Early Developments
Revisiting the Relationship Between Federal Design and Economic Growth
Matthew Uttermark
Publius: The Journal of Federalism, Winter 2020, Pages 135-155
Abstract:
Federal design matters - but how? Federalism research has addressed the longstanding question whether federalism is linked with economic growth, but with differing results. In this study, I address the possible linkage using measures from the empirically rich Regional Authority Index. Examining federalism over time across approximately seventy nations, I evaluate the conceptually distinct expectations of self-rule and shared-rule federalism on several measures of economic development. The results fail to find an association between either self-rule or shared-rule and economic development, supporting the argument that the linkage is weak or even nonexistent.
Discrimination, Managers, and Firm Performance: Evidence from "Aryanizations" in Nazi Germany
Kilian Huber, Volker Lindenthal & Fabian Waldinger
University of Chicago Working Paper, October 2019
Abstract:
Large-scale increases in discrimination can lead to dismissals of highly qualified business leaders who belong to targeted groups. We study how the forced removal of Jewish managers in Nazi Germany, caused by surging antisemitism, affected large firms. The loss of Jewish managers led to large and persistent stock price reductions for affected firms. Dividend payments and returns on assets also declined. The effect of losing Jewish managers was distinct from other shocks that hit German firms after 1933, for example Nazi policies or firm-specific demand shocks. A back-of-the-envelope calculation suggests that the aggregate market valuation of firms listed in Berlin fell by 1.8 percent of German GNP because of the expulsion of Jewish managers. The findings imply that discrimination can lead to persistent and first-order economic losses.
Population Size and the Size of Government
Tim Krieger & Daniel Meierrieks
European Journal of Political Economy, forthcoming
Abstract:
We examine the effect of population size on government size for a panel of 130 countries for the period between 1970 and 2014. We show that previous analyses of the nexus between population size and government size are incorrectly specified and fail to consider the influence of cross-sectional dependence, non-stationarity and cointegration. Using a panel time-series approach that adequately accounts for these issues, we find that population size has a positive long-run effect on government size. This finding suggests that effects of population size that increase government size (primarily due to the costs of heterogeneity, congestion, crime and conflict) dominate effects that reduce government size (primarily due to scale economies).
Is the Public Investment Multiplier Higher in Developing Countries? An Empirical Investigation
Alejandro Izquierdo et al.
NBER Working Paper, November 2019
Abstract:
Over the last decade, empirical studies analyzing macroeconomic conditions that may affect the size of government spending multipliers have flourished. Yet, in spite of their obvious public policy importance, little is known about public investment multipliers. In particular, the clear theoretical implication that public investment multipliers should be higher (lower) the lower (higher) is the initial stock of public capital has not, to the best of our knowledge, been tested. This paper tackles this empirical challenge and finds robust evidence in favor of the above hypothesis: countries with a low initial stock of public capital (as a proportion of GDP) have significantly higher public investment multipliers than countries with a high initial stock of public capital. This key finding seems robust to the sample (European countries, U.S. states, and Argentine provinces) and identification method (Blanchard-Perotti, forecast errors, and instrumental variables). Our results thus suggest that public investment in developing countries would carry high returns.
Urban Growth Shadows
David Cuberes, Klaus Desmet & Jordan Rappaport
Federal Reserve Working Paper, September 2019
Abstract:
Does a location's growth benefit or suffer from being geographically close to large economic centers? Spatial proximity may lead to competition and hurt growth, but it may also generate positive spillovers and enhance growth. Using data on U.S. counties and metro areas for the period 1840-2017, we document this tradeoff between urban shadows and urban spillovers. Proximity to large urban centers was negatively associated with growth between 1840 and 1920, and positively associated with growth after 1920. Using a two-city spatial equilibrium model with intra-city and inter-city commuting, we show that the secular evolution of commuting costs can account for this and other observed patterns in the data.
The Wheels of Change: Human Capital, Millwrights, and Industrialization in Eighteenth-Century England
Joel Mokyr, Assaf Sarid & Karine van der Beek
Northwestern University Working Paper, November 2019
Abstract:
Measures of human capital correlate strongly with technological change and economic growth across regions. However, the endogeneity of these measures complicated this interpretation. This paper aims to identify the causal effect of human capital in the context of Britain's industrialization in the eighteenth century, by uncovering the geographical origins of its highly skilled mechanical labor. We achieve this by exploiting the persistent effect of the spatial location of early medieval watermills across England (as registered in Domesday Book in 1086) on the spatial distribution of a specific group of mechanical workmen known as wrights, who specialized in building watermills, and using the exogenous source of cross-district variation in geographical suitability for the construction of watermills in the early medieval period, to instrument for the availability of wrights in the first half of the eighteenth century (1710-50). In the case of England, the mechanical skills that evolved in response to the extensive adoption of watermills for grinding in the early middle ages, were complementary to technological change and turned out to be an important power behind England's leadership in the second half of the eighteenth century.
The Legacy of Colonial Medicine in Central Africa
Sara Lowes & Eduardo Montero
Stanford Working Paper, September 2019
Abstract:
Between 1921 and 1956, French colonial governments organized medical campaigns to treat and prevent sleeping sickness. Villagers were forcibly examined and injected with medications with severe, sometimes fatal, side effects. We digitized thirty years of archival records to document the locations of campaign visits at a granular geographic level for five central African countries. We find that greater campaign exposure reduces vaccination rates and trust in medicine - as measured by willingness to consent to a blood test. We examine relevance for present day health initiatives; World Bank projects in the health sector are less successful in areas with greater exposure.
Teaching Through Television: Experimental Evidence on Entrepreneurship Education in Tanzania
Kjetil Bjorvatn et al.
Management Science, forthcoming
Abstract:
Can television be used to teach and foster entrepreneurship among youth in developing countries? We report from a randomized control field experiment of an edutainment show on entrepreneurship broadcasted over almost three months on national television in Tanzania. The field experiment involved more than 2,000 secondary school students, where the treatment group was incentivized to watch the edutainment show. We find some suggestive evidence of the edutainment show making the viewers more interested in entrepreneurship and business, particularly among females. However, our main finding is a negative effect: the edutainment show discouraged investment in schooling without convincingly replacing it with some other valuable activity. Administrative data show a strong negative treatment effect on school performance, and long-term survey data show that fewer treated students continue schooling, but we do not find much evidence of the edutainment show causing an increase in business ownership. The fact that an edutainment show for entrepreneurship caused the students to invest less in education carries a general lesson to the field experimental literature by showing the importance of taking a broad view of possible implications of a field intervention.
Historical legacies in savings: Evidence from Romania
Sarah Walker
Journal of Comparative Economics, forthcoming
Abstract:
This study explores channels of savings persistence using a spatial regression discontinuity across an imperial border in present-day Romania. With data obtained from a lab in the field experiment and household survey, the findings suggest that imperial history influences savings behaviors today. I find no evidence that economic preferences for risk and time differ across the border, nor that these preferences are culturally transmitted. Rather, imperial history is strongly correlated with current financial access and asset choice, which affect savings accumulation. To confirm the robustness of these findings, I conduct falsification tests that arbitrarily move the border and also rule out several alternative mechanisms, including trust in financial institutions, financial literacy, and migration. I establish the external validity of the field experiment using nationally-representative data, which also suggests that savings legacies have important welfare consequences for the ability to mitigate household shocks. These findings highlight the role of history in under-saving, as well as the reinforcing nature of culture and institutions in shaping contemporary economic outcomes.