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Kevin Lewis

January 02, 2015

The Empire Is Dead, Long Live the Empire! Long-Run Persistence of Trust and Corruption in the Bureaucracy

Sascha Becker et al.
Economic Journal, forthcoming

We hypothesize that the Habsburg Empire with its well-respected administration increased citizens’ trust in local public services. In several Eastern European countries, communities on both sides of the long-gone Habsburg border have shared common formal institutions for a century now. We use a border specification and a two-dimensional geographic regression discontinuity design to identify from individuals living within a restricted band around the former border. We find that historical Habsburg affiliation increases current trust and reduces corruption in courts and police. Falsification tests of spuriously moved borders, geographic and pre-existing differences, and interpersonal trust corroborate a genuine Habsburg effect.


Forced Coexistence and Economic Development: Evidence From Native American Reservations

Christian Dippel
Econometrica, November 2014, Pages 2131–2165

Studying Native American reservations, and their historical formation, I find that their forced integration of autonomous polities into a system of shared governance had large negative long-run consequences, even though the affected people were ethnically and linguistically homogenous. Reservations that combined multiple sub-tribal bands when they were formed are 30% poorer today, even when conditioning on pre-reservation political traditions. The results hold with tribe fixed effects, identifying only off within-tribe variation across reservations. I also provide estimates from an instrumental variable strategy based on historical mining rushes that led to exogenously more centralized reservations. Data on the timing of economic divergence and on contemporary political conflict suggest that the primary mechanism runs from persistent social divisions through the quality of local governance to the local economic environment.


Does Law and Order Attenuate the Benefits of Democracy on Economic Growth?

Andreas Assiotis & Kevin Sylwester
Economica, forthcoming

Recent studies have reported positive associations between democracy and economic growth. They have also explored how associations could differ across regions or income levels. However, might the effects of democracy on growth also depend on factors such as institutions promoting law and order? Using a panel specification, we employ a democracy–law and order interactive term to examine if the effects of democracy on economic growth depend on these other institutions. We find that positive effects of democracy diminish and might even turn negative in countries where other institutions such as those supporting law and order are strong.


Foreign Aided: Why Democratization Brings Growth When Democracy Does Not

Jacob Gerner Hariri
British Journal of Political Science, January 2015, Pages 53-71

There is an unresolved puzzle in research on the economics of democracy. While there is consensus that democracy is not generally associated with higher rates of economic growth, recent studies have found that democratization is followed by growth. But why should becoming a democracy bring growth if being one does not? This article shows that a substantial and immediate influx of foreign aid into new democracies accounts for the positive growth effect of democratization. The domestic regime characteristics of neither democracy nor democratization therefore seems to bring growth. The importance of aid in explaining the democratization-growth nexus underscores that democratizations do not occur in vacuum and cannot be fully understood from internal factors alone.


The franchise, taxes, and public goods: The political economy of infrastructure investment in nineteenth century England

Jonathan Chapman
Caltech Working Paper, September 2014

Many theories of democratization suggest that extending the right to vote will lead to increased government expenditure (e.g. Meltzer and Richard, 1981; Lizzeri and Persico, 2004; Acemoglu and Robinson, 2000). However, these models frequently assume that government can engage in transfer expenditure, which is often not true for local governments. This paper presents and tests a model in which government expenditure is limited to the provision of public goods. The model predicts that the poor and the rich desire lower public goods expenditure than the middle class: the rich because of the relatively high tax burden, and the poor because of a high marginal utility of consumption. Consequently extensions of the franchise to the poor can be associated with declines in government expenditure on public goods. This prediction is tested using a new dataset of local government financial accounts in England between 1867 and 1900, which captures government expenditure on key infrastructure projects that are not included in many studies of national democratic reform. The empirical analysis exploits plausibly exogenous variation in the extent of the franchise to identify the effects of extending voting rights to the poor. The results show strong support for the theoretical prediction: expenditure increased following relatively small extensions of the franchise, but fell following extensions of the franchise beyond around 50% of the adult male population.


Unintended Consequences of Women’s Inheritance Rights on Female Mortality in India

Daniel Rosenblum
Economic Development and Cultural Change, January 2015, Pages 223-248

Before 2005, most states of India only gave sons the legal right to inherit their parents’ ancestral land. However, five states in India had legal reforms giving daughters the same inheritance rights as sons. This article examines the impact of these reforms on female child mortality and fertility. A model shows that if parents desire to maximize their bequest per son, then giving daughters inheritance rights increases the cost of daughters, causing parents to reduce investment in their daughters’ health or decrease fertility. A difference-in-difference analysis shows that the reforms caused an increase in female child mortality but had no effect on fertility rates.


It's a Small World after All: Internet Access and Institutional Quality

Kathleen Sheehan & Andrew Young
Contemporary Economic Policy, forthcoming

Using a panel of up to 114 countries covering the years 1990 through 2010, we estimate the effect of Internet use on changes in countries' Economic Freedom of the World (EFW) scores. The point estimates suggest that the marginal effect is generally positive. However, starting from above-average EFW scores (>7.7 out of 10; examples in 2010 include the UK, Switzerland, and Hong Kong) the marginal effect turns negative. Taking this interaction into account, the marginal effect is positive and statistically significant for countries starting at initial EFW scores of around 6 or less. Examples of countries with 2010 EFW scores near this threshold include China, Nigeria, and Pakistan. We discuss mechanisms that potentially generate this conditional relationship between Internet use and institutional change.


Aid Externalities: Evidence from PEPFAR in Africa

Melissa Lee & Melina Platas Izama
World Development, March 2015, Pages 281–294

Do targeted aid programs have unintended consequences outside of the target issue area? We investigate this question with an examination of one of the largest targeted aid programs in the world: the President’s Emergency Plan for AIDS Relief (PEPFAR). Critics of PEPFAR worry that a targeted program focusing on single diseases has a negative externality, in which the influx of massive amounts of target aid damages broader public health systems in countries that receive PEPFAR funds. Using a difference-in-differences identification strategy, we find statistical evidence that supports critics of targeted aid.


The great Indian calorie debate: Explaining rising undernourishment during India’s rapid economic growth

Lisa Smith
Food Policy, January 2015, Pages 53–67

The prevalence of undernourishment in India – the percent of people consuming insufficient calories to meet their energy requirements – has been rising steadily since the mid 1980s. Paradoxically, this period has been one of robust poverty reduction and rapid economic growth. The reasons for the apparent reductions in calorie consumption underlying increased undernourishment have been the subject of intense debate both within India and internationally. This paper critically reviews this debate, finding that is has taken place outside of the context of India’s recent nutrition and epidemiological transitions, which appear to have brought with them increased, not decreased, food consumption. The debate has also taken place under the unchallenged assumption that the data on which the conflicting trends are based, collected as part of the country’s Household Consumption and Expenditure Surveys (HCESs), are reliable. The paper provides supporting literature and empirical evidence that a probable key source of the calorie decline is incomplete collection of data on food consumed away from peoples’ homes, which is widespread and rapidly increasing. Complete measurement of this food source in the HCESs of all developing countries is vital for accurate measurement of both undernourishment and poverty – and for resolving the Indian calorie debate.


Copper sheathing and the British slave trade

Peter Solar & Klas Rönnbäck
Economic History Review, forthcoming

British slave traders were early and rapid adopters of the new technique of sheathing ships' hulls with copper. From the 1780s this innovation increased sailing speeds of British slave ships by about a sixth, prolonged the ships' lives by at least a half, and reduced the death rates of slaves on the middle passage by about half. It was, above all, the fall in death rates, and possibly the improved condition of surviving slaves, that made the investment so compelling. Copper sheathing may have paid for itself in a single voyage, even though it was usually good for several. By the 1790s few slave ships, even if making only a single voyage, were uncoppered. These results confirm that copper sheathing was one of the major improvements in shipping productivity before the use of iron and steam in the mid-nineteenth century.


The Resource Curse: A Statistical Mirage?

Alexander James
Journal of Development Economics, May 2015, Pages 55–63

A surprising feature of resource-rich economies is slow growth. It is often argued that natural-resource production impedes development by creating market or institutional failures. This paper establishes an alternative explanation — a slow-growing resource sector. A declining resource sector is disproportionately reflected in resource-dependent countries. Additionally, there is little evidence that resource dependence impedes growth in non-resource sectors. More generally, this paper illustrates the importance of considering industry composition in cross-country growth regressions.


How Dynamics of Urbanization Affect Physical and Mental Health in Urban China

Juan Chen et al.
China Quarterly, December 2014, Pages 988-1011

Using a 2011 national survey of urban residents, irrespective of their official hukou status, and the 2000–2009 night-time light data from the Defense Meteorological Satellite Program Operational Linescan System (DMSP-OLS), this paper goes beyond the simple dichotomy of migrant versus non-migrant or rural versus urban hukou to disentangle the processes of urbanization and migration and their complex associations with health, and assesses the impact of various levels and speed of urbanization on the physical and mental health of current residents in a city or town. By disaggregating urbanization into three discrete dimensions at sub-provincial levels, we find that while a higher absolute level of urbanization at the county level negatively impacted self-reported physical health, faster and accelerating urbanization had a positive impact which could be attributed to the demand-pull effect underlying the healthy migrant phenomenon. By contrast, all three dimensions of urbanization were associated with greater depressive distress and thus had an adverse effect on residents' mental health. Beyond demonstrating how variation in the process and location of urbanization affects individual health, we also illustrate more broadly the value of modelling locational parameters in analyses of individual outcomes based on national samples.


Does intelligence explain the association between generalized trust and economic development?

Noah Carl
Intelligence, November–December 2014, Pages 83–92

Both generalized trust and intelligence are correlated with economic development. However, recent research has shown that trust and intelligence are themselves correlated, both across countries and among individuals. Theory suggests that causality runs from intelligence to trust at the individual level, which raises the possibility that the association between trust and development is explained by intelligence. Indeed, intelligence may cause both trust and development. Alternatively, development may lead to higher intelligence, which in turn gives rise to greater trust. Note that intelligence may cause trust not only because individuals with higher intelligence tend to report greater trust, but also because such individuals tend to be more trustworthy. This study analyzes data on trust, intelligence and economic development for 15 Spanish regions, 20 Italian regions, 50 US states, and 107 countries. In all four domains, there is a statistically significant positive relationship between trust and intelligence (r = .74, r = .74, r = .72 and r = .50, respectively). Moreover, partial correlations suggest that intelligence accounts for some or all of the association between trust and development in at least two out of the four domains.


The Achaemenid Empire’s Contributions to Public Administration

Joshua Steinfeld
International Journal of Public Administration, forthcoming

The Achaemenid Empire established the world’s first complex administrative system of government in 559 B.C. There are numerous administrative accomplishments by the Achaemenids that have not successfully been duplicated in modern times, despite the Pony Express, the Suez Canal, and perfected recycling systems. Political debate, formal rewards systems, federal agencies, and integrated federal and provincial levels of government among a culturally diverse population were characteristic of the trailblazing Achaemenid Empire. Furthermore, administrative ideologies such as government’s responsibility to serve the public and provide equal rights were incorporated first by Cyrus the Great’s Human Rights Charter.


Empirical Linkages between Good Government and National Well-being

John Helliwell et al.
NBER Working Paper, November 2014

This paper first reviews existing studies of the links between good governance and subjective well-being. It then brings together the largest available sets of national-level measures of the quality of governance to assess the extent to which they contribute to explaining the levels and changes in life evaluations in 157 countries over the years 2005-2012, using data from the Gallup World Poll. The results show not just that people are more satisfied with their lives in countries with better governance quality, but also that actual changes in governance quality since 2005 have led to large changes in the quality of life. For example, the ten-most-improved countries, in terms of delivery quality changes between 2005 and 2012, when compared to the ten countries with most worsened delivery quality, are estimated to have thereby increased average life evaluations by as much as would be produced by a 40% increase in per capita incomes. The results also confirm earlier findings that the delivery quality of government services generally dominates democratic quality in supporting better lives. The situation changes as development proceeds, with democratic quality having a positive influence among countries that have already achieved higher quality of service delivery.


How sustainable is the macroeconomic impact of foreign aid?

Simon Feeny & Tim Fry
Journal of Policy Modeling, November–December 2014, Pages 1066–1081

This paper examines how long the impact of foreign aid on growth lasts in recipient countries. An econometric technique is adopted which recognises that the impact of aid in the current year is a function not just of the current aid received but also of the aid received in previous years. Results indicate that foreign aid has a half-life of two years. In other words, half of the total impact of aid on growth is experienced within two years of its disbursement. Aid loans are found to have longer half-lives than their grant counterparts. Policy implications are discussed.

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