Medieval
Social Organizations, Violence, and Modern Growth
Avner Greif & Murat Iyigun
American Economic Review, May 2013, Pages 534-538
Abstract:
Social institutions were often founded by the elite to avoid social upheavals. Institutions helped mitigate the threat of violent social responses to labor-saving innovations. But their organizational forms were influenced by preexisting cultural and social factors. The differences in Chinese and English social institutions explain why England became the first modern economy. Using an English panel of poor relief and social unrest from 1650 to 1830, we document that poor relief was statistically significant in reducing social disorder. Social instability, in turn, negatively influenced innovations, while innovations were positively and significantly related to poor relief.
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If Technology Has Arrived Everywhere, Why has Income Diverged?
Diego Comin & Martí Mestieri Ferrer
NBER Working Paper, May 2013
Abstract:
We study the lags with which new technologies are adopted across countries, and their long-run penetration rates once they are adopted. Using data from the last two centuries, we document two new facts: there has been convergence in adoption lags between rich and poor countries, while there has been divergence in penetration rates. Using a model of adoption and growth, we show that these changes in the pattern of technology diffusion account for 80% of the Great Income Divergence between rich and poor countries since 1820.
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Parasitical cultures? The cultural origins of institutions and development
Robbert Maseland
Journal of Economic Growth, June 2013, Pages 109-136
Abstract:
Do cultural attitudes affect institutions and economic performance? This paper suggests they do. To measure the impact of cultural attitudes we use prevalence rates of the common parasite Toxoplasma gondii which is known to affect individual attitudes and societal values in predictable ways. By using prevalence rates of Toxoplasma as instrument for cultural variation, we are able to isolate the effects of cultural attitudes on institutions, distinguishing them from effects of institutions and economic outcomes on culture. We find that our indicators of cultural attitudes are significant determinants of institutional quality, and strong predictors of long-run economic performance.
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Agricultural Productivity, Structural Change, and Economic Growth in Post-Reform China
Kang Cao & Javier Birchenall
Journal of Development Economics, forthcoming
Abstract:
We examine the role of agricultural productivity as a determinant of China's post-reform economic growth and sectoral reallocation. Using microeconomic farm-level data, and treating labor as a highly differentiated input, we find that the labor input in agriculture decreased by 5% annually and agricultural TFP grew by 6.5%. Using a calibrated two-sector general equilibrium model, we find that agricultural TFP growth: (i) accounts for the majority of output and employment reallocation toward non-agriculture; (ii) contributes (at least) as much to aggregate and sectoral economic growth as non-agricultural TFP growth; and (iii) influences economic growth primarily by reallocating workers to the non-agricultural sector, where rapid physical and human capital accumulation are currently taking place.
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Terrorism and the macroeconomy: Evidence from Pakistan
Mehmood Sultan
Defence and Peace Economics, forthcoming
Abstract:
Pakistan with highest number of terrorism related deaths of any country over the past decade, the number exceeding the total terrorism related deaths for both the European and North American continents, provides an ideal laboratory to study impact of terrorism on the macroeconomy. Quasi-Structural VAR, Vector Error Correction Model, Impulse Response Functions and Granger-Causality tests on a sample that covers over 4500 terrorist incidents and consequent 10,200 deaths [from 1973 to 2010] are employed to study the relationship between terrorism and the macroeconomy. One of the major advantages of the current methodology is that it not only enables one to circumvent the heterogeneity biases inherent in cross-country studies but it also allows distinguishing between short and long-run effects. It is documented that cumulatively terrorism has cost Pakistan around 33.02% of its real national income i.e. terrorism costs Pakistan around 1% of real GDP per capita growth every year.
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Ronald Batchelder & Nicolas Sanchez
Public Choice, July 2013, Pages 45-60
Abstract:
During the conquest and early administration of Spain's American colonies the most controversial policy was the granting of temporary encomiendas, or temporary rights to collect tribute from Indians, as a reward for conquest. The contribution of the encomienda to the destruction of Indian populations was recognized by Spanish authorities at the time, yet the Crown persisted in introducing the most destructive form of the institution during the early stage of each colonial venture for over 200 years. Because the Crown financed the defense of its colonial possessions against other European imperialists, an addition to colonial capital, by increasing the return to an aggressor, imposed a defense-cost externality on the Crown. Since the cost of defending additional assets was higher in the Americas than in Spain, an efficient policy would have been to encourage the rapid transformation of human services into durable assets that could be transported to Spain. According to our defense-externality argument, the temporary encomienda and its parallel modification in each colonial episode becomes a rational Crown policy. The administration of Spain's distant colonial possessions, especially the adjustments in the restrictions on encomiendas, required information about the local conditions, and we argue that the Church, as designated "protector of the Indians," may have played an unwitting role in the communication of information.
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Economic Growth, Law, and Corruption: Evidence from India
Sambit Bhattacharyya & Raghbendra Jha
Comparative Economic Studies, June 2013, Pages 287-313
Abstract:
Is corruption influenced by economic growth? Are legal institutions such as the ‘Right to Information Act (RTI) 2005' in India effective in curbing corruption? Using a panel dataset covering 20 Indian states for the years 2005 and 2008 we estimate the effects of growth and law on corruption. Accounting for endogeneity, omitted fixed factors, and other nationwide changes we find that economic growth reduces overall corruption as well as corruption in banking, land administration, education, electricity, and hospitals. Growth reduces bribes but has little impact on corruption perception. In contrast the RTI Act reduces both corruption experience and corruption perception.
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Political Origins of Financial Structure
Sambit Bhattacharyya
Journal of Comparative Economics, forthcoming
Abstract:
There is growing policy interest in the role of financial structure in promoting development. However, very little is known about how different financial structures emerge and evolve. In this paper we empirically assess the political origins of financial structure. Using difference-in difference estimation and annual data, we study the effects of democratization on financial structure in a sample of 96 countries covering the period 1970 to 2005. Democratization here corresponds to the event of becoming a democracy. We find that democratization leads to a more market-based financial system. Democratic change could also be incremental rather than a one off. To identify the effect of incremental democratic change on financial structure we estimate a separate model and find that democracy matters. We also find that countries with substantial democratic capital are more likely to have a market-based financial structure. Our main results are robust to a variety of controls, Arellano-Bond GMM estimation, alternative measures of democracy and financial structure, and across different samples.
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Geography, institutions, and the making of comparative development
Raphael Auer
Journal of Economic Growth, June 2013, Pages 179-215
Abstract:
While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and, therefore, institutional outcomes. Using non-colonized countries as a control group, I re-examine the theories put forward by La Porta et al. (J Law Econ Org 15(1):222-279, 1999 and Acemoglu et al. (Am Econ Rev 91(5), 1369-1401, 2001. I find strong support for both theories, but also evidence that the authors' estimates of the impact of colonization on institutions and growth are biased, since they confound the effect of the historical determinants of institutions with the direct impact of geographic endowments on development. In a baseline estimation, I find that the approach of Acemoglu et al. (2001) overestimates the importance of institutions for economic growth by 28%, as a country's natural disease environment affected settler mortality during colonization and also has a direct impact on prosperity. The approach of La Porta et al. (1999) underestimates the importance of colonization-imposed legal origin for institutional development by 63%, as Britain tended to colonize countries that are remote from Europe and thus suffer from low access to international markets.
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Law, politics and the governance of English and Scottish joint-stock companies, 1600-1850
Mark Freeman, Robin Pearson & James Taylor
Business History, Spring 2013, Pages 633-649
Abstract:
This article examines the impact of law on corporate governance by means of a case study of joint-stock enterprise in England and Scotland before 1850. Based on a dataset of over 450 company constitutions together with qualitative information on governance practice, it finds little evidence to support the hypothesis that common-law regimes such as England were more supportive of economic growth than civil-law jurisdictions such as Scotland: indeed, levels of shareholder protection were slightly stronger in the civil-law zone. Other factors, such as local political institutions, played a bigger role in shaping organisational forms and business practice.
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The Political Economy of Educational Content and Development: Lessons from History
Davide Cantoni & Noam Yuchtman
Journal of Development Economics, forthcoming
Abstract:
Beyond years of schooling, educational content can play an important role in the process of economic development. Individuals' choices of educational content are often shaped by the political economy of government policies that determine the incentives to acquire various skills. We first present a model in which differences in human capital investments emerge as an equilibrium outcome of private decisions and government policy choices. We then illustrate these dynamics in two historical circumstances. In medieval Europe, states and the Church found individuals trained in Roman law valuable, and eventually supported productive investments in this new form of human capital. In late 19th-century China, elites were threatened by the introduction of Western science and engineering and continued to select civil servants - who enjoyed substantial rents - based on their knowledge of the Confucian classics; as a result, investments in productive, modern human capital were not made.
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Ratbek Dzhumashev
Contemporary Economic Policy, forthcoming
Abstract:
The existing empirical evidence suggests that in low-income economies, an increase in government spending leads to a reduction of growth. This article aims to explain this empirical fact by considering a growth model that incorporates a two-way relationship between corruption and government spending. That is, government spending gives rise to corruption and rent seeking, which feeds back by distorting the structure and size of government spending. In addition, the cost of corruption depends on the wage rate. Therefore, in low-income economies, increases in government spending tend to generate larger social losses caused by a higher level of rent dissipation and a concomitant rise in corruption and government inefficiency. Consequently, in such economies, an increase in government spending is more likely to result in a decline of economic growth.
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Development outcomes, resource abundance, and the transmission through inequality
Fabrizio Carmignani
Resource and Energy Economics, September 2013, Pages 412-428
Abstract:
The paper studies the effect of resource abundance on human development in light of two complementary hypotheses: (i) resource abundance increases the inequality of income distribution within a country, and (ii) higher income inequality reduces human development. The estimation of a system of equations provides support to both hypotheses. In addition, results suggest that resource abundance might also affect human development by reducing the quality of institutions. However, while statistically significant, this effect is quantitatively small. Finally, there is evidence of a strong, negative direct effect of resource abundance on human development after controlling for inequality, institutional quality, and the level of per-capita income.
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Blaine Robbins
PLoS ONE, March 2013
Abstract:
Sociologists, political scientists, and economists all suggest that culture plays a pivotal role in the development of large-scale cooperation. In this study, I used generalized trust as a measure of culture to explore if and how culture impacts intentional homicide, my operationalization of cooperation. I compiled multiple cross-national data sets and used pooled time-series linear regression, single-equation instrumental-variables linear regression, and fixed- and random-effects estimation techniques on an unbalanced panel of 118 countries and 232 observations spread over a 15-year time period. Results suggest that culture and large-scale cooperation form a tenuous relationship, while economic factors such as development, inequality, and geopolitics appear to drive large-scale cooperation.
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Economy of Ragusa, 1300-1800: The Tiger of Medieval Mediterranean
Oleh Havrylyshyn & Nora Srzentic
Comparative Economic Studies, June 2013, Pages 201-231
Abstract:
Using data for proxying economic activity, we confirm historical consensus that the medieval Republic of Ragusa (now Dubrovnik) was a prosperous small open economy, rivaling bigger competitors like Venice. More tentatively, we test a number of hypotheses on the determinants of success, finding partial evidence that Ragusa had strong fundamentals with prudent finances, effective rule of law, good governance, social fairness, business-friendly institutions, and trade openness. Ragusa may be an early example of a ‘Tiger' economy with growth-promoting institutions. Future research should test the ‘resilience hypothesis' that such economies are best able to deal with external shocks.
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Political versus Economic Institutions in the Growth Process
Emmanuel Flachaire, Cecilia García-Peñalosa & Maty Konte
Journal of Comparative Economics, forthcoming
Abstract:
After a decade of research on the relationship between institutions and growth, there is no consensus about the exact way in which these two variables interact. In this paper we re-examine the role that institutions play in the growth process using data for developed and developing economies over the period 1975-2005. Our results indicate that the data is best described by an econometric model with two growth regimes. Political institutions are the key determinant of which regime an economy belongs to, while economic institutions have a direct impact on growth rates within each regime. These findings support the hypothesis that political institutions are one of the deep causes of growth, setting the stage in which economic institutions and standard covariates operate.
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Mass education or a minority well educated elite in the process of growth: The case of India
Amparo Castelló-Climent & Abhiroop Mukhopadhyay
Journal of Development Economics, forthcoming
Abstract:
This paper analyzes whether mass education is more growth enhancing in developing countries than having a minority well educated elite. Using Indian Census data as a benchmark and enrollment rates at different levels of education, we compute annual attainment levels for a panel of 16 Indian states from 1961 to 2001. Results indicate that if the reduction in illiteracy stops at the primary level of education, it is not worthwhile for growth. Instead, the findings reveal a strong and significant effect on growth of a greater share of population completing tertiary education. The economic impact is also found to be large: a one percent change in tertiary education has the same effect on growth as a 13% decrease in illiteracy rates. A sensitivity analysis shows the results are unlikely to be driven by omitted variables, structural breaks, reverse causation or atypical observations.
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Do demographics influence aggregate entrepreneurship?
Olivier Lamotte & Ana Colovic
Applied Economics Letters, Summer 2013, Pages 1206-1210
Abstract:
Analysing a cross-country panel of 53 countries from 2001 to 2009, we find that the age distribution of a population is related to entrepreneurial activity. More specifically, a high share of young people in a country positively influences nascent entrepreneurship, whereas a high share of older people has a negative influence.
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George Halkos & Nickolaos Tzeremes
International Review of Applied Economics, forthcoming
Abstract:
This paper provides empirical evidence of the link between countries' cultural factors and innovation performance. By defining innovation process in a knowledge production framework it uses conditional and unconditional Data Envelopment Analysis (DEA) models together with data from the European Innovation Scoreboard for the year 2007 and Hofstede's cultural indexes. In this way it models and measures the effect of cultural values on 25 European countries' innovation efficiency levels. The empirical results reveal that national culture can impact countries' innovation performance. Specifically, we find significant negative effects on countries' innovation efficiency levels for countries with higher power distance and uncertainty avoidance values.
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Sharon DeWitte & Philip Slavin
Journal of Interdisciplinary History, Summer 2013, Pages 37-60
Abstract:
Archaeological findings, in conjunction with contemporary quantitative data from manorial records, demonstrate that most of the English population before the onset of the Black Death (1348-1350) suffered from a chronic shortage of protein, calcium, and Vitamin B12 for at least one generation - much longer than the three years of bad harvests and grain famine typically attributed to the Great Famine (1315-1317). The skeletal evidence suggests that after the Great Famine had thinned the population of its frailest individuals, the Great Bovine Pestilence (1319-1320), which caused a prolonged dearth of dairy products, created a generation of people who were less healthy than those who had survived the famine and who therefore were particularly susceptible to the ravages associated with the Black Death.
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Targeting, Accountability and Capture in Development Projects
Matthew Winters
International Studies Quarterly, forthcoming
Abstract:
If development projects are to be effective, a minimum requirement is that the funding reaches its intended destination. Yet the history of international development is replete with examples of this not happening. I argue that there will be fewer problems with corruption or other diversions of funding - which I jointly label capture - in more precisely targeted projects. More well-defined targeting results in superior accountability relationships because there is greater clarity of responsibility, clearer information about outcomes, and improved identifiability of stakeholders. I use an original cross-country, cross-project data set on the incidence of capture in World Bank-funded investment projects to test the theory. The data show a negative relationship between targeting and capture, and I demonstrate that this relationship is robust to a variety of specifications. In addition, I find that there is a higher baseline likelihood of project capture in countries perceived as more corrupt according to commonly used survey-based measures from Transparency International and the Worldwide Governance Indicators, cross-validating those measures and my own.
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Prices and production: Agricultural supply response in fourteenth-century England
Eric Schneider
Economic History Review, forthcoming
Abstract:
This article challenges the growing consensus in the literature that medieval manorial managers were price responsive in their production decisions. Using prices of and acreages planted with wheat, barley, and oats on manors held by the bishop of Winchester from 1325 to 1370, price elasticities of supply are estimated for each grain in aggregate and on each particular manor. Aggregate price elasticities of supply for wheat, barley, and oats were rarely statistically significant and when significant were very low compared with elasticities estimated for developing and developed countries in the nineteenth and twentieth centuries. The low levels of agricultural supply response in fourteenth-century England suggest that commercialization was not as dominant in the medieval economy as has been argued. Thus, structural changes in the economy, such as the leasing of demesnes, the growth of wage labour, and the end of villeinage, may have been more important than price fluctuations in driving long-run economic change after the Black Death. Likewise, a shift from low price responsiveness to higher price responsiveness could have been an important part of the capitalist transformation of agriculture in the early modern period.
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Food Price Volatility and Domestic Stabilization Policies in Developing Countries
Christophe Gouel
NBER Working Paper, April 2013
Abstract:
When food prices spike in countries with large numbers of poor people, hunger and malnutrition are very likely to result in the absence of public intervention. For governments, this is also a case of political survival. Government actions often take the form of direct interventions in the market to stabilize food prices, which goes against most international advice to rely on safety nets and world trade. Despite the limitations of food price stabilization policies, they are widespread in developing countries. This paper attempts to untangle the elements of this policy conundrum. Price stabilization policies arise as a result of international and domestic coordination problems. At the individual country level, it is in the national interest of many countries to adjust trade policies to take advantage of the world market in order to achieve domestic price stability. When countercyclical trade policies become widespread, the result is a thinner and less reliable world market, which further decreases the appeal of laissez-faire. A similar vicious circle operates in the domestic market: without effective policies to protect the poor, such as safety nets, food market liberalization lacks credibility and makes private actors reluctant to intervene, which in turn forces government to step in. The current policy challenge lies in designing policies that will build trust in world markets and increase trust between public and private agents.
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Growing Up Roman: Infant Mortality and Reproductive Development
Nathan Pilkington
Journal of Interdisciplinary History, Summer 2013, Pages 1-36
Abstract:
Variables from modern epidemiological models can be used to reconstruct infant-mortality rates, childhood-growth patterns, and the onset of fertility in the Roman Empire from osteoarchaeological evidence. The anthropometry of Roman sub-adult skeletons compares closely to that of the unhealthiest modern and premodern populations, thus supporting pessimistic estimations of life expectancy at birth for Roman populations. Furthermore, the onset of female fertility was delayed due to childhood morbidity and malnutrition.
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Social Capital and Well-Being in Times of Crisis
John Helliwell, Haifang Huang & Shun Wang
Journal of Happiness Studies, forthcoming
Abstract:
This paper attempts to show how the quality of the social fabric of a community or nation affects its capacity to deal with crises and to develop human and natural resources in ways that maintain and sustainably improve subjective well-being. Three types of crisis will be used as examples. These include economic crises; transition and other institutional crises; and conflicts over sustainable resource use. The bulk of the new results in this paper relate to economic crises and institutional transitions, and shows that communities and nations with better social capital and trust respond to crises and transitions more happily and effectively.