct types. First, legal history shows that the high-level institutional measures of 1688-1701 can be characterized primarily as either durable and endorsing the status quo or path-breaking and ephemeral. This is evolutionary trial and error. Second, patterns in structural breaks in myriad data sets reveal that widespread socioeconomic change was under way before 1688 and continued thereafter. Because England's early development provides a popular paradigmatic example for economists, the paper's verdict on the nature of English history is pertinent to debates on transition and development, on the importance of critical junctures, and on the relative roles of culture and institutions.
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The Economic Consequences of the 1953 London Debt Agreement
Gregori Galofré-Vilà et al.
NBER Working Paper, August 2016
Abstract:
In 1953 the Western Allied powers implemented a radical debt-relief plan that would, in due course, eliminate half of West Germany’s external debt and create a series of favourable debt repayment conditions. The London Debt Agreement (LDA) correlated with West Germany experiencing the highest rate of economic growth recorded in Europe in the 1950s and 1960s. In this paper we examine the economic consequences of this historical episode. We use new data compiled from the monthly reports of the Deutsche Bundesbank from 1948 to the 1960s. These reports not only provide detailed statistics of the German finances, but also a narrative on the evolution of the German economy on a monthly basis. These sources also contain special issues on the LDA, highlighting contemporaries’ interest in the state of German public finances and public opinion on the debt negotiation. We find evidence that debt relief in the LDA spurred economic growth in three main ways: creating fiscal space for public investment; lowering costs of borrowing; and stabilising inflation. Using difference-in-differences regression models comparing pre- and post-LDA years, we find that the LDA was associated with a substantial rise in real per capita social expenditure, in health, education, housing, and economic development, this rise being significantly over and above changes in other types of spending that include military expenditure. We further observe that benchmark yields on long-term debt, an indication of default risk, dropped substantially in West Germany when LDA negotiations began in 1951 and then stabilised at historically low rates after the LDA was ratified. The LDA coincided with new foreign borrowing and investment, which in turn helped promote economic growth. Finally, the German currency, the deutschmark, introduced in 1948, had been highly volatile until 1953, after which time we find it largely stabilised.
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Social Constraints and Women's Education: Evidence from Afghanistan under Radical Religious Rule
Abdul Noury & Biagio Speciale
Journal of Comparative Economics, forthcoming
Abstract:
We analyze how growing up under Taliban rule affects Afghan women's educational attainments and subsequent labor market and fertility outcomes. While in power from 1996 to 2001, the Taliban ruled a large portion of the Afghan territory and introduced a ban on girls’ education. Using data from the National Risk and Vulnerability Assessment survey, we rely on the fact that, depending on their year of birth and province of residence, individuals differed in the number of years they were exposed to the Taliban government while of school age. Our difference-in-differences estimates show that an additional year of exposure to the Taliban occupation while of school age reduces a woman's probability of completing basic education by about two percentage points. The effects on educational outcomes are larger in Pashtun districts and rural areas. These findings are not due to the 1992 introduction of the provisional Islamist government that preceded the Taliban, cultural differences related to ethnicity, or varying emigration rates across provinces. The estimates are robust to differences across provinces in the number of violent events before, during, and after the Taliban occupation. Women exposed to the Taliban’s radical religious rule while they were of school age are also less likely to be employed outside of the household and more likely to have an agricultural job within the household. For fertility choices, exposure to the Taliban occupation increases total number of children and lowers age at first marriage. We discuss our empirical findings against theoretical economic literature on radical religious groups (e.g., Iannaccone, 1992; Berman, 2000).
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Agne Skrebyte, Philip Garnett & Jeremy Kendal
Journal of Cross-Cultural Psychology, forthcoming
Abstract:
Collectivism and individualism are commonly used to delineate societies that differ in their cultural values and patterns of social behavior, prioritizing the relative importance of the group and the individual, respectively. Collectivist and individualist expression is likely to be intricately linked with the political and economic history of a society. Scholars have proposed mechanisms for both positive and negative correlations between economic growth and a culture of either individualism or collectivism. Here, we consider these relationships across the dramatic history of 20th- and early 21st-century Russia (1901-2009), spanning the late Russian Empire, the communist state, and the growth of capitalism. We sample Russian speakers to identify common Russian words expressing individualism or collectivism, and examine the changing frequencies of these terms in Russian publications collected in Google’s Ngram corpus. We correlate normalized individualism and collectivism expression against published estimates of economic growth (GDP and net material product [NMP]) available between 1961 and 1995, finding high collectivist expression and economic growth rate followed by the correlated decline of both prior to the end of Soviet system. Temporal trends in the published expression of individualism and collectivism, in addition to their correlations with estimated economic growth rates, are examined in relation to the change in economic and political structures, ideology and public discourse. We also compare our sampled Russian-language terms for individualism and collectivism with Twenge et al.’s equivalent collection from American English speakers.