Under Development
Loss in the Time of Cholera: Long-Run Impact of a Disease Epidemic on the Urban Landscape
Attila Ambrus, Erica Field & Robert Gonzalez
American Economic Review, February 2020, Pages 475-525
Abstract:
How do geographically concentrated income shocks influence the long-run spatial distribution of poverty within a city? We examine the impact on housing prices of a cholera epidemic in one neighborhood of nineteenth century London. Ten years after the epidemic, housing prices are significantly lower just inside the catchment area of the water pump that transmitted the disease. Moreover, differences in housing prices persist over the following 160 years. We make sense of these patterns by building a model of a rental market with frictions in which poor tenants exert a negative externality on their neighbors. This showcases how a locally concentrated income shock can persistently change the tenant composition of a block.
The Virtuous Cycle of Property
Marco Fabbri & Giuseppe Dari-Mattiacci
Review of Economics and Statistics, forthcoming
Abstract:
The article shows that formalizing private property rights has a positive effect on the propensity to respect the property of others. We study a recent large-scale land tenure reform in West Africa which was the first of its kind to be implemented as a randomized control-trial. Results of a modified dictator game show that the formalization of private property rights reduced an individual's willingness to take from others' endowment. We used additional experimental measures and post-experimental survey data to rule out alternative explanations for the observed behavior that do not imply a change in preferences.
Reassessing the dependence of capitalism on democracy – the case of Imperial Germany and the Weimar Republic
Gerhard Wegner
Journal of Institutional Economics, forthcoming
Abstract:
The paper interrogates the argument put forward by Acemoglu and Robinson or North et al. that capitalism and democracy are supportive to each other. It analyzes the development of political and economic institutions in Germany before and after World War I. It is shown that the lack of democracy in Imperial Germany furthered a liberal economic order and gives reasons why the transition to full-scale parliamentarianism would have impaired the quality of economic institutions. This also explains why such a transition was not completed. The Weimar Republic established a modern democracy but was unable to secure the quality of economic institutions achieved before. Not only in Germany did the politicization of the economy impair the economic order. This empirical outcome helps to explain why Eucken and other liberals identified democracy as part of the economic problem during the interwar period. It also gives reasons to rethink the complex relationship between capitalism and democracy.
Bismarck to No Effect: Fertility Decline and the Introduction of Social Insurance in Prussia
Timothy Guinnane & Jochen Streb
Yale Working Paper, November 2019
Abstract:
Economists have long argued that introducing social insurance will reduce fertility. The hypothesis relies on standard models: if children are desirable in part because they provide security in case of disability or old age, then state programs that provide insurance against these events should induce couples to substitute away from children in the allocation of wealth. We test this claim using the introduction of social insurance in Germany in the 1880s and 1890s. Bismarck’s social-insurance system provided health insurance, workplace-accident insurance, and old age pensions to a majority of the working population. The German case appeals because the social insurance program started on a large scale and was compulsory for covered classes of workers, and because fertility in Germany in this period was still relatively high. Focusing on the state of Prussia, we estimate differences-in-differences models that ask whether marriage and marital fertility reacted to the introduction or extension of the main social insurance programs. For Prussia as a whole we find little impact.
Risky Moms, Risky Kids? Fertility and Crime after the Fall of the Wall
Arnaud Chevalier & Olivier Marie
University of London Working Paper, December 2019
Abstract:
We study the link between parental selection and child criminality. Following the collapse of the communist regime in 1989, the number of births halved in East Germany. These cohorts became markedly more likely to be arrested as they grew up in reunified Germany. This is observed for both genders and all offence types. We highlight risk attitude as an important reason why certain women did not alter their fertility decisions during this time of economic uncertainty. We also show that this preference for risk was then strongly transmitted to their children which may in turn explain their high criminal propensity.
Ethnic Diversity and Growth: Revisiting the Evidence
José Montalvo & Marta Reynal-Querol
Review of Economics and Statistics, forthcoming
Abstract:
The relationship between ethnic heterogeneity and economic growth is complex. Empirical research working with cross-country data finds a negative, or statistically insignificant, relationship. However, analysis at city level finds a positive effect of diversity on wages and productivity. Generally, there is a trade-off between the economic benefits of diversity and the costs of heterogeneity. Using cells of fixed size we find that the relationship between diversity and growth is positive for small geographical areas. In the case of Africa, we argue that the explanation is the increase in trade at the boundaries between ethnic groups due to ethnic specialization.
Liberalizing Art. Evidence on the Impressionists at the end of the Paris Salon
Federico Etro, Silvia Marchesi & Elena Stepanova European
Journal of Political Economy, forthcoming
Abstract:
We analyze the art market in Paris between the government-controlled Salon and the post-1880 system, when the Republican government liberalized art exhibitions. The jury of the old Salon decided on submissions with a bias in favor of conservative art of the academic insiders, erecting entry barriers against outsiders as the Impressionists. With a difference-in difference estimation, we provide evidence that the end of the government-controlled Salon contributed to start the price increase of the Impressionists relative to the insiders.
The limiting factor: Energy, growth, and divergence, 1820–1913
Paolo Malanima
Economic History Review, forthcoming
Abstract:
On the basis of a new series on the consumption of traditional and modern sources of energy between 1820 and 1913, this article addresses the start of modern growth and the great divergence on the world scale. Since the beginning of the nineteenth century, the greater availability of modern energy sources expanded working capacity well beyond the potential of previous agricultural civilizations. Growth of energy consumption rose primarily in western Europe, northern America, and Oceania. As a result, labour productivity rose, leading to an increase in real wages, which was an incentive to replace labour with mechanical engines. The higher energy consumption in these three macro‐areas led to global inequality in productive capacity and technology which peaked on the eve of the First World War.
Gangs, Labor Mobility, and Development
Nikita Melnikov, Carlos Schmidt-Padilla & Maria Micaela Sviatschi
Princeton Working Paper, October 2019
Abstract:
We study the effects that two of the largest gangs in Latin America, MS-13 and 18th Street, have on economic development in El Salvador. We exploit the fact that the emergence of gangs in El Salvador was in part the consequence of an exogenous shift in US immigration policy that led to the deportation of gang leaders from the United States to El Salvador. Using the exogenous variation in the timing of the deportations and the boundaries of the territories controlled by the gangs, we perform a spatial regression discontinuity design and a difference-in-differences analysis to estimate the causal effect that living under the rule of gangs has on development outcomes. Our results show that individuals living under gang control have significantly worse education, wealth, and less income than individuals living only 50 meters away in areas not controlled by gangs. None of these discontinuities existed before the arrival of gangs from the US. The results are not determined by exposure to violence, lower provision of public goods, or selective migration away from gang locations. We argue that our findings are mostly driven by gangs restricting residents' mobility and labor choices. We find that individuals living under the rule of gangs have less freedom of movement and end up working in smaller firms. The results are relevant for many developing countries where non-state actors control parts of the country.
The Role of Land in Temperate and Tropical Agriculture
Ryan Johnson & Dietrich Vollrath
Economica, forthcoming
Abstract:
We document differences in the elasticity of agricultural output with respect to land in temperate and tropical regions. We estimate this elasticity from the relationship of rural labour/land ratios and agroclimatic constraints using global district‐level data. We find that the elasticity in temperate areas (0.285) is higher than in the tropics (0.126), and that this is not an artefact of the level of development. The land elasticity influences the degree of decreasing returns to labour and capital in agriculture, and thus how sensitive living standards are to shocks in productivity and population. Evidence from the postwar mortality transition supports this prediction.
Technology Adoption and Productivity Growth During the Industrial Revolution: Evidence from France
Réka Juhász, Mara Squicciarini & Nico Voigtländer
University of California Working Paper, December 2019
Abstract:
We construct a novel dataset to examine the process of technology adoption during a period of rapid technological change: The diffusion of mechanized cotton spinning during the Industrial Revolution in France. We exploit a key feature of the setting that allows us to isolate the productivity distribution of the adopters of new technology: Before mechanization, cotton spinning was performed in households, while production in firms only emerged with the new technology around 1800. We contrast the evolution of the productivity distribution for mechanized cotton spinners to two comparison sectors -- metallurgy and paper milling. We document several stylized facts that can explain the well-documented puzzle that major technological breakthroughs tend to be adopted slowly across firms and -- even after being adopted -- take time to be reflected in higher aggregate productivity: Relative to the comparison sectors, the productivity of firms in mechanized cotton spinning was initially highly dispersed. Over the subsequent decades, cotton spinning experienced dramatic productivity growth that was almost entirely driven by a disappearance of firms in the lower tail, while innovations in the comparison sectors shifted the whole productivity distribution. Rich historical evidence suggests that these patterns were driven by the need to re-organize production under the new technology. This process of 'trial and error' led to widely dispersed initial productivity 'draws,' low initial average productivity, and -- in the subsequent decades -- to high productivity growth as new entrants adopted improved methods of production and organization. We document evidence consistent with this mechanism through the spatial diffusion of best practice knowledge.