Making them great

Kevin Lewis

June 10, 2019

Women's Liberation as a Financial Innovation
Moshe Hazan, David Weiss & Hosny Zoabi
Journal of Finance, forthcoming


In one of the greatest extensions of property rights in human history, common law countries began giving rights to married women in the 1850s. Before this "women's liberation," the doctrine of coverture strongly incentivized parents of daughters to hold real estate, rather than financial assets such as money, stocks, or bonds. We exploit the staggered nature of coverture's demise across US states to show that women's rights led to shifts in household portfolios; a positive shock to the supply of credit; and a reallocation of labor towards non-agriculture and capital intensive industries. Investor protection deepened financial markets aiding industrialization.

London Calling? Agglomeration Economies in Literature since 1700
Sara Mitchell
Journal of Urban Economics, July 2019, Pages 16-32


This paper utilises a unique, purpose-built panel dataset on prominent authors in the UK and Ireland born 1700–1925 to estimate the productivity gains associated with agglomeration of an industry with few capital requirements and no apparent need to cluster geographically. I find the average author experiences productivity gains of 11.94% per annum when residing in London, the only major literary cluster – a gain not associated with living in any of the minor literary clusters. I find evidence of negative selection with respect to productivity, indicating the results are not driven by the self-selection of highly productive authors to London. I find heterogeneity of returns to living in London by birth cohort and Impact Index quartile (a measure of author quality) and that the cohorts who receive the greatest gains from locating in London are those for which there is the strongest evidence of negative selection with respect to productivity.

Malthus Was Right: Explaining a Millennium of Stagnation
Jakob Madsen, Peter Robertson & Longfeng Ye
European Economic Review, September 2019, Pages 51-68


We develop a simple Malthusian growth model with continuous productivity growth and derive the stationary steady-state equilibrium. We show that linearization around the steady-state gives an empirically tractable model of Malthusian wage and population behaviour using the familiar concept of β – convergence. Our empirical strategy addresses the concern in the literature over model identification and inconsistent parameter estimates. Based on newly constructed population data, we estimate wage and population growth models using panel data for up to 17 countries from 900CE to 1870CE. Our results provide the first time-series evidence of a strong Malthusian trap that was pervasive across countries and time before the 19th century industrial revolution.

Endogenous Institutions and Economic Outcomes
Carmine Guerriero
Economica, forthcoming


To evaluate the relative importance of a culture of cooperation and inclusive political institutions, I divide Europe into 120 km×120 km grid cells, and exploit the exogenous variation in both institutions created by medieval history. I document strong first‐stage relationships between present‐day norms of respect and trust and the severity of consumption risk — i.e. climate volatility — over the period 1000–1600 and between the inclusiveness of present‐day regional political institutions and the factors that raised the returns on elite‐citizenry investments — i.e. terrain ruggedness and direct access to the coast. Building on these first stages, I show that only culture has a first‐order effect on income, even after controlling for country fixed effects, proxies for the alternative roles of the excluded instruments, factors modulating the roles of institutions, and intermediate outcomes. Two possible explanations for these results are that more inclusive regional political institutions might have impeded, in the early modern era, state‐building and market integration, and that in modern representative democracies, they are irrelevant in easing the monitoring of politicians by voters when the latter are not morally compelled to punish political malfeasance or the former have weak civic virtues. Macro and micro evidence supports these ideas.

Special Deals with Chinese Characteristics
Chong-En Bai, Chang-Tai Hsieh & Zheng Michael Song
NBER Working Paper, May 2019


Chinese local governments wield their enormous political power and administrative capacity to provide “special deals” for favored private firms. We argue that China’s extraordinary economic growth comes from these special deals. Local political leaders do so because they derive personal benefits, either political or monetary, from providing special deals. Competition between local governments limits the predatory effects of special deals.

The Agricultural Roots of Chinese Innovation Performance
Jiong Zhu, James Ang & Per Fredriksson
European Economic Review, September 2019, Pages 126-147


A debate is brewing in the literature on whether legacies of rice and wheat cultivation in China matters for cultural attributes, in particular individualism vs. collectivism. In turn, this important cultural dimension has recently been shown to affect the pattern of innovation across countries. However, the previous literature has not firmly connected agricultural legacies and innovation rates, and has consistently used low resolution data. We study the role of agricultural legacy for innovation performance using unique patent data from close to two thousand Chinese counties. We provide robust evidence that counties with a legacy of rice cultivation generate fewer patent applications than other counties, and a legacy of wheat production tends to be associated with more patent applications. The results for rice are robust to, e.g., controlling for temperature, precipitation, irrigation, disease burden, religiosity, and corruption, as well as accounting for migration patterns. Our results firmly establish the importance of agricultural legacy for shaping the culture of innovation.

The Puzzle of Open Defecation in Rural India: Evidence from a Novel Measure of Caste Attitudes in a Nationally Representative Survey
Dean Spears & Amit Thorat
Economic Development and Cultural Change, forthcoming


Uniquely widespread and persistent open defecation in rural India has emerged as an important policy challenge and puzzle about behavioral choice in economic development. One candidate explanation is the culture of purity and pollution that reinforces and has its origins in the caste system. Although such a cultural account is inherently difficult to quantitatively test, we provide support for this explanation by comparing open defecation rates across places in India where untouchability is more and less intensely practiced. In particular, we exploit a novel question in the 2012 India Human Development Survey that asked households whether they practice untouchability, meaning whether they enforce norms of purity and pollution in their interactions with lower castes. We find an association between local practice of untouchability and open defecation that is robust; is not explained by economic, educational, or other observable differences; and is specific to open defecation rather than other health behavior or human capital investments more generally. We verify that practicing untouchability is not associated with general disadvantage in health knowledge or access to medical professionals. We interpret this as evidence that the culture of purity, pollution, untouchability, and caste contributes to the exceptional prevalence of open defecation in rural India.

Stunted firms: The long-term impacts of colonial taxation
Gabriel Natividad
Journal of Financial Economics, forthcoming


I study how the colonial mita forced labor system (1573–1812) impacted Peruvian firms’ formalization, investment, and performance measured by the 2008 business census. Regression discontinuity models with granular geospatial controls reveal lower sales and fixed assets, less likely use of a commercial name, and less likely tax ID registration for firms within mita boundaries. Firms with banking relationships in mita regions struggle more financially. Evidence on centuries-long disadvantageous taxation in mita regions suggests a persistent channel of distrust. Individuals in mita regions surveyed today show lower levels of trust in the tax authority and more informality at their workplace.

Displacement and Development: Long Term Impacts of Population Transfer in India
Prashant Bharadwaj & Rinchan Ali Mirza
Explorations in Economic History, forthcoming


The partition of British India in 1947 resulted in one of the largest and most rapid migrations and population transfers of the 20th century. Using refugee presence by 1951 as a measure for the intensity of the impact of the population transfer, and district level data on agricultural output between 1911-2009 from India, we find using difference in differences and event study approaches that areas that received more refugees have higher average yields, are more likely to take up high yielding varieties of seeds, and are more likely to use agricultural technologies. The increase in yields and use of agricultural technology coincide with the timing of the Green Revolution in India. Using pre-partition data, we show that refugee placement is uncorrelated with soil and water table characteristics, agricultural infrastructure, and agricultural yields prior to 1947; hence, the effects are not explained by selective movement into districts with a higher potential for agricultural development. We highlight refugee literacy and land reforms in areas with refugees as two of the many potential mechanisms that could be driving these effects.

Perverse Incentives? Labor Market Regulation and Performance in the Public Sector
Alberto Chong & Angelo Cozzubo
Southern Economic Journal, forthcoming


We test the link between labor market regulations and job performance in the public sector using a novel outcome variable, namely, the number of days it takes the postal service to return letters sent to nonexistent foreign addresses, a measure that we argue is an excellent proxy for job performance. We find a positive and statistically significant link between these two variables, regardless of the labor regulation measure employed, changes in specification, and even unlikely endogeneity considerations, which suggest that this finding may be causal.

Can Kings Create Towns that Thrive? The long-term implications of new town foundations
Alexandra Cermeño & Kerstin Enflo
Journal of Urban Economics, forthcoming


We examine the long-term effects of a series of Swedish towns founded by the Crown during the early modern period. Their advantage over rural parishes consisted in having monopoly rights to trade with the local hinterland. Since the optimum sites were occupied by medieval towns, the Crown could only aim for second-rate locations. Using difference-in-difference combined with Propensity Score Matching, we find that a reduction in the distance to town increased gross production and population up to 30-40 km away. However, there is no evidence of increasing per capita production or yields. These natural constraints could only support a sluggish growth in the towns themselves. However, after the Industrial Revolution, the towns began to thrive. We argue that town status signalled the commitment of the Crown to nurture these locations creating positive expectations despite their natural constraints. During industrialization, agglomeration economies led them to become significantly large urban areas persistent until today.

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