Kevin Lewis

October 12, 2021

The Long-Run Impact of the Dissolution of the English Monasteries
Leander Heldring, James Robinson & Sebastian Vollmer
Quarterly Journal of Economics, forthcoming

We use the impact of the Dissolution of the English monasteries in 1535 to test the commercialization hypothesis about the roots of long-run English economic development. Before the Dissolution, monastic lands were relatively unencumbered by inefficient feudal land tenure, but could not be sold. The Dissolution created a market for formerly monastic lands, which could now be more effectively commercialized relative to nonmonastic lands, where feudal tenure persisted until the 20th century. We show that parishes impacted by the Dissolution subsequently experienced a ‘rise of the Gentry’, had higher innovation and yields in agriculture, a greater share of the population working outside of agriculture, and ultimately higher levels of industrialization. Our results are consistent with explanations of the Agricultural and Industrial Revolutions which emphasize the commercialization of society as a key precondition for taking advantage of technological change and new economic opportunities. 

Elite Cleavage and the Rise of Capitalism under Authoritarianism: A Tale of Two Provinces in China
Qi Zhang et al.
Journal of Politics, July 2021, Pages 1010–1023

A great challenge for capitalist development under authoritarian regimes is to effectively constrain predatory behavior. Beyond existing frameworks of the dictator’s time horizon and institutionalized power sharing, we introduce an alternative perspective -- elite cleavage. We argue that the systematic vulnerability of marginalized local cadres motivated them to ally with grassroots constituents and protect local economic interests in order to increase the odds of political survival. Difference-in-differences analysis of counties in two Chinese provinces shows that the upheaval of the Cultural Revolution created a moment of political decentralization which enabled marginalized local elites to protect local entrepreneurs against national-level radical policies, resulting in much more vibrant private economic activities in some regions. Further empirical evidence shows that elite cleavages formed in the 1940s had a long-lasting impact on economic performance in the reform era. 

Malthus Goes to China: The Effect of “Positive Checks” on Grain Market Development, 1736–1910
Yanfeng Gu & James Kai-sing Kung
Journal of Economic History, forthcoming

After peaking around the mid-eighteenth century, grain market integration in China declined by a colossal 80 percent amid a twofold increase in population and remained at low levels for well over a century. Markets only resumed their growth momentum after the largest peasant revolt—the Taiping Rebellion—wiped out roughly one-sixth of the Chinese population starting 1851. This U-shaped pattern of grain market integration distinguished China from Europe in their trajectories of market development. Using grain prices to divide China into grain-deficit and grain-surplus regions, we find that the negative relationship between population growth and market integration originated from the grain-surplus-cum-exporting regions. 

Why do people stay poor?
Clare Balboni et al.
NBER Working Paper, October 2021

There are two broad views as to why people stay poor. One emphasizes differences in fundamentals, such as ability, talent or motivation. The other, the poverty traps view, differences in opportunities which stem from access to wealth. To test between these two views, we exploit a large-scale, randomized asset transfer and an 11-year panel on 6000 households who begin in extreme poverty. The setting is rural Bangladesh and the asset is cows. The data supports the poverty traps view - we identify a threshold level of initial assets above which households accumulate assets, take on better occupations (from casual labor in agriculture or domestic services to running small livestock businesses) and grow out of poverty. The reverse happens for those below the threshold. Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated in the work they do at baseline and that the gains arising from eliminating misallocation would far exceed the program costs. Our findings imply that large transfers which create better jobs for the poor are an effective means of getting people out of poverty traps and reducing global poverty. 

Economic growth in Sub-Saharan Africa, 1885-2008: Evidence from eight countries
Stephen Broadberry & Leigh Gardner
Explorations in Economic History, forthcoming

Sub-Saharan Africa (SSA) has been absent from recent debates about comparative long-run growth owing to the lack of data on aggregate economic performance before 1950. This paper provides estimates of GDP per capita on an annual basis for eight Anglophone African economies for the period since 1885, raising new questions about previous characterizations of the region's economic performance. The new data show that many of these economies had levels of per capita income which were above subsistence by the early twentieth century, on a par with the largest economies in Asia until the 1980s. However, overall improvements in GDP per capita were limited by episodes of negative growth or “shrinking”, the scale and scope of which can be measured through annual data. 

The Long-Term Effects of Industrial Policy
Jaedo Choi & Andrei Levchenko
NBER Working Paper, September 2021

This paper provides causal evidence of the impact of industrial policy on firms' long-term performance and quantifies industrial policy's long-term welfare effects. Using a natural experiment and unique historical data during the Heavy and Chemical Industry (HCI) Drive in South Korea, we find large and persistent effects of firm-level subsidies on firm size. Subsidized firms are larger than those never subsidized even 30 years after subsidies ended. Motivated by this empirical finding, we build a quantitative heterogeneous firm model that rationalizes these persistent effects through a combination of learning-by-doing (LBD) and financial frictions that hinder firms from internalizing LBD. The model is calibrated to firm-level micro data, and its key parameters are disciplined with the econometric estimates. Counterfactual analysis implies that the industrial policy generated larger benefits than costs. If the industrial policy had not been implemented, South Korea's welfare would have been 22-31% lower, depending on how long-lived are the productivity benefits of LBD. Between one-half and two-thirds of the total welfare difference comes from the long-term effects of the policy. 

From Hermit Kingdom to Miracle on the Han: Policy Decisions that Transformed South Korea into an Export Powerhouse
Douglas Irwin
NBER Working Paper, September 2021

In 1960, South Korea’s exports were about 1 percent of GDP, and the country’s ability to import depended almost entirely on US aid. After changing its foreign exchange and trade policies in the mid-1960s, Korea saw a surge in exports to more than 10 percent of GDP by the end of the decade. What factors account for the shift in policy that enabled this dramatic export growth to occur? The United States helped initiate the process by withholding financial assistance, pressuring Korea to devalue its currency and reform its foreign exchange regime. Initially, the Korean government resisted taking these steps, but in 1964 it became firmly committed to an export promotion strategy to boost foreign exchange earnings and end its dependence on American aid. 

International Capital and Subnational Politics: Partisanship and Foreign Direct Investment in Mexican States
Ana Carolina Garriga
Political Research Quarterly, forthcoming

Do foreign investors have subnational political preferences? The political economy of foreign direct investment (FDI) involves not only choosing among host countries, but also the subnational location of the assets. However, factors affecting investors’ decisions about subnational location likely differ from the ones affecting international investment. This paper studies the effect of state-level partisanship on new FDI inflows to Mexican states. I argue that investors prefer states ruled by left-wing governors because they are more likely to invest in human capital. Statistical analyses using new data on subnational allocation of FDI in Mexican states between 1999 and 2017 support the main hypothesis. Given the persistence of authoritarian enclaves in Mexico, I also disentangle the effects of partisanship from subnational democratization. The partisan effect is independent from party turnover and political competition at the subnational level, and it is robust to different model specifications and estimation strategies. Additional evidence supports the plausibility of the argued mechanism. 

The Influence of Kin Proximity on the Reproductive Success of American Couples, 1900–1910
David Hacker et al.
Demography, forthcoming

Children require a large amount of time, effort, and resources to raise. Physical help, financial contributions, medical care, and other types of assistance from kin and social network members allow couples to space births closer together while maintaining or increasing child survival. We examine the impact of kin availability on couples' reproductive success in the early twentieth-century United States with a panel data set of over 3.1 million couples linked between the 1900 and 1910 U.S. censuses. Our results indicate that kin proximity outside the household was positively associated with fertility, child survival, and net reproduction, and suggest that declining kin availability was an important contributing factor to the fertility transition in the United States. We also find important differences between maternal and paternal kin inside the household—including higher fertility among women residing with their mother-in-law than among those residing with their mother—that support hypotheses related to the contrasting motivations and concerns of parents and parents-in-law. 

Beyond the male breadwinner: Life-cycle living standards of intact and disrupted English working families, 1260–1850
Sara Horrell, Jane Humphries & Jacob Weisdorf
Economic History Review, forthcoming

This article provides a novel framework within which to evaluate real household incomes of predominantly rural working families of various sizes and structures in England in the years 1260–1850. We reject ahistorical assumptions about complete reliance on men's wages and male breadwinning, moving closer to reality by including women and children's contributions to family incomes. Our empirical strategy benefits from recent estimates of men's annual earnings, so avoiding the need to gross up day rates using problematic assumptions about days worked, and from new data on women and children's wages and labour inputs. A family life-cycle approach which accommodates consumption smoothing through saving adds further breadth and realism. Moreover, the analysis embraces two historically common but often overlooked family types alternative to the traditional male-breadwinner model: one where the husband is missing having died or deserted, and one where the husband is present but unwilling or unable to find work. Our framework suggests living standards varied widely by family structure and dependency ratio. Incorporating detailed demographic data available for 1560 onward suggests that small and intact families enjoyed high and rising living standards after 1700, while large or disrupted families depended on child labour and poor relief until c. 1830. A broader perspective on family structures informs understanding of the chronology and nature of poverty and coping strategies. 

How Property Rights Matter to Firm Resource Investment: Evidence from China’s Property Law Enactment
Wenlong He, Tony Tong & Mingtao Xu
Organization Science, forthcoming

Although property-rights theory has long been used to explain firms’ ownership of resources, research on the channels through which property rights affect heterogeneous firms’ investment in building resources remains scarce. Leveraging a property-law enactment in China, we find that strengthening property-rights protection leads private firms to make greater intangible and tangible asset investment compared with state-owned firms and that these effects are mediated by external equity and debt financing. Further, we unpack resource heterogeneity by explicating key differences between intangible and tangible assets, and we document an alignment between asset intangibility and financing approaches such that for intangible asset investment, equity plays a larger mediation role, whereas for tangible asset investment, debt’s mediating effect is greater. We contribute to the strategy literature by using property-rights theory to link together asset intangibility and financing approaches and by showing that the strength of property-rights protection affects firms’ resource investment and shapes firm heterogeneity. 

Erosion of State Power, Corruption Control, and Fiscal Capacity
Weijia Li, Gérard Roland & Yang Xie
Economic Journal, forthcoming

We model how corruption erodes state power, i.e., the state’s ability to keep its apparatus under control in crises. Under a general assumption about fat-tailed risk of crisis, we show that given strong fiscal capacity, the head of the state will control local corruption at such a level that its power is secured; given weaker capacity, the state will over-tolerate corruption to retain officials, risking control in crises; moreover, a state may be trapped with too weak fiscal capacity, rampant corruption, and the state losing control in any real crisis, while having little incentive to invest in fiscal capacity. By developing historical narratives, we show that these theoretical results are consistent with experience from the Roman Empire, New Kingdom of Egypt, Ming China, and many other powerful states in history. 

Sectarian aid, sanctions and subnational development
Cemal Eren Arbatli & David Gomtsyan
European Economic Review, October 2021

Hezbollah, a Shia Islamist political party and militant group based in Lebanon, is believed to receive a significant amount of informal funding from Iran. In this paper we evaluate whether this funding has had any economically meaningful effect on subnational development in Lebanon. Since the amount of funding is not observed, we use Iranian oil rents and the intensity of sanctions against Iran as plausibly exogenous drivers of transfers to Hezbollah. Then, we leverage the well-established sectarian bias in Hezbollah’s spending to obtain conservative estimates of the direct effect of funding to Hezbollah. Studying the 1993-2010 period, we find a positive and economically significant relationship between Iranian oil windfalls and nighttime lights. This effect is significantly stronger in areas with greater concentration of Shia population. Also, nighttime lights are relatively lower in Shia areas than elsewhere during periods when sanctions against Iran intensified. These novel results attest to the non-negligible developmental effects of informal aid as well as how economic sanctions against donors might offset such effects. 

Cotton cultivation under colonial rule in India in the nineteenth century from a comparative perspective
Klas Rönnbäck & Dimitrios Theodoridis
Economic History Review, forthcoming

India has played an important role in recent debates on the development of agriculture during colonial rule, and on the performance of US cotton plantations during the nineteenth century. The debates suffer from a lack of quantitative evidence on the productivity of Indian cotton cultivation. In this article, we examine levels of land and labour productivity in cotton cultivation in nineteenth-century India, and compare this data with corresponding productivity figures from the US. Average yields in India were much lower than previous research would suggest, and trends were generally stagnant or even negative. The difference between the cost of labour in India and the US was also lower than previous research would suggest.


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