Modernity
Luigi Pascali
Review of Economics and Statistics, forthcoming
Abstract:
Are differences in local banking development long lasting? Do they affect economic performance? I answer these questions by relying on an historical development that occurred in Italian cities during the Renaissance. A change in Catholic doctrine led to the development of modern banks in those cities hosting Jewish communities. Using Jewish demography in 1500 as an instrument, I provide evidence of (1) extraordinary persistence in the level of banking development across Italian cities (2) substantial effects of local banks on per-capita income. Additional firm-level analyses suggest that banks exert large effects on aggregate productivity by reallocating resources toward more efficient firms.
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James Fenske & Namrata Kala
Journal of Development Economics, January 2015, Pages 19–32
Abstract:
African societies exported more slaves in colder years. Lower temperatures reduced mortality and raised agricultural yields, lowering slave supply costs. Our results help explain African participation in the slave trade, which predicts adverse outcomes today. We use an annual panel of African temperatures and port-level slave exports to show that exports declined when local temperatures were warmer than normal. This result is strongest where African ecosystems are least resilient to climate change. Cold weather shocks at the peak of the slave trade predict lower economic activity today. We support our interpretation using the histories of Whydah, Benguela, and Mozambique.
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The role of lactase persistence in precolonial development
Justin Cook
Journal of Economic Growth, December 2014, Pages 369-406
Abstract:
This paper argues that a genetic adaptation to the Neolithic Revolution led to differential levels of development in the precolonial era. The ability to digest milk, or to be lactase persistent, is conferred by a gene variant that is unequally distributed across the Old World. Milk provided qualitative and quantitative advantages to the diet that led to differences in the carrying capacities of respective countries. It is shown through a number of specifications that country-level variation in the frequency of lactase persistence is positively and significantly related to population density in 1,500 CE; specifically, a one standard deviation increase in the frequency of lactase persistent individuals (roughly 24 percentage points) is associated with roughly a 40 % increase in precolonial population density. This relationship is robust to a large number of sample specifications and potentially omitted variables.
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Longevity and the Rise of the West: Lifespans of the European Elite, 800-1800
Neil Cummins
London School of Economics Working Paper, September 2014
Abstract:
I analyze the age at death of 121,524 European nobles from 800 to 1800. Longevity began increasing long before 1800 and the Industrial Revolution, with marked increases around 1400 and again around 1650. Declines in violence contributed to some of this increase, but the majority must reflect other changes in individual behavior. The areas of North-West Europe which later witnessed the Industrial Revolution achieved greater longevity than the rest of Europe even by 1000 AD. The data suggest that the 'Rise of the West' originates before the Black Death.
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Why did the Netherlands develop so early? The legacy of the Brethren of the Common Life
Semih Akçomak, Dinand Webbink & Bas ter Weel
Economic Journal, forthcoming
Abstract:
This research establishes a link between the Brethren of the Common Life (BCL), a religious community founded by Geert Groote in Deventer in the late fourteenth century, and the early economic development of the Netherlands. The BCL stimulated human capital accumulation. The historical analyses show that the BCL contributed to the high rates of literacy, to the high level of book production and to city growth in the Netherlands. These findings are supported by a set of OLS regressions and further corroborated by 2SLS estimates that use distance from Deventer as an instrument for the presence of the BCL.
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Indigenous Origins of Colonial Institutions
Luz Marina Arias & Desha Girod
Quarterly Journal of Political Science, Summer 2014, Pages 371-406
Abstract:
What are the origins of colonial forced labor? While extensive research investigates the effects of colonial forced labor on contemporary political and economic development, little is known about the origins of colonial forced labor. Based on historical accounts, we offer a simple formal model that emphasizes constraints facing profit-maximizing colonists. The model provides a novel explanation for colonial forced labor by demonstrating that local and foreign forced labor depended on different factors. Colonists used local, indigenous forced labor when they encountered an indigenous political administration that was already coercing labor. However, colonists used foreign forced labor, like African slavery in the Americas, when indigenous labor was not already organized and natural resources were present. Original data from 439 subnational territories covering the Americas support the hypotheses across a variety of model specifications. This study implies that differences in political and economic development today may predate European colonialism.
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Asia’s little divergence: State capacity in China and Japan before 1850
Tuan-Hwee Sng & Chiaki Moriguchi
Journal of Economic Growth, December 2014, Pages 439-470
Abstract:
This paper explores the role of state capacity in the comparative economic development of China and Japan. Before 1850, both nations were ruled by stable dictators who relied on bureaucrats to govern their domains. We hypothesize that agency problems increase with the geographical size of a domain. In a large domain, the ruler’s inability to closely monitor bureaucrats creates opportunities for the bureaucrats to exploit taxpayers. To prevent overexploitation, the ruler has to keep taxes low and government small. Our dynamic model shows that while economic expansion improves the ruler’s finances in a small domain, it could lead to lower tax revenues in a large domain as it exacerbates bureaucratic expropriation. To check these implications, we assemble comparable quantitative data from primary and secondary sources. We find that the state taxed less and provided fewer local public goods per capita in China than in Japan. Furthermore, while the Tokugawa shogunate’s tax revenue grew in tandem with demographic trends, Qing China underwent fiscal contraction after 1750 despite demographic expansion. We conjecture that a greater state capacity might have prepared Japan better for the transition from stagnation to growth.
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Asiaphoria Meets Regression to the Mean
Lant Pritchett & Lawrence Summers
NBER Working Paper, October 2014
Abstract:
Consensus forecasts for the global economy over the medium and long term predict the world’s economic gravity will substantially shift towards Asia and especially towards the Asian Giants, China and India. While such forecasts may pan out, there are substantial reasons that China and India may grow much less rapidly than is currently anticipated. Most importantly, history teaches that abnormally rapid growth is rarely persistent, even though economic forecasts invariably extrapolate recent growth. Indeed, regression to the mean is the empirically most salient feature of economic growth. It is far more robust in the data than, say, the much-discussed middle-income trap. Furthermore, statistical analysis of growth reveals that in developing countries, episodes of rapid growth are frequently punctuated by discontinuous drop-offs in growth. Such discontinuities account for a large fraction of the variation in growth rates. We suggest that salient characteristics of China — high levels of state control and corruption along with high measures of authoritarian rule — make a discontinuous decline in growth even more likely than general experience would suggest. China’s growth record in the past 35 years has been remarkable, and nothing in our analysis suggests that a sharp slowdown is inevitable. Still, our analysis suggests that forecasters and planners looking at China would do well to contemplate a much wider range of outcomes than are typically considered.
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The Politics of Capital Flight in the Global Economic Crisis
Thomas Pepinsky
Economics & Politics, November 2014, Pages 431–456
Abstract:
This paper studies the effects of economic governance and political institutions on portfolio investment during the Global Economic Crisis of 2008–2009. Leveraging a unique cross-national dataset on portfolio flows immediately following the collapse of Lehman Brothers in September 2008, it shows that countries with “better institutions” – those with more (or less) democratic, more (or less) constrained or more accountable political systems – were no less vulnerable to portfolio outflows than countries with “worse institutions.” However, countries with better governance prior to the crisis – those with better regulatory apparatuses, rule of law, property rights, and those considered less politically risky – experienced lower net portfolio capital outflows after Lehman. Governance is in fact the strongest predictor of portfolio capital flows during the global flight to liquidity, while political institutions perform poorly. The findings shed light onto the political factors that mediated how the collapse of Lehman affected national financial markets the world over, and have implications for literatures on the political economy of foreign investment, as well as for broader topics of institutions, governance, and economic performance.
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Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee
Clément Imbert & John Papp
American Economic Journal: Applied Economics, forthcoming
Abstract:
We estimate the effect of a large rural workfare program in India on private employment and wages by comparing trends in districts that received the program earlier relative to those that received it later. Our results suggest that public sector hiring crowded out private sector work and increased private sector wages. We compute the implied welfare gains of the program by consumption quintile. Our calculations show that the welfare gains to the poor from the equilibrium increase in private sector wages are large in absolute terms and large relative to the gains received solely by program participants.
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Urban working-class food consumption and nutrition in Britain in 1904
Ian Gazeley & Andrew Newell
Economic History Review, forthcoming
Abstract:
This article re-examines the food consumption of working-class households in 1904 and compares the nutritional content of these diets with modern measures of adequacy. We find a fairly steep gradient of nutritional attainment relative to economic class, with high levels of vitamin and mineral deficiency among the very poorest working households. However, we conclude that the average unskilled-headed working household was better fed and nourished than previously thought. When proper allowance is made for the likely consumption of alcohol, household energy intakes were significantly higher still. We investigate the likely impact of contemporary cultural food distribution norms and conclude on the basis of the very limited evidence available that women may have received, on average, about 80 per cent of a man's share of the available food. We adjust energy requirements for likely higher physical activity rates and smaller stature and find that except among the poorest households, early twentieth-century diets were sufficient to provide energy for reasonably physically demanding work. These results are consistent with recent attempts to relate the available anthropometric evidence to long-run trends in food consumption. We also find that the lower tail of the household nutrition distribution drops away very rapidly, so that few households are estimated to have suffered severe food shortages.
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Gross Domestic Product, Science Interest, and Science Achievement: A Person × Nation Interaction
Elliot Tucker-Drob, Amanda Cheung & Daniel Briley
Psychological Science, November 2014, Pages 2047-2057
Abstract:
Maximizing science achievement is a critical target of educational policy and has important implications for national and international economic and technological competitiveness. Previous research has identified both science interest and socioeconomic status (SES) as robust predictors of science achievement, but little research has examined their joint effects. In a data set drawn from approximately 400,000 high school students from 57 countries, we documented large Science Interest × SES and Science Interest × Per Capita Gross Domestic Product (GDP) interactions in the prediction of science achievement. Student interest in science is a substantially stronger predictor of science achievement in higher socioeconomic contexts and in higher-GDP nations. Our results are consistent with the hypothesis that in higher-opportunity contexts, motivational factors play larger roles in learning and achievement. They add to the growing body of evidence indicating that substantial cross-national differences in psychological effect sizes are not simply a logical possibility but, in many cases, an empirical reality.
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A Disruption Mechanism for Bribes
Robert Cooter & Nuno Garoupa
Review of Law & Economics, September 2014, Pages 241–263
Abstract:
Crimes such as bribery require the cooperation of two or more criminals for mutual gain. Instead of deterring these crimes, the state should disrupt them by creating distrust among criminals so they cannot cooperate. In a cooperative crime with two criminals, the state should offer amnesty and a bounty to the criminal who first secures punishment of the other criminal. When the bounty exceeds the bribe, a bribed official gains less from keeping the bribe than from confessing and receiving the bounty. Consequently the person who pays the bribe cannot trust the person who takes it. The game’s unique equilibrium is non-cooperative and bribes disappear. We explore legal implications and practical challenges to this disruption mechanism.
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Seven Million Lives Saved: Under-5 Mortality Since the Launch of the Millennium Development Goals
John McArthur
Brookings Institution Working Paper, September 2014
Abstract:
To what extent have developing countries’ patterns in reducing under-5 mortality rates (U5MR) changed since the advent of the Millennium Development Goals (MDGs)? This paper investigates that question across multiple time horizons, with attention to the fact that countries’ progress had already begun to accelerate during the late 1990s compared to the early 1990s. The paper gives special consideration to countries the MDGs were primarily intended to support, including initially “Off Track” and low-income countries. Although only 21 percent of originally Off Track countries and 34 percent of originally low-income countries are now on a path to achieve the MDG target by 2015, at least 80 percent of each group has seen accelerated progress since 2001. Approximately 90 percent of countries in sub-Saharan Africa have accelerated. Most importantly, regression analysis indicates that cross-country trends since 2000 differ considerably from previous decades. The years since the launch of the MDGs include the first extended period in at least four decades during which rates of U5MR decline have not been negatively correlated with U5MR levels. Compared to a conservative counterfactual trend from 1996 to 2001, at least 7.5 million additional children’s lives are estimated to have been saved between 2002 and 2013. The results suggest that much of the greatest structural progress has been achieved by countries not likely to achieve the formal MDG targets, even if their progress might be linked to the pursuit of those targets. Implications are considered for setting U5MR targets through to 2030.
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Piet van Cruyningen
Economic History Review, forthcoming
Abstract:
In the early modern period the viability of large-scale drainage projects implemented by courtiers, officials, or merchants could be endangered by litigation or violent conflicts with landlords, commoners, cities, or water boards whose interests were harmed by the implementation of such projects. A comparison between the Dutch Republic, England, and France shows that the Dutch had developed institutions to deal with this efficiently. State patents for drainage granted compensation to all parties involved and precluded long drawn-out lawsuits. When large-scale drainage began in England and France from c. 1600 onwards, these states had no experience with drainage regulation. They had to find their way by trial and error. In England this led to lawsuits and riots by commoners that ruined several drainage schemes. The decentralized nature of the Dutch state turned out to be an advantage. Dutch politicians and entrepreneurs were used to compromises, and solutions could be adapted to local circumstances. In more centralized England and France this was more difficult to achieve. The Dutch also profited from the fact that territorial lords had already abolished common rights of usage in the coastal provinces in the late middle ages, thus removing an important source of conflict.