Paying it forward
In the Shadow of Coal: How Large-Scale Industries Contributed to Present-Day Regional Differences in Personality and Well-Being
Martin Obschonka et al.
Journal of Personality and Social Psychology, forthcoming
Abstract:
Recent research has identified regional variation of personality traits within countries but we know little about the underlying drivers of this variation. We propose that the Industrial Revolution, as a key era in the history of industrialized nations, has led to a persistent clustering of well-being outcomes and personality traits associated with psychological adversity via processes of selective migration and socialization. Analyzing data from England and Wales, we examine relationships between the historical employment share in large-scale coal-based industries (coal mining and steam-powered manufacturing industries that used this coal as fuel for their steam engines) and today's regional variation in personality and well-being. Even after controlling for possible historical confounds (historical energy supply, education, wealth, geology, climate, population density), we find that the historical local dominance of large-scale coal-based industries predicts today's markers of psychological adversity (lower Conscientiousness [and order facet scores], higher Neuroticism [and anxiety and depression facet scores], lower activity [an Extraversion facet], and lower life satisfaction and life expectancy). An instrumental variable analysis, using the historical location of coalfields, supports the causal assumption behind these effects (with the exception of life satisfaction). Further analyses focusing on mechanisms hint at the roles of selective migration and persisting economic hardship. Finally, a robustness check in the U.S. replicates the effect of the historical concentration of large-scale industries on today's levels of psychological adversity. Taken together, the results show how today's regional patterns of personality and well-being (which shape the future trajectories of these regions) may have their roots in major societal changes underway decades or centuries earlier.
The Long-run Effects of Agricultural Productivity on Conflict, 1400-1900
Murat Iyigun, Nathan Nunn & Nancy Qian
NBER Working Paper, November 2017
Abstract:
This paper provides evidence of the long-run effects of a permanent increase in agricultural productivity on conflict. We construct a newly digitized and geo-referenced dataset of battles in Europe, the Near East and North Africa covering the period between 1400 and 1900 CE. For variation in permanent improvements in agricultural productivity, we exploit the introduction of potatoes from the Americas to the Old World after the Columbian Exchange. We find that the introduction of potatoes permanently reduced conflict for roughly two centuries. The results are driven by a reduction in civil conflicts.
The Legacy of the Missing Men: The Long-Run Impact of World War I on Female Labor Force Participation
Victor Gay
University of Chicago Working Paper, November 2017
Abstract:
I explore the pathways underlying the diffusion of women's participation in the labor force across generations at the individual level. I rely on a severe exogenous shock to the adult sex ratio, World War I military fatalities in France, which generated a short-run upward shift in female labor force participation. I find that this shock to female labor transmitted across generations: women residing under the same institutional conditions but born in locations exposed to higher military death rates were more likely to be in the labor force from 1962 to 2012. Three primary mechanisms account for the long-run impact of World War I military fatalities on women's working behavior: vertical intergenerational transmission (from mothers and fathers to daughters), transmission through marriage (from husbands to wives, and from mothers in-law to daughters in-law), and oblique intergenerational transmission (from migrants to non-migrants). Consistent with theories of intergenerational diffusion of female labor force participation, I provide supporting evidence that WWI military fatalities altered preferences and beliefs about female labor in the long run.
Weak States: Causes and Consequences of the Sicilian Mafia
Daron Acemoglu, Giuseppe De Feo & Giacomo De Luca
NBER Working Paper, December 2017
Abstract:
We document that the spread of the Mafia in Sicily at the end of the 19th century was in part shaped by the rise of socialist Peasant Fasci organizations. In an environment with weak state presence, this socialist threat triggered landholders, estate managers and local politicians to turn to the Mafia to resist and combat peasant demands. We show that the location of the Peasant Fasci is significantly affected by an exceptionally severe drought in 1893, and using information on rainfall, we establish the causal effect of the Peasant Fasci on the location of the Mafia in 1900. We provide extensive evidence that rainfall before and after this critical period has no effect on the spread of the Mafia or various economic and political outcomes. In the second part of the paper, we use the source of variation in the location of the Mafia in 1900 to estimate its medium-term and long-term effects. We find significant and quantitatively large negative impacts of the Mafia on literacy and various public goods in the 1910s and 20s. We also show a sizable impact of the Mafia on political competition, which could be one of the channels via which it affected local economic outcomes. We document negative effects of the Mafia on longer-term outcomes (in the 1960s, 70s and 80s) as well, but these are in general weaker and often only marginally significant. One exception is its persistent and strong impact on political competition.
Origins of the Sicilian Mafia: The Market for Lemons
Arcangelo Dimico, Alessia Isopi & Ola Olsson
Journal of Economic History, December 2017, Pages 1083-1115
Abstract:
In this article, we study the emergence of an extractive institution that hampered economic development in Italy for more than a century: the Sicilian mafia. Since its first appearance in the late 1800s, the reasons behind the rise of the Sicilian mafia have remained a puzzle. In this article, we argue that the mafia arose as a response to an exogenous shock in the demand for oranges and lemons, following Lind's discovery in the late eighteenth century that citrus fruits cured scurvy. More specifically, we claim that mafia appeared in locations where producers made high profits from citrus production for overseas export. Operating in an environment with a weak rule of law, the mafia protected citrus production from predation and acted as intermediaries between producers and exporters. Using original data from a parliamentary inquiry in 1881-1886 on Sicilian towns, the Damiani Inquiry, we show that mafia presence is strongly related to the production of oranges and lemons. The results hold when different data sources and several controls are employed.
What do women want? Female suffrage and the size of government
Claudio Bravo-Ortega, Nicolas Eterovic & Valentina Paredes
Economic Systems, forthcoming
Abstract:
The economic literature has attributed part of the increase in government expenditure over the 20th century to female voting. This is puzzling, considering that the political science literature has documented that women tended to be more conservative than men over the first half of the 20th century. We argue that the current estimates of this relationship are afflicted by endogeneity bias. Using data for 46 countries and a novel set of instruments related to the diffusion of female suffrage across the globe, we find that, on average, the introduction of female suffrage did not increase either social expenditures or total government expenditure.
Intrinsic Openness and Endogenous Institutional Quality
Yang Jiao & Shang-Jin Wei
NBER Working Paper, November 2017
Abstract:
Quality of public institutions has been recognized as a crucial determinant of macroeconomic outcomes. We propose that a country's intrinsic level of openness (due to population size, geography, or exogenous trade opportunities) affects its incentives in investing in better institutions. We present a simple theory and extensive empirical evidence validating the role of intrinsic openness in determining governance quality. This suggests an indirect but important channel for globalization to improve welfare by raising the quality of governance.
Income inequality, poverty, and the liquidity of stock markets
Benjamin Blau
Journal of Development Economics, January 2018, Pages 113-126
Abstract:
Using a broad cross-sectional sample of countries, this study tests whether stock market liquidity affects the level of income inequality. After holding a variety of factors constant - including traditional measures of financial development, results show that liquidity in a country's stock market is negatively related to various measures of inequality. We find that this relationship does not exist in the most developed countries. Instead, our results are stronger in underdeveloped and moderately developed countries. In addition, we find that stock market liquidity is negatively associated with poverty rates. In our final set of tests, we attempt to identify the mechanism through which liquidity reduces inequality. After decomposing wage growth into the portion that is driven by stock market liquidity and the portion that is orthogonal to liquidity, we find strong evidence that liquidity-induced wage growth drives the reduction in both inequality and poverty.
Absolute Poverty: When Necessity Displaces Desire
Robert Allen
American Economic Review, December 2017, Pages 3690-3721
Abstract:
A new basis for an international poverty measurement is proposed based on linear programming for specifying the least cost diet and explicit budgeting for nonfood spending. This approach is superior to the World Bank's $1-a-day line because it is (i) clearly related to survival and well being; (ii) comparable across time and space since the same nutritional requirements are used everywhere while nonfood spending is tailored to climate; (iii) adjusts consumption patterns to local prices; (iv) presents no index number problems since solutions are always in local prices; and (v) requires only readily available information. The new approach implies much more poverty than the World Bank's, especially in Asia.
Quantitative historical analysis uncovers a single dimension of complexity that structures global variation in human social organization
Peter Turchin et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
Do human societies from around the world exhibit similarities in the way that they are structured, and show commonalities in the ways that they have evolved? These are long-standing questions that have proven difficult to answer. To test between competing hypotheses, we constructed a massive repository of historical and archaeological information known as "Seshat: Global History Databank." We systematically coded data on 414 societies from 30 regions around the world spanning the last 10,000 years. We were able to capture information on 51 variables reflecting nine characteristics of human societies, such as social scale, economy, features of governance, and information systems. Our analyses revealed that these different characteristics show strong relationships with each other and that a single principal component captures around three-quarters of the observed variation. Furthermore, we found that different characteristics of social complexity are highly predictable across different world regions. These results suggest that key aspects of social organization are functionally related and do indeed coevolve in predictable ways. Our findings highlight the power of the sciences and humanities working together to rigorously test hypotheses about general rules that may have shaped human history.
Creativity Over Time and Space
Michel Serafinelli & Guido Tabellini
University of California Working Paper, November 2017
Abstract:
Creativity is often highly concentrated in time and space, and across different domains. What explains the formation and decay of clusters of creativity? In this paper we match data on thousands of notable individuals born in Europe between the XIth and the XIXth century with historical data on city institutions and population. After documenting several stylized facts, we show that the formation of creative clusters is not preceded by increases in city size or wages. Instead, the emergence of city institutions protecting economic and political freedoms facilitates the attraction and production of creative talent.
Financial development and prehistoric geographical isolation: Global evidence
Oasis Kodila-Tedika et al.
Financial History Review, forthcoming
Abstract:
Using cross-country differences in the degree of isolation before the advent of technologies in sea and air transportation, we assess the relationship between geographical isolation and financial development across the globe. We find that prehistoric geographical isolation has been beneficial to development because it has contributed to contemporary cross-country differences in financial intermediary development. The relationship is robust to alternative samples, different estimation techniques, outliers and varying conditioning information sets. The established positive relationship between geographical isolation and financial intermediary development does not significantly extend to stock market development.
The Development Effects of the Extractive Colonial Economy: The Dutch Cultivation System in Java
Melissa Dell & Benjamin Olken
NBER Working Paper, November 2017
Abstract:
Colonial powers typically organized economic activity in the colonies to maximize their economic returns. While the literature has emphasized long-run negative economic impacts via institutional quality, the changes in economic organization implemented to spur production historically could also directly influence economic organization in the long-run, exerting countervailing effects. We examine these in the context of the Dutch Cultivation System, the integrated industrial and agricultural system for producing sugar that formed the core of the Dutch colonial enterprise in 19th century Java. We show that areas close to where the Dutch established sugar factories in the mid-19th century are today more industrialized, have better infrastructure, are more educated, and are richer than nearby counterfactual locations that would have been similarly suitable for colonial sugar factories. We also show, using a spatial regression discontinuity design on the catchment areas around each factory, that villages forced to grow sugar cane have more village owned land and also have more schools and substantially higher education levels, both historically and today. The results suggest that the economic structures implemented by colonizers to facilitate production can continue to promote economic activity in the long run, and we discuss the contexts where such effects are most likely to be important.
How Natural Resources Affect Authoritarian Leaders' Provision of Public Services: Evidence from China
Ji Yeon Hong
Journal of Politics, forthcoming
Abstract:
This article examines the effects of natural resource extraction on authoritarian governments' provision of public services, using subnational data from China. Facing no electoral constraint that would reflect the policy preferences of citizens, Chinese local leaders instead allocate public funds differentially based on their need for quality labor in local economic development, a critical criterion for their political success. When the local economy benefits from natural resources, the need for skilled local labor dissipates, and leaders invest less in social services that enhance labor productivity. Using panel data across all prefecture-level cities (1992-2010), I find evidence that mineral resource abundance leads local governments to provide fewer public services for education and health care. Meanwhile, services unrelated to labor quality remain unaffected. The results are robust to the inclusion of key confounding factors such as FDI inflows and state-owned enterprises' output contributions. Additional analyses reject alternative mechanisms including political turnover.
Breaking the Unbreakable Union: Nationalism, Disintegration and the Soviet Economic Collapse
Marvin Suesse
Economic Journal, forthcoming
Abstract:
This paper investigates the effect of prospective secessions on economic integration and growth by examining the break-up of the Soviet Union in the late 1980s and early 1990s. Firstly, I show theoretically how regional elites had an incentive to restrict domestic trade once secession from the Union became possible. Secondly, I show empirically that the increased likelihood of secessions by the Union's member republics strongly cut domestic trade. Thirdly, I show how this explains the severity of the Soviet output fall. These patterns persist once I instrument for prospective secessions with nationalist agendas that are exogenous to trade or growth.
Chief for a Day: Elite Capture and Management Performance in a Field Experiment in Sierra Leone
Maarten Voors et al.
Management Science, forthcoming
Abstract:
We use a field experiment in Sierra Leone to examine how the identity of the manager influences rent seeking and performance in participatory development projects. Specifically, we vary the composition of a committee responsible for implementing a development project - local elites or randomly selected villagers. The design is unique in that it permits us to explore the effectiveness of two alternative local governance modalities and the extent of elite capture in community projects. We find little evidence that local elites capture project resources. We do observe they are better managers of development projects. Improved performance covaries with a proxy for power of the local chief.
Companies and the Rise of Economic Thought: The Institutional Foundations of Early Economics in England, 1550 to 1720
Emily Erikson & Mark Hamilton
Yale Working Paper, December 2016
Abstract:
Seventeenth-century England was the site of a profound transformation of early economic thought. The amount of works published increased rapidly and the works became less concerned with morality and scripture and more concerned with national prosperity and empirical evidence. We show that the proliferation of the chartered company in a context of low state representation of merchants play an important role in this shift. We outline the mechanisms through which chartered companies impacted publication rates of economic texts and provide systematic evidence of the impact of companies and merchant representation with a time series analysis of the period from 1550 to 1720 that controls for a number of other possible factors. We further supplement this analysis with data on author biographies and the changing contents of the works. The results are consistent in supporting the importance of chartered company in stimulating the new discourse on economics and suggest a new appreciation of the role of corporatism in stimulating both economic discourse and the shape of the early expansion of the public sphere in England.
Inequality, Financial Development and Economic Growth in the OECD, 1870-2011
Jakob Madsen, Rabiul Islam & Hristos Doucouliagos
European Economic Review, January 2018, Pages 605-624
Abstract:
Inequality's effect on growth remains elusive, largely due to endogeneity, complex interactions, and lead-lag relationships. We revisit this issue by examining the four main channels through which inequality transmits to growth: savings, investment, education, and knowledge production. We construct new panel data for 21 OECD countries spanning 142 years. External communist influence is used as a new time-varying instrument for inequality and the effects of inequality on the outcome variables are made conditional on the stage of financial development. Our results show that inequality hampers growth at low to moderate levels of financial development but has little effect on growth at advanced levels of financial development.
Ethnic Diversity and Ethnic Discrimination: Explaining Local Public Goods Provision
Alexander Lee
Comparative Political Studies, forthcoming
Abstract:
Numerous studies have found that ethnic diversity is negatively associated with the provision of local public goods. However, these accounts neglect both the strong role of central institutions in the provision of many "local" public goods and the frequently positive correlation between diversity and the presence of less politically powerful ethnic groups. These factors suggest that existing diversity findings may be explained in some cases by central governments discriminating against areas inhabited by less powerful groups. This hypothesis is tested using data in village-level public goods provision in Northern India, supplemented by data on service provision in Kenyan villages and American cities. While there is evidence that the presence of socially powerful groups is positively associated with service provision, evidence for the diversity hypothesis is weak. The results suggest that failures of public services in diverse areas may reflect larger inequalities within the political system rather than local problems in cooperation.