Getting to greatness
Why Are the Fastest Growing Countries Autocracies?
Zhaotian Luo & Adam Przeworski
Journal of Politics, forthcoming
Why are the fastest growing countries predominantly autocracies? One possible reason is that growth “tigers” are poor countries that begin growing when their distance to the most advanced economies is large, and poor countries tend to be autocracies. All that is needed to reproduce the observed historical patterns is income convergence and a positive association of income with incidence of democracy, with no assumptions about the effect of regimes on growth. We take Robert Lucas’s macroeconomic model and augment it with regime dynamics identified by Adam Przeworski and colleagues and Torsten Persson and Guido Tabellini, calibrate the model, and show that these dynamics account for the data well.
Aid, Policies, and Growth: Why So Much Confusion?
Shaomeng Jia & Claudia Williamson
Contemporary Economic Policy, forthcoming
We revisit the highly debated aid‐policy‐growth association. Our results overturn Burnside and Dollar's original findings by simply using new data over the same countries and years. Marginal effects from the extended sample (1962–2013) provide weak evidence that aid can promote growth in the presence of good policies. Post‐Cold War (1990–2013) analysis, however, reveals that aid can decrease growth at any level of policy. The overwhelming majority of the results suggest aid conditional on policy is ineffective. This debate continues because the results are highly sensitive to country‐year selection, choice of methodology, measurement of institutional quality, and growth rate measurement.
Culture, Legal Origins, and Financial Development
Economic Inquiry, forthcoming
This study proposes that countries with a cultural orientation toward individualism tend to enjoy a higher level of financial development. Estimates based on cross‐country data lend strong support to this hypothesis. Specifically, the results indicate that existing disparity in the level of financial development is significantly correlated with variation in the extent of individualism across countries, where a one standard deviation increase in individualism is associated with 0.631 standard deviations improvement in the level of financial development. The results are robust to a number of considerations. Additional results provide some support to the notion that individualistic culture and legal origin may serve as complements rather than substitutes to each other.
Mining matters: Natural resource extraction and firm-level constraints
Ralph De Haas & Steven Poelhekke
Journal of International Economics, March 2019, Pages 109-124
We estimate the impact of local mining activity on the business constraints experienced by 25,777 firms across nine large and resource-rich countries. We find that the presence of active mines in firms' immediate vicinity (<20 km) deteriorates the business environment in tradeable sectors. Access to inputs and infrastructure becomes more constrained for these firms and this adversely affects their growth. In contrast, nearby active mines have a positive effect on firms in non-tradeable sectors. Moreover, we show that the presence of mines at a greater distance (21–150 km) relaxes business constraints of all firms, in line with positive regional spending effects.
When State-Building Hinders Growth: The Legacy of China's Confucian Bureaucracy
Yale Working Paper, November 2018
Do countries with a long history of state-building fare better in the long run? Recent work has shown that earlier state-building may lead to higher levels of present-day growth. By contrast, I use a natural experiment to show that the regions of China with over a thousand years of sustained exposure to state-building are significantly poorer today. The mechanism of persistence, I argue, was the introduction of a civil service exam based on knowledge of Confucian classics, which strengthened the social prestige of the civil service and weakened the prestige of commerce. A thousand years later, the regions of China where the Confucian bureaucracy was first introduced have a more educated population and more Confucian temples, but lower levels of wealth. The paper contributes to an important debate on the Great Divergence, highlighting how political institutions interact with culture to cause long-run patterns of growth.
Does oil substitute for patriarchy?
Economics & Politics, forthcoming
Critics of Ross's (American Political Science Review, 102, 2008, 107) gendered resource curse thesis argue that culture trumps oil wealth as a determinant of female labor force participation (FLFP). Here, I argue that, while cultural attributes do indeed affect the female labor supply, oil wealth reduces the demand for female labor by hurting the export‐oriented industries that employ female labor intensively. By reducing the demand for female labor in this way, oil wealth undermines the positive effect of gender egalitarianism on FLFP. Thus, oil curses women. Using data from the World Values Survey and the World Bank, I find support for the argument.
How the medium shapes the message: Printing and the rise of the arts and sciences
C. Jara-Figueroa, Amy Yu & César Hidalgo
PLoS ONE, February 2019
Communication technologies, from printing to social media, affect our historical records by changing the way ideas are spread and recorded. Yet, finding statistical evidence of this fact has been challenging. Here we combine a common causal inference technique (instrumental variable estimation) with a dataset on nearly forty thousand biographies from Wikipedia (Pantheon 2.0), to study the effect of the introduction of printing in European cities on Wikipedia’s digital biographical records. By using a city’s distance to Mainz as an instrument for the adoption of the movable type press, we show that European cities that adopted printing earlier were more likely to become the birthplace of a famous scientist or artist during the years following the invention of printing. We bring these findings to recent communication technologies by showing that the number of radios and televisions in a country correlates with the number of globally famous performing artists and sports players born in that country, even after controlling for GDP, population, and including country and year fixed effects. These findings support the hypothesis that the introduction of communication technologies can bias historical records in the direction of the content that is best suited for each technology.
Development Derailed: Railroad Land Grants and Irrigation in the Western United States
Eric Alston & Steven Smith
University of Colorado Working Paper, January 2019
We analyze how uncertain property rights – exogenously generated by railroad land grants – stymied irrigation investment and economic development on the Western frontier. While property rights scholarship recognizes that economic development can be hindered by a lack of formal security of rights, it also recognizes property rights are often strengthened directly or indirectly by investment, making empirical identification of the effects challenging. Meanwhile, in the context of the US West, economic historians have long argued that the economic benefits of the railroads outweighed the costs of incentivizing development with federal land grants and loans. However, the way these land grants were awarded was not uniform in process or timing; we argue that uncertainty surrounding the development of the Northern Pacific in Montana created the right historical context within which to examine the effects of uncertainty to title on one costly economic activity along the frontier, irrigation development. Montana’s irrigation development generally lagged that of Colorado and we create a spatially granular data set of land patents and water rights that yields a variety of evidence that uncertainty surrounding railroad land grants in Montana specifically contributed to delaying and stunting settlement and irrigation development in the state.
Change and Persistence in the Age of Modernization: Saint-Germain-d'Anxure 1730-1895
Guillaume Blanc & Romain Wacziarg
NBER Working Paper, January 2019
Using a unique, comprehensive household-level dataset for a single French village from 1730 to 1895, we study the process of modernization during a period of rapid institutional and demographic transformation. We document changes in fertility, mortality, human capital and intergenerational mobility, looking for structural breaks associated with the French Revolution and paying close attention to the sequencing of changes associated with various aspects of modernization in the village. We find that the fall in fertility preceded the rise in education by several decades. Demographic change is plausibly associated with institutional and cultural change rather than with changes in the opportunity cost of children. The rise in education occurred mostly as the result of an increase in the supply of schooling due to the Guizot Law, rather than demand side forces. All these changes occurred in the absence of industrialization in and around the village. We conclude that institutional and cultural changes originating outside the village were likely the dominant forces explaining its modernization.
The colonial origins of fiscal capacity: Evidence from patronage governors
Journal of Comparative Economics, forthcoming
We combine historical personnel data from the British colonial administration with modern public finance data to study the impact of colonial governors on fiscal capacity. Exploiting rule-based variation in the allocation of governors connected to their superior at the time of appointment, we find that modern-day countries exposed to more patronage governors exhibit lower fiscal capacity today. These negative effects are persistent over time and driven by indirect taxes that patronage governors disproportionately controlled in the colonial period. The results thus provide evidence for a public finance channel through which the effects of patronage appointments extend beyond decolonization.
Stock markets, banks and economic growth in the UK, 1850–1913
Financial History Review, forthcoming
This article shows that neither stock markets nor commercial banks had a significant impact on the UK's economic growth from 1850 to 1913. These results are based on a new dataset on paid-in capital of securities listed on the UK's stock exchanges, which is analysed using a vector autoregression with time-varying parameters. Econometric results also indicate that the growth of the banking sector and the capital markets was, to a significant extent, driven by factors other than domestic economic growth.