Findings

It's a developing story

Kevin Lewis

May 23, 2016

The Long-Term Effects of the Printing Press in Sub-Saharan Africa

Julia Cagé & Valeria Rueda

American Economic Journal: Applied Economics, forthcoming

Abstract:
This article investigates the long-term consequences of the printing press in the 19th century sub-Saharan Africa on social capital nowadays. Protestant missionaries were the first to import the printing press and to allow the indigenous population to use it. We build a new geocoded dataset locating Protestant missions in 1903. This dataset includes, for each mission station, the geographic location and its characteristics, as well as the printing-, educational-, and health-related investments undertaken by the mission. We show that, within regions close to missions, proximity to a printing press is associated with higher newspaper readership, trust, education, and political participation.

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Law and Finance Matter: Lessons from Externally Imposed Courts

James Brown, Anthony Cookson & Rawley Heimer

Review of Financial Studies, forthcoming

Abstract:
This paper provides novel evidence on the real and financial market effects of legal institutions. Our analysis exploits persistent and externally imposed differences in court enforcement that arose when the U.S. Congress assigned state courts to adjudicate contracts on a subset of Native American reservations. Using area-specific data on small business lending, we find that reservations assigned to state courts, which enforce contracts more predictably than tribal courts, have stronger credit markets. Moreover, the law-driven component of credit market development is associated with significantly higher per capita income, with stronger effects in sectors that depend more on external financing.

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Time for Growth

Lars Boerner & Battista Severgnini

London School of Economics Working Paper, February 2016

Abstract:
This paper studies the impact of the early adoption of one of the most important high-technology machines in history, the public mechanical clock, on long-run growth in Europe. We avoid endogeneity by considering the relationship between the adoption of clocks with two sets of instruments: distance from the first adopters and the appearance of repeated solar eclipses. The latter instrument is motivated by the predecessor technologies of mechanical clocks, astronomic instruments that measured the course of heavenly bodies. We find significant growth rates between 1500 and 1700 in the range of 30 percentage points in early adopter cities and areas.

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Abstinence Funding Was Not Associated With Reductions In HIV Risk Behavior In Sub-Saharan Africa

Nathan Lo, Anita Lowe & Eran Bendavid

Health Affairs, May 2016, Pages 856-863

Abstract:
The President's Emergency Plan for AIDS Relief (PEPFAR) has been the largest funder of abstinence and faithfulness programming in sub-Saharan Africa, with a cumulative investment of over US $1.4 billion in the period 2004-13. We examined whether PEPFAR funding for abstinence and faithfulness programs, which aimed to reduce the risk of HIV transmission, was associated with a relative change in five outcomes indicative of high-risk sexual behavior: number of sexual partners in the past twelve months for men and for women, age at first sexual intercourse for men and for women, and teenage pregnancies. Using nationally representative surveys from twenty-two sub-Saharan African countries, we compared trends between people living in countries that received PEPFAR abstinence and faithfulness funding and those living in countries that did not in the period 1998-2013. We found no evidence to suggest that PEPFAR funding was associated with population-level reductions in any of the five outcomes. These results suggest that alternative funding priorities for HIV prevention may yield greater health benefits.

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Population Size Effects in the Structural Development of England

Oksana Leukhina & Stephen Turnovsky

American Economic Journal: Macroeconomics, forthcoming

Abstract:
The English structural transformation from farming to manufacturing was accompanied by rapid technological change, expansion of trade, and massive population growth. While the roles of technology and trade in this process have been investigated, the literature has largely ignored the role of population growth. We examine population size effects on various aspects of structural development, characterizing their explicit dependence on preference-side and production-side characteristics of the economy, and trade. Our quantitative analysis of the English transformation assigns a major role to population growth, with especially notable contributions to post-1750 rise in the manufacturing employment share and the relative price dynamics.

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Jewish Communities and City Growth in Preindustrial Europe

Noel Johnson & Mark Koyama

George Mason University Working Paper, May 2016

Abstract:
We study whether cities with Jewish communities grew faster than cities without Jewish communities in Europe between 1400 and 1850. We match data on city populations from Bairoch (1988) with data on the presence of a Jewish community from the Encyclopedia Judaica. Our difference-in-differences results indicate that cities with Jewish communities grew about 30% faster than comparable cities without Jewish communities between 1400 and 1850. To establish causality, we create time varying instrumental variables which rely only on the spatially extended network of Jewish communities in order to predict Jewish presence in a given city. We also provide evidence that the advantage of cities with Jewish communities stemmed in part from Jewish Emancipation and their ability to exploit increases in market access after 1600.

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Gender Discrimination in Property Rights: Six Centuries of Commons Governance in the Alps

Marco Casari & Maurizio Lisciandra

Journal of Economic History, June 2016, Pages 559-594

Abstract:
Starting from the Medieval period, women in the Italian Alps experienced a progressive erosion in property rights over the commons. We collected documents about the evolution of inheritance regulations on collective land issued by hundreds of villages over a period of six centuries (thirteenth-nineteenth). Based on this original dataset, we provide a long-term perspective of decentralized institutional change in which gender-biased inheritance systems emerged as a defensive measure to preserve the wealth of village insiders. This institutional change also had implications for the population growth, marriage strategies, and the protection from economic shocks.

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Are the world's poorest being left behind?

Martin Ravallion

Journal of Economic Growth, June 2016, Pages 139-164

Abstract:
Traditional assessments of economic growth and progress against poverty tell us little about whether the poorest are being left behind - whether the consumption floor is rising above the biological minimum. To address this deficiency, the paper identifies the expected value of the floor as a weighted mean of observed consumptions for the poorest stratum. Under the identifying assumptions and using data for the developing world over 1981-2011, the estimated floor is about half the $1.25 a day poverty line. Economic growth and social policies have delivered only modest progress in raising the floor, despite overall growth and progress in reducing the number living near the floor.

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Aid, Catastrophes and the Samaritan's Dilemma

Paul Raschky & Manijeh Schwindt

Economica, forthcoming

Abstract:
This paper analyses the impact of past foreign aid on the recipient country's preparedness against natural disasters. We estimate the impact of past foreign aid on the occurrence of natural disasters and the death toll from disasters using data from 5089 major natural disasters in 81 developing countries between 1979 and 2012. The results suggest that past foreign aid flows crowd out the recipient's incentives to provide protective measures that decrease the likelihood and the societal impact of a disaster. The crowding-out effect appears to be stronger in developing countries that are relatively poorer and have weaker political institutions.

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The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade

Vernon Henderson et al.

NBER Working Paper, April 2016

Abstract:
We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average area 560 square kilometers. We first document that nearly half of the variation can be explained by a parsimonious set of physical geography attributes. A full set of country indicators only explains a further 10%. When we divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, we find that the agriculture variables have relatively more explanatory power in countries that developed early and the trade variables have relatively more in countries that developed late, despite the fact that the latter group of countries are far more dependent on agriculture today. We explain this apparent puzzle in a model in which two technological shocks occur, one increasing agricultural productivity and the other decreasing transportation costs, and in which agglomeration economies lead to persistence in urban locations. In countries that developed early, structural transformation due to rising agricultural productivity began at a time when transport costs were still relatively high, so urban agglomerations were localized in agricultural regions. When transport costs fell, these local agglomerations persisted. In late developing countries, transport costs fell well before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. With structural transformation, these initial coastal locations grew, without formation of more cities in the agricultural interior.

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State Capacity and Public Goods: Institutional Change, Human Capital, and Growth in Early Modern Germany

Jeremiah Dittmar & Ralf Meisenzahl

Federal Reserve Working Paper, March 2016

Abstract:
What are the origins and consequences of the state as a provider of public goods? We study legal reforms that established mass public education and increased state capacity in German cities during the 1500s. These fundamental changes in public goods provision occurred where ideological competition during the Protestant Reformation interacted with popular politics at the local level. We document that cities that formalized public goods provision in the 1500s began differentially producing and attracting upper tail human capital and grew to be significantly larger in the long-run. We study plague outbreaks in a narrow time period as exogenous shocks to local politics and find support for a causal interpretation of the relationship between public goods institutions, human capital, and growth. More broadly, we provide evidence on the origins of state capacity directly targeting welfare improvement.

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Demographic Dividend and Asia's Economic Convergence towards the US

Joonkyung Ha & Sang-Hyop Lee

Journal of the Economics of Ageing, forthcoming

Abstract:
This paper shows the possibility of a middle-income trap for Asia due to demographics. Using panel analyses for 93 countries from all continents for 1970-2011, we show that, first, the speed of convergence to the US in terms of GDP per capita is closely related to the share of working age population - the support ratio - as it drives national saving and various investments. In the case of Asia, the speed of convergence is more elastic to support ratios than other continents, suggesting that the first and the second demographic dividend have been extracted to a deeper degree. Second, fertility - the main driving force of support ratio dynamics - is determined by child rearing costs that are, in turn, a function of the level of GDP per capita relative to the US. Again, Asia's fertility is extremely sensitive to the level of development, implying that economic convergence leads to too high child rearing costs and too low fertility. These findings lead to the possibility of Asia's demography-driven middle-income trap: low fertility eventually turns the positive demographic dividends of the past into negative ones and forces the speed of convergence to slow down, so that the relative per capita GDP stagnates before it fully converges to the US. However, in the meantime, East Asia's declining support ratios and South and South East Asia's increasing support ratios imply that within-Asia convergence may occur for some time. In the long run, economic convergence cannot be sustained without demographic convergence.

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The Effect of Aid on Growth: Evidence from a Quasi-Experiment

Sebastian Galiani et al.

NBER Working Paper, April 2016

Abstract:
The literature on aid and growth has not found a convincing instrumental variable to identify the causal effects of aid. This paper exploits an instrumental variable based on the fact that since 1987, eligibility for aid from the International Development Association (IDA) has been based partly on whether or not a country is below a certain threshold of per capita income. The paper finds evidence that other donors tend to reinforce rather than compensate for reductions in IDA aid following threshold crossings. Overall, aid as a share of gross national income (GNI) drops about 59 percent on average after countries cross the threshold. Focusing on the 35 countries that have crossed the income threshold from below between 1987 and 2010, a positive, statistically significant, and economically sizable effect of aid on growth is found. A one percentage point increase in the aid to GNI ratio from the sample mean raises annual real per capita growth in gross domestic product by approximately 0.35 percentage points.

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Is Living in African Cities Expensive?

Shohei Nakamura et al.

World Bank Working Paper, April 2016

Abstract:
Although several studies have examined why overall price levels are higher in richer countries, little is known about whether there is a similar relationship at the urban and city level across countries. This paper compares the price levels of cities in Sub-Saharan Africa with those of other regions by analyzing price information collected for the 2011 round of the International Comparison Program. Readjusting the calculated price levels from national to urban levels, the analysis indicates that African cities are relatively more expensive, despite having lower income levels. The price levels of goods and services consumed by households are up to 31 percent higher in Sub-Saharan Africa than in other low- and middle-income countries, relative to their income levels. Food and non-alcoholic beverages are especially expensive, with price levels around 35 percent higher than in other countries. The paper also analyzes price information collected by the Economist Intelligence Unit's Worldwide Cost of Living Survey, and obtains a similar result, indicating higher prices of goods and services in African cities.

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Transforming lives: The impact of compulsory schooling on hope and happiness

Bahadır Dursun & Resul Cesur

Journal of Population Economics, July 2016, Pages 911-956

Abstract:
This is the first article examining the causal impact of mandatory extended primary schooling on happiness (sense of well-being) of young adults. We rely on a law change that raised compulsory schooling from 5 to 8 years in Turkey to address the endogeneity of education to happiness. Our study shows that, for females, earning at least a middle school diploma increases the likelihood of being happy and the probability of being satisfied with various life domains. Descriptive tests suggest that being hopeful about one's own future well-being partly explains the relationship between women's schooling and happiness. For males, although relatively imprecisely estimated, we find evidence that earning at least a middle school degree results in a decline in subjective well-being. Supplemental analysis develops evidence consistent with the view that an imbalance between aspirations and attainments, flowing from extended primary schooling, may be the reason behind this counterintuitive finding among men.

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IQ and Socioeconomic Development across Regions of the UK

Noah Carl

Journal of Biosocial Science, May 2016, Pages 406-417

Abstract:
Cross-regional correlations between average IQ and socioeconomic development have been documented in many different countries. This paper presents new IQ estimates for the twelve regions of the UK. These are weakly correlated (r=0.24) with the regional IQs assembled by Lynn (1979). Assuming the two sets of estimates are accurate and comparable, this finding suggests that the relative IQs of different UK regions have changed since the 1950s, most likely due to differentials in the magnitude of the Flynn effect, the selectivity of external migration, the selectivity of internal migration or the strength of the relationship between IQ and fertility. The paper provides evidence for the validity of the regional IQs by showing that IQ estimates for UK nations (England, Scotland, Wales and Northern Ireland) derived from the same data are strongly correlated with national PISA scores (r=0.99). It finds that regional IQ is positively related to income, longevity and technological accomplishment; and is negatively related to poverty, deprivation and unemployment. A general factor of socioeconomic development is correlated with regional IQ at r=0.72.

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The Political Cure: Gender Quotas and Women's Health

Aubrey Westfall & Carissa Chantiles

Politics & Gender, forthcoming

Abstract:
Political gender quotas have become the institutional solution for most governments hoping to increase women's descriptive and substantive representation in national and local government, despite the lack of consensus over whether quotas have a consistent positive effect on the lives of women. We argue that the different forms in which quotas are implemented result in diverse effects in the substantive representation of women's issues. Using women's health to illustrate the substantive effect of women's political participation through quotas, we utilize multilevel models to find that quotas are effective at placing women into legislative office and that this descriptive representation is associated with positive conditions for women's health. However, the strength of the relationship depends on the type of quota implemented. Countries implementing candidate quotas exhibit more consistent but weaker relationships between representation and women's health outcomes than in countries with reserved seat quotas. These results affirm the quota's objective to place women in political office but suggest that the policy effectiveness of the individual female legislators may depend on the quota system in place.

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How did trade norms evolve in Scandinavia? Long-distance trade and social trust in the Viking age

Gunnar Lind Haase Svendsen & Gert Tinggaard Svendsen

Economic Systems, forthcoming

Abstract:
As the saying goes, "it takes years to build up trust and only seconds to destroy it." In this paper, we argue that this is indeed the case when explaining trust formation in Scandinavia. Hence, in an attempt to explain why the Scandinavian welfare states hold the highest social trust scores in the world today, we argue that one possible historical root of social trust may be the long-distance trade practices of the Viking age. To manage the risk of being cheated, trade between strangers in an oral world required a strong informal institution of trust-based trade norms out of necessity to deal with the risk of being cheated. In contrast to similar cases like the famous medieval Maghribi traders, who counted on writing (Greif, 1989), the punishment of cheaters could not be supported by written documents such as legal documents and letters, as the large majority of Vikings were non-literate. If a trader did not keep his word, social sanctioning by word of mouth was most likely the only method to discipline the cheater and prevent future free-rider behavior. The early rise of trust-based trade norms in Scandinavia is an overlooked factor in the region's long-term socio-economic development and social trust accumulation. This result points to the importance of free trade today, especially in poor countries with low levels of economic development and high rates of non-literacy.

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Corporate Resilience to Banking Crises: The Roles of Trust and Trade Credit

Ross Levine, Chen Lin & Wensi Xie

NBER Working Paper, April 2016

Abstract:
Are firms more resilient to systemic banking crises in economies with higher levels of social trust? Using firm-level data in 34 countries from 1990 through 2011, we find that liquidity-dependent firms in high-trust countries obtain more trade credit and suffer smaller drops in profits and employment during banking crises than similar firms in low-trust economies. The results are consistent with the view that when banking crises block the normal banking-lending channel, greater social trust facilitates access to informal finance, cushioning the effects of these crises on corporate profits and employment.


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