Settling
Randall Akee, Miriam Jorgensen & Uwe Sunde
Journal of Comparative Economics, forthcoming
Abstract:
Utilizing a novel data set on American Indian Nations, we investigate how conditions at critical junctures of development can have long-lasting economic effects. We investigate the effect of the party of the US President at the time when American Indian tribes adopt a written constitution for the first time. Our results indicate that there is a persistent effect on economic development, even after controlling for other important characteristics and conducting extensive robustness checks. We also find suggestive evidence for the constitutional design, and specifically whether the chief executive is elected directly or indirectly, being a likely channel through which the presidential party affects long-run economic development.
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Poor Institutions, Rich Mines: Resource Curse in the Origins of the Sicilian Mafia
Paolo Buonanno et al.
Economic Journal, August 2015, Pages F175–F202
Abstract:
With weak law-enforcement institutions, a positive shock to the value of natural resources may increase demand for private protection and opportunities for rent appropriation through extortion, favouring the emergence of mafia-type organisations. We test this hypothesis by investigating the emergence of the mafia in twentieth century Sicily, where a severe lack of state property-rights enforcement coincided with a steep rise in international demand for sulphur, Sicily's most valuable export commodity. Using historical data on the early incidence of mafia activity and on the distribution of sulphur reserves, we document that the mafia was more present in municipalities with greater sulphur availability.
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Colonial Legacies and State Institutions in China: Evidence From a Natural Experiment
Daniel Mattingly
Comparative Political Studies, forthcoming
Abstract:
What is the legacy of Japanese colonial rule in East Asia? In this article, I use a geographic regression discontinuity design to examine of the long-run effects of Japanese rule over northern China. I find that the Japanese colonization of northern China had a positive long-run effect on state institutions — with persistent increases in schooling, health, and bureaucratic density. I also find suggestive evidence that colonization led to increases in wealth, as measured by census data and nighttime luminosity. The positive legacy of Japanese colonization in northern China suggests that intense state building efforts can pay long-run dividends, even in the context of a brutal and extractive regime.
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Moral Hazard and Financial Crises: Evidence from US Troop Deployments
Michaël Aklin & Andreas Kern
Georgetown University Working Paper, September 2015
Abstract:
Why do governments adopt macroeconomic policies that increase the risk of financial crisis? One explanation is moral hazard induced by an international lender of last resort. We focus on the role of the US, and hypothesize that a credible commitment by the US toward other countries generates moral hazard in two ways. First, these countries will adopt riskier macroeconomic policies. Second, markets will be more willing to lend them capital. Empirically, we use the number of US troops deployed abroad to measure the US's commitment to a country. We find that increasing the contingent from zero to 500 (a small battalion) raises the risk of a crisis by about 20 percentage points. To rule out alternative explanations and reverse causality, we investigate the channels through which moral hazard materializes. We find that countries with more US troops conduct more expansionary fiscal and monetary policies, and that they receive more capital, especially from the US markets.
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Industry structure, entrepreneurship, and culture: An empirical analysis using historical coalfields
Michael Stuetzer et al.
European Economic Review, forthcoming
Abstract:
There is mounting evidence demonstrating that entrepreneurship is spatially clustered and that these spatial differences are quite persistent over long periods of time. However, especially the sources of that persistence are not yet well-understood, and it is largely unclear whether persistent differences in entrepreneurship are reflected in differences in entrepreneurship culture across space as it is often argued in the previous literature. We approach the cluster phenomenon by theorizing that a historically high regional presence of large-scale firms negatively affects entrepreneurship, due to low levels of human capital and entrepreneurial skills, fewer opportunities for entry and entrepreneurship inhibiting formal and informal institutions. These effects can become self-perpetuating over time, ultimately resulting in persistent low levels of entrepreneurship activity and entrepreneurship culture. Using data from Great Britain, we analyze this long-term imprinting effect by using the distance to coalfields as an exogenous instrument for the regional presence of large-scale industries. IV regressions show that British regions with high employment shares of large-scale industries in the 19th century, due to spatial proximity to coalfields, have lower entrepreneurship rates and weaker entrepreneurship culture today. We control for an array of competing hypotheses like agglomeration forces, the regional knowledge stock, climate, and soil quality. Our main results are robust with respect to inclusion of these control variables and various other modifications which demonstrates the credibility of our empirical identification strategy. A mediation analysis reveals that a substantial part of the impact of large-scale industries on entrepreneurship is through human capital.
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The Heavy Plough and the Agricultural Revolution in Medieval Europe
Thomas Barnebeck Andersen, Peter Sandholt Jensen & Christian Volmar Skovsgaard
Journal of Development Economics, forthcoming
Abstract:
This research sheds new light on the much-debated link between agricultural productivity and development. We do so by estimating the causal impact of a large shock to agricultural productivity — the introduction of the heavy plough in the Middle Ages — on long run development. We build on the work of Lynn White, Jr. (1962), who argued that it was impossible to take proper advantage of the fertile clay soils of Northern Europe prior to the invention and widespread adoption of the heavy plough. We implement the test in a difference-in-difference set-up by exploiting regional variation in the presence of fertile clay soils. Using a high quality dataset for Denmark, we find that historical counties with relatively more fertile clay soil experienced higher urbanization after the heavy plough had its breakthrough, which was around AD 1000. We obtain a similar result, when we extend the test to European regions. Our findings substantiate that agricultural productivity can be an important driver of long-run development.
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Economic freedom in the long run: Evidence from OECD countries (1850–2007)
Leandro Prados De La Escosura
Economic History Review, forthcoming
Abstract:
This article presents historical indices for the main dimensions of economic freedom and an aggregate index for the developed countries of today, specifically pre-1994 OECD members. Economic liberty expanded over the last century-and-a-half, reaching more than two-thirds of its possible maximum. However, its evolution has been far from linear. After a substantial improvement from the mid-nineteenth century, the First World War brought a major setback. The postwar recovery up to 1929 was followed by a dramatic decline in the 1930s. Significant progress took place during the 1950s but fell short of the pre-First World War peak. After a period of stagnation, steady expansion since the early 1980s has resulted in the highest levels of economic liberty of the last two centuries. Each of the main dimensions of economic freedom exhibited a distinctive trend and its contribution to the aggregate index varied over time. Overall, improved property rights provided the main contribution to the long-run advancement of economic liberty.
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Electoral Democracy and Human Development
John Gerring et al.
Boston University Working Paper, August 2015
Abstract:
This study attempts to reconcile competing positions in the debate over whether democracy improves human development by showing that some aspects of democracy – but not others – affect human development. Specifically, we argue that the “electoral” aspect of democracy improves human development while aspects related to citizen empowerment do not (or scarcely so). Likewise, composite indices of democracy bear only a weak relationship to human development, especially if they do not take the mutual dependence between electoral components into account in their aggregation procedures. We argue, finally, that public policies serve as a key causal mechanism in this relationship. Electoral competition incentivizes politicians to provide public goods and services, and these, in turn, save lives. This set of hypotheses is tested in a more rigorous fashion than has hitherto been possible. First, we enlist a new dataset compiled by the CLIO Infra project that measures mortality – infant mortality, child mortality, and life expectancy – for most sovereign countries over the course of the twentieth century. Second, we draw on a new political institutions dataset – Varieties of Democracy (V- Dem) – that provides highly differentiated measures of democracy, measured annually for most sovereign countries from 1900 to the present. Third, we apply a diverse set of empirical tests including fixed effects, lagged dependent variables, first-difference, system GMM, and instrumental variables. Considered together, these tests mitigate concerns about causal identification.
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Democracy, Elite Bias, and Financial Development in Latin America
Victor Menaldo & Daniel Yoo
World Politics, October 2015, Pages 726-759
Abstract:
Does democracy induce financial development? There are good theoretical reasons to believe this to be the case, but the evidence adduced to support this claim has been mixed. In this article, the authors posit that only democracies that appeal to the median voter should experience financial development because those democracies have adopted their own constitution after transition, rather than having inherited one from an authoritarian predecessor. The authors empirically test this theory by focusing attention on Latin America, where there have been several reversals and improvements in financial outcomes and where many countries have cycled between regime types. They find robust support for it across different specifications. While popular democracies tend to reform their financial systems, have greater participation in the banking system, increase the supply of credit and reduce its price, and grow their stock markets, elite-biased democracies do not.
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The Wealth of Subnations: Geography, Institutions, and Within-Country Development
Todd Mitton
Journal of Development Economics, forthcoming
Abstract:
I study determinants of economic development in a new dataset covering 1,867 subnational regions from 101 countries, focusing on within-country effects of geography and institutions. Several geographic factors have significant explanatory power for within-country differences in per-capita GDP, including terrain ruggedness, tropical climate, ocean access, temperature range, storm risk, and natural resources such as oil, diamonds, or iron. Institutions have a significant positive effect on income among subnational regions with greater autonomy, suggesting that strong subnational institutions enhance development when not dominated by national institutions.
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Cristóbal Montt & Ineke Maas
Research in Social Stratification and Mobility, forthcoming
Abstract:
In this article we study the occupational careers of British men during industrialisation. We ask whether careers became more successful during industrialisation and whether British society became more open. Using the Longitudinal Study of Residential Histories dataset we analysed the career of 6,229 men born between 1780 and 1880 with a multilevel growth model. Over time men's careers became somewhat more successful: men started their careers at a higher occupational status, but status did not grow at a faster rate. Father's occupational status and son's education were main determinants of career success. The importance of education did not increase, but the relevance of father's status declined, suggesting that with industrialisation Britain became a more open society.