Growing From the Past

Kevin Lewis

January 18, 2022

Pandemic recession and helicopter money: Venice, 1629-1631
Donato Masciandaro, Charles Goodhart & Stefano Ugolini
Financial History Review, forthcoming

We analyse the money-financed fiscal stimulus implemented in Venice during the famine and plague of 1629-31, which was equivalent to a 'net-worth helicopter money' strategy - a monetary expansion generating losses to the issuer. We argue that the strategy aimed at reconciling the need to subsidize inhabitants suffering from containment policies with the desire to prevent an increase in long-term government debt, but it generated much monetary instability and had to be quickly reversed. This episode highlights the redistributive implications of the design of macroeconomic policies and the role of political economy factors in determining such designs. 

Post-materialism and economic growth: Cultural backlash, 1981-2019
Kyriaki Kafka & Pantelis Kostis
Journal of Comparative Economics, December 2021, Pages 901-917

In recent decades it seems that various factors have led to a cultural background change, which although mainly characterized as incremental, in some cases can be sudden. A question therefore arises as to whether the way in which the cultural background has evolved during last decades affects the growth rate of economies. We use an unbalanced panel dataset comprised from 34 OECD countries from 1981 to 2019, and a Least Squares Dummy Variable Correction (LSDVC) method as well as a series of robustness tests including different methods of analysis, adding control variables and breaking the overall period into subperiods. We conclude that the cultural background during the overall period under consideration is characterized as post-materialistic and harms economic growth. Moreover, we highlight both theoretically and empirically the cultural backlash hypothesis since the cultural background of the countries under analysis presents a shift from traditional/materialistic (from 1981 up to 1998) to post-materialist values (from 1999 up to 2019). Doing so, we conclude on a positive effect of cultural background on economic growth when traditional/materialistic values prevail, and a negative effect when post-materialistic values prevail. These results highlight culture as a crucial factor for economic growth and indicate that economic policy makers should take it seriously into account before designing economic policy and in order to explain the effectiveness of economic policies implemented. 

The Ecological Origins of Economic and Political Systems
Stephen Haber, Roy Elis & Jordan Horrillo
Stanford Working Paper, November 2021

We offer a theory that explains the wide variance in levels of economic development around the planet, accounts for its geographic clustering, and makes plain why these patterns only emerged over the past two centuries. Its mechanics focus on the fundamental challenge of survival that faced all human societies prior to the 19th century: insuring against starvation. Local factor endowments conditioned how societies could respond to that challenge, thereby shaping pre-1800 forms of social organization. Those forms of social organization, in turn, conditioned how quickly societies could respond to the next great challenge they all faced: absorbing rapidly a broad suite of mutually dependent, post-1800 technologies that were crucial to economic development and geopolitical competition in the modern world. We develop novel datasets to put the predictions of the theory to the test. We find that a vector of exogenous factors that were binding constraints on food production, transport, and post-harvest storage (conditional on 18th century technologies) within the densely populated nuclei from which nation states later emerged account for 60 percent of the cross-country variance in per capita GDP today. Importantly, we also find that this vector of exogenous factors accounts for progressively less of the variance in levels of economic development (as measured by urbanization ratios) going back in time, such that circa 1500-1700 they account for almost none of the variance. We also discover that a particular complex combination of ecological factors that permitted some societies to insure against starvation through local trade is associated with faster economic growth from 1800 to 2000, faster development of market towns from 1500 to 1800, higher levels of investment in trade-related human capital circa 1800, faster absorption of 19th century technologies, and lower probability of being colonized. 

Assessing different historical pathways in the cultural evolution of economic development
Adam Flitton & Thomas Currie
Evolution and Human Behavior, January 2022, Pages 71-82

A huge number of hypotheses have been put forward to explain the substantial diversity in economic performance we see in the present-day. There has been a growing appreciation that historical and ecological factors have contributed to social and economic development. However, it is not clear whether such factors have exerted a direct effect on modern productivity, or whether they influence economies indirectly by shaping the cultural evolution of norms and institutions. Here we analyse a global cross-national dataset to test between hypotheses involving a number of different ecological, historical, and proximate social factors and a range of direct and indirect pathways. We show that the historical timing of agriculture predicts the timing of the emergence of statehood, which in turn affects economic development indirectly through its effect on institutions. Ecological factors appear to affect economic performance indirectly through their historical effects on the development of agriculture and by shaping patterns of European settler colonization. More effective institutional performance is also predicted by lower-levels of in-group bias which itself appears related to the proportion of a nation's population that descends from European countries. These results support the idea that cultural evolutionary processes have been important in shaping the social norms and institutions that enable large-scale cooperation and economic growth in present-day societies. 

Institutional quality shapes cooperation with out-group strangers
Marco Fabbri
Evolution and Human Behavior, January 2022, Pages 53-70

Humans display a puzzling cross-population variation in the ability to cooperate with out-group members. One hypothesis is that impartial institutions substituting kith and kin as risk-buffering providers would favor the expansion of cooperative networks. Here I propose a research design that overcomes the endogeneity between institutions and preferences, making it possible to isolate the causal effects of institutional quality on out-group cooperation. I study a land tenure reform implemented as a randomized control-trial in hundreds of Beninese villages. The reform reduces the village community's discretion in regulating members' access to land by granting formal legal protection to individual rights-holders. Using a lab-in-the-field incentivized experiment (N = 576), I show that the reform significantly increases participants' cooperation with anonymous strangers from other villages. The results illustrate how humans' investments in in-group and out-group relationships are sensitive to cost-benefit evaluations, and emphasize that the institutional environment is a key driver of large-scale human cooperation. 

The Curse of Good Intentions: Why Anticorruption Messaging Can Encourage Bribery
Nic Cheeseman & Caryn Peiffer
American Political Science Review, forthcoming

Awareness-raising messages feature prominently in most anticorruption strategies. Yet, there has been limited systematic research into their efficacy. There is growing concern that anticorruption awareness-raising efforts may be backfiring; instead of encouraging citizens to resist corruption, they may be nudging them to "go with the corrupt grain." This study offers a first test of the effect of anticorruption messaging on ordinary people's behavior. A household-level field experiment, conducted with a representative sample in Lagos, Nigeria, is used to test whether exposure to five different messages about (anti)corruption influence the outcome of a "bribery game." We find that exposure to anticorruption messages largely fails to discourage the decision to bribe, and in some cases it makes individuals more willing to pay a bribe. Importantly, we also find that the effect of anticorruption messaging is conditioned by an individual's preexisting perceptions regarding the prevalence of corruption.

Patience and Comparative Development
Uwe Sunde et al.
Review of Economic Studies, forthcoming

This paper studies the relationship between patience and comparative development through a combination of reduced-form analyses and model estimations. Based on a globally representative dataset on time preference in 76 countries, we document two sets of stylized facts. First, patience is strongly correlated with per capita income and the accumulation of physical capital, human capital and productivity. These correlations hold across countries, subnational regions, and individuals. Second, the magnitude of the patience elasticity strongly increases in the level of aggregation. To provide an interpretive lens for these patterns, we analyze an OLG model in which savings and education decisions are endogenous to patience, aggregate production is characterized by capital-skill complementarities, and productivity implicitly depends on patience through a human capital externality. In our model estimations, general equilibrium effects alone account for a non-trivial share of the observed amplification effects, and an extension to human capital externalities can quantitatively match the empirical evidence. 

The causal effects of rule of law & property rights on fiscal capacity
Robin Grier, Andrew Young & Kevin Grier
European Journal of Political Economy, forthcoming

How have governments in rich countries developed the ability to levy taxes on their citizens and achieve high compliance? While it may seem simple, the process of developing fiscal capacity is often long and torturous. We explore the possibility that governments build this capacity in part by making a credible commitment to strong property rights under the rule of law. We identify large, sustained jumps in how countries score on both broad and narrow measures of legal system and property rights quality and investigate if these jumps produce increases in several measures of fiscal capacity. In a sample of 119 countries from 1970 to 2015, we find sustained improvements in property rights do not cause increases in any of our fiscal capacity measures. If the development of strong property rights is indeed necessary for developing fiscal capacity, it is evidently not sufficient. 

The Predicament of Establishing Persistence: Slavery and Human Capital in Africa
Adeel Malik & Vanessa Bouaroudj
Journal of Historical Political Economy, November 2021, Pages 411-446

We investigate the impact of historic slave trade on contemporary educational outcomes in Africa by replicating the empirical approach in Nunn (2008) and Nunn and Wantchekon (2011). We show that slavery's long-term legacy for literacy depends on how spatial effects are accounted for. In cross-country regressions, exposure to historic slave trade negatively predicts contemporary literacy. However, within countries, individuals whose ethnic ancestors were historically more exposed to slave exports, have higher education levels today compared to individuals from ethnicities less exposed to slave trade in the past. We argue that these somewhat puzzling findings resonate with emerging critiques of persistence studies that link historical variables with long-run development outcomes.

Of Families and Inheritance: Law and Development in Pre-Industrial England
Peter Grajzl & Peter Murrell
University of Maryland Working Paper, November 2021

We examine how pre-industrial English caselaw development on land, inheritance, and families affected, and was affected by, economic and demographic outcomes. Our yearly measures of caselaw development are derived from existing topic-model estimates that reflect a comprehensive corpus of reports on pre-1765 court cases. We estimate a structural VAR model using these caselaw time-series in combination with measures of real per-capita income and vital rates. Pre-industrial caselaw development profoundly shaped economic development. Strikingly, the areas of caselaw that stimulated real-income growth are on families and inheritance, not land. Caselaw on families and inheritance was especially important as a driver of real income and birth rates after 1710. Caselaw developments were spurred primarily by changes in real income, not by changes in vital rates. Incorporation of endogenous caselaw development leaves intact the findings of the existing literature that examines pre-industrial economic-demographic interactions. However, our findings do imply that any Malthusian trap that was present in pre-industrial England was made less severe as a result of developments in caselaw on families and inheritance. 

Restricted access: How the internet can be used to promote reading and learning
Laura Derksen, Catherine Michaud-Leclerc & Pedro Souza
Journal of Development Economics, forthcoming

Can schools use the internet to promote reading and learning? We provided Wikipedia access to randomly-selected students in Malawian boarding secondary schools. Students used the online resource broadly and intensively, and found it trustworthy, including for information about news and safe sex. We find a 0.10σ impact on English exam scores, and a higher impact among low achievers (0.20σ). Students used Wikipedia to study Biology, and exam scores increased for low achievers (0.14σ). Our results show that by restricting internet access to a source of engaging and accessible reading material, it is possible to encourage independent reading and affect educational outcomes. 

Community policing does not build citizen trust in police or reduce crime in the Global South
Graeme Blair et al.
Science, 26 November 2021

Is it possible to reduce crime without exacerbating adversarial relationships between police and citizens? Community policing is a celebrated reform with that aim, which is now adopted on six continents. However, the evidence base is limited, studying reform components in isolation in a limited set of countries, and remaining largely silent on citizen-police trust. We designed six field experiments with Global South police agencies to study locally designed models of community policing using coordinated measures of crime and the attitudes and behaviors of citizens and police. In a preregistered meta-analysis, we found that these interventions led to mixed implementation, largely failed to improve citizen-police relations, and did not reduce crime. Societies may need to implement structural changes first for incremental police reforms such as community policing to succeed. 

Silver coins, wooden tallies and parchment rolls in Henry III's Exchequer
Richard Cassidy
Financial History Review, forthcoming

In the mid thirteenth century, England used only a single coin, the silver penny. The flow of coins into and out of the government's treasury was recorded in the rolls of the Exchequer of Receipt. These receipt and issue rolls have been largely ignored, compared to the pipe rolls, which were records of audit. Some more obscure records, the memoranda of issue, help to show how the daily operations of government finance worked, when cash was the only medium available. They indicate something surprising: the receipt and issue rolls do not necessarily record transactions which took place during the periods they nominally cover. They also show that the Exchequer was experimenting with other forms of payment, using tally sticks, several decades earlier than was previously known. The rolls and the tallies indicate that the objectives of the Exchequer were not, as we would now expect, concerned with balancing income and expenditure, drawing up a budget, or even recording cash flows within a particular year. These concepts were as yet unknown. Instead, the Exchequer's aim was to ensure the accountability of officials, its own and those in other branches of government, by allocating financial responsibility to individuals rather than institutions.


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