Findings

Recent developments

Kevin Lewis

July 22, 2019

The Garbage Problem: Corruption, Innovation, and Capacity in Four American Cities, 1890–1940
Patricia Strach, Kathleen Sullivan & Elizabeth Pérez-Chiqués
Studies in American Political Development, forthcoming

Abstract:
While American political development scholars tend to focus on national or state-level politics, late nineteenth-century cities provided the lion's share of services: clean water, paved and lighted streets, and sanitation. How did cities innovate and build municipal capacity to do these things? We answer this question by looking at municipal responses to the garbage problem. As cities grew and trash piled up in the 1890s, cities explored ways to effectively collect the garbage. A government requires not just resources, but also the ability to marshal those resources. Corruption could provide such abilities. Looking at four corrupt cities — Pittsburgh, Charleston, New Orleans, and St. Louis — we consider whether corruption, and what type of corruption, fostered innovation and capacity. We compare these corrupt cities with a shadow study of the reformist government of Columbus. We found the following: (1) The logic of corruption is the most important factor to explain why municipal governments chose particular garbage strategies. Corrupt regimes chose garbage collection and disposal strategies that would benefit themselves — but these varied depending on what type of corruption dominated a city. (2) Corruption sometimes promoted innovation and capacity, but at other times, corruption hindered them. For better or worse, cities ruled by corruption gained the capacity that these informal regimes held.


Fertility and Modernity
Enrico Spolaore & Romain Wacziarg
NBER Working Paper, June 2019

Abstract:
We investigate the determinants of the fertility decline in Europe from 1830 to 1970 using a newly constructed dataset of linguistic distances between European regions. We find that the fertility decline resulted from a gradual diffusion of new fertility behavior from French-speaking regions to the rest of Europe. We observe that societies with higher education, lower infant mortality, higher urbanization, and higher population density had lower levels of fertility during the 19th and early 20th century. However, the fertility decline took place earlier and was initially larger in communities that were culturally closer to the French, while the fertility transition spread only later to societies that were more distant from the cultural frontier. This is consistent with a process of social influence, whereby societies that were linguistically and culturally closer to the French faced lower barriers to the adoption of new social norms and attitudes towards fertility control.


Historical state stability and economic development in Europe
S.P. Harish & Christopher Paik
Political Science Research and Methods, forthcoming

Abstract:
In this paper, we show that state stability exhibits a persistent and robust non-monotonic relationship with economic development. Based on observations in Europe spanning from 1 to 2000 AD, regions that have historically experienced either short- or long-duration state rule on average lag behind in their local wealth today, while those that have experienced medium-duration state rule fare better. These findings support the argument that both an absence as well as an excess of state stability are bad for economic development. State instability hinders investment for growth, while too much stability is likely indicative of elite capture and subsequent stagnation of innovation.


Three Revolutions of the Modern Era
Richard Easterlin
University of Southern California Working Paper, June 2019

Abstract:
The emergence and evolution of modern science since the 17th century has led to three major breakthroughs in the human condition. The first, the Industrial Revolution, started in the late 18th century and is based chiefly on developments associated with the rise of the natural sciences. The second, the Demographic Revolution, began in the latter half of the 19th century and is largely the result of progress in the life sciences. The third is a Happiness Revolution that commenced in the late 20th century and is the outgrowth of the social sciences. The first two revolutions, both familiar concepts, are summarized briefly; this paper develops the rationale for the third, the Happiness Revolution. It also notes the implications of this perspective for the interpretation of international cross-section studies.


Education rather than age structure brings demographic dividend
Wolfgang Lutz et al.
Proceedings of the National Academy of Sciences, 25 June 2019, Pages 12798-12803

Abstract:
The relationship between population changes and economic growth has been debated since Malthus. Initially focusing on population growth, the notion of demographic dividend has shifted the attention to changes in age structures with an assumed window of opportunity that opens when falling birth rates lead to a relatively higher proportion of the working-age population. This has become the dominant paradigm in the field of population and development, and an advocacy tool for highlighting the benefits of family planning and fertility decline. While this view acknowledges that the dividend can only be realized if associated with investments in human capital, its causal trigger is still seen in exogenous fertility decline. In contrast, unified growth theory has established human capital as a trigger of both demographic transition and economic growth. We assess the relative importance of changing age structure and increasing human capital for economic growth for a panel of 165 countries during the time period of 1980–2015. The results show a clear dominance of improving education over age structure and give evidence that the demographic dividend is driven by human capital. Declining youth dependency ratios even show negative impacts on income growth when combined with low education. Based on a multidimensional understanding of demography that considers education in addition to age, and with a view to the additional effects of education on health and general resilience, we conclude that the true demographic dividend is a human capital dividend. Global population policies should thus focus on strengthening the human resource base for sustainable development.


Liberalizing, state building, and getting to Denmark: Analyzing 21st-century institutional change
Ryan Murphy
Journal of Institutional Economics, forthcoming

Abstract:
This paper undertakes a descriptive analysis of changes in economic institutions across countries from 2000 to 2016, using Economic Freedom of the World and the “State Economic Modernity” index. This latter index is a recent creation, similar conceptually to state capacity, measuring what can variously be thought of as state building, effectiveness, and economic power. These two indexes are used in concert with one another to classify countries into eight directions of institutional change. Despite recent pessimism, countries besides those at the top world income bracket have continued to liberalize, while wealthy countries have merely stagnated. At the high level aggregates, there is little movement in state economic modernity over this period, although there is considerable heterogeneity among individual countries. Of those measured, Rwanda is the single country to make the greatest movement toward the development benchmark of “Getting to Denmark.”


No Household Left Behind: Afghanistan Targeting the Ultra Poor Impact Evaluation
Guadalupe Bedoya et al.
NBER Working Paper, June 2019

Abstract:
The share of people living in extreme poverty fell from 36 percent in 1990 to 10 percent in 2015 but has continued to increase in many fragile and conflict-affected areas where half of the extreme poor are expected to reside by 2030. These areas are also where the least evidence exists on how to tackle poverty. This paper investigates whether the Targeting the Ultra Poor program can lift households out of poverty in a fragile context: Afghanistan. In 80 villages in Balkh province, 1,219 of the poorest households were randomly assigned to a treatment or control group. Women in treatment households received a one-off “big-push” package, including a transfer of livestock assets, cash consumption stipend, skills training, and coaching. One year after the program ended — two years after assets were transferred — significant and large impacts are found across all the primary pre-specified outcomes: consumption, assets, psychological well-being, total time spent working, financial inclusion, and women’s empowerment. Per capita consumption increases by 30 percent (USD 24 purchasing power parity, USD 7 nominal per month) with respect to the control group, and the share of households below the national poverty line decreases from 82 percent in the control group to 62 percent in the treatment group. Using modest assumptions about consumption impacts, the intervention has an estimated internal rate of return of 26 percent, excluding non-monetized improvements in psychological well-being, women’s empowerment, and children’s health and education. These findings suggest that “big-push” interventions can dramatically reduce poverty in fragile and conflict-affected regions.


Early Life Circumstance and Adult Mental Health
Achyuta Adhvaryu, James Fenske & Anant Nyshadham
Journal of Political Economy, forthcoming

Abstract:
We show that psychological well-being in adulthood varies with circumstance in early life. Combining a time series of real producer prices of cocoa with a nationally representative household survey in Ghana, we find that a one standard deviation rise in the cocoa price in early life decreases the likelihood of severe mental distress in adulthood by 3 percentage points (half the mean prevalence) for cohorts born in cocoa-producing regions relative to those born in other regions. Impacts on related personality traits are consistent with this result. Maternal nutrition, reinforcing childhood investments, and adult circumstance are likely operative channels of impact.


Bad governance: How privatization increases corruption in the developing world
Bernhard Reinsberg et al.
Regulation & Governance, forthcoming

Abstract:
International organizations have become key actors in the fight against corruption. Among these organizations, the International Monetary Fund (IMF) maintains a powerful position over borrowing countries in its ability to mandate far‐ranging policy reforms – so‐called “conditionalities” – in exchange for access to financial assistance. While IMF pressure can force the implementation of anti‐corruption policies, potentially reducing corruption, other IMF policy measures, such as the privatization of state‐owned enterprises, can create rent‐extraction opportunities and limit the capacity of state institutions to limit corrupt behavior. To test these mechanisms, we conduct instrumental‐variable regression analysis using an original dataset on IMF conditionality for up to 141 developing countries from 1982 to 2014. We find that conditions to privatize state‐owned enterprises exert significant detrimental effects on corruption control. Conversely, other areas of IMF intervention are not consistently related to corruption abatement. These findings offer policy lessons regarding the design of conditionality, which should avoid large‐scale privatization, especially under conditions of weak accountability.


Collective Action by Contract: Prior Appropriation and the Development of Irrigation in the Western United States
Bryan Leonard & Gary Libecap
Journal of Law and Economics, February 2019, Pages 67-115

Abstract:
We analyze the economic characteristics of prior-appropriation water rights adopted across the US West in the 19th century. Much of the region’s massive irrigation infrastructure was developed by private irrigators. We develop a model to show how prior appropriation facilitated investment by securing water against future claims and defining a property right to a specific amount of water that was the basis for contracting among numerous heterogeneous agents. We construct a data set of over 7,000 water rights in Colorado from 1852 to 2013, including location, date, size, infrastructure investment, irrigated acreage, and geographic characteristics to test the predictions of the model. We find that prior appropriation facilitated cooperation through contracting, increasing infrastructure investment, and promoting irrigated agriculture that contributed up to 16 percent of western states’ income by 1930. Areas with preexisting norms for supporting collective action exhibit smaller differences in investment based on formal contracts.


Is Bigger Always Better? How Targeting Aid Windfalls Affects Capture and Social Cohesion
Laura Paler, Camille Strauss-Kahn & Korhan Kocak
Comparative Political Studies, forthcoming

Abstract:
A central challenge in development involves ensuring that aid reaches those in greatest need. Aid agencies typically try to achieve this by targeting aid to vulnerable individuals or groups. Despite the prevalence of targeting, we know little about its effects on distributional outcomes and social cohesion in communities where some are intended to benefit and others are excluded. We investigate this by formalizing targeting as a bargaining game with coalition formation involving three players — the target group, the elite, and an excluded group. Our approach yields the counter-intuitive insight that the target group will actually benefit more in communities where elites and the excluded group compete to capture aid. We provide support for predictions using a regression discontinuity design and original survey data from an aid program implemented in Aceh, Indonesia. This article demonstrates the importance of understanding the role of community dynamics in shaping the economic and social outcomes of targeted aid programs.


Falling behind and catching up: India's transition from a colonial economy
Bishnupriya Gupta
Economic History Review, August 2019, Pages 803-827

Abstract:
India fell behind during colonial rule. The absolute and relative decline of Indian GDP per capita with respect to Britain began before colonization and coincided with the rise of the textile trade with Europe. However, the fortunes of the traditional textile industry cannot explain the decline in the eighteenth century and stagnation in the nineteenth century as India integrated into the global economy of the British Empire. Inadequate investment in agriculture and consequent decline in yield per acre stalled economic growth. Modern industries emerged and grew relatively fast. The reversal began after independence. Policies of industrialization and a green revolution in agriculture increased productivity in agriculture and industry. However, India's growth in the closing decades of the twentieth century has been led by services. A concentration of human capital in the service sector has origins in colonial policy. Expenditure on education prioritized higher education, creating an advantage for the service sector. At the same time, the slow expansion of primary education lowered the accumulation of human capital and put India at a disadvantage in comparison with the fast‐growing economies of East Asia.


Trade and institutions: Explaining urban giants
Fabien Candau & Tchapo Gbandi
Journal of Institutional Economics, forthcoming

Abstract:
By analyzing the population growth at the top of the urban hierarchy, we test two hypotheses explaining the rise of mega-cities: trade and political institutions. We find that democratic institutions are the main factor behind the concentration of a nation's urban population in the main city. Contrary to the literature, we find that extractive institutions reduce the size of the biggest city.


The impact of the Indian Ocean tsunami on Aceh's long-term economic growth
Martin Philipp Heger & Eric Neumayer
Journal of Development Economics, forthcoming

Abstract:

Existing studies typically find that natural disasters have negative economic consequences, resulting in, at best, a recovery to trend after initial losses or, at worst, longer term sustained losses. We exploit the unexpected nature of the 2004 Indian Ocean tsunami for carrying out a quasi-experimental difference-in-differences analysis of flooded districts and sub-districts in Aceh. The Indonesian province saw the single largest aid and reconstruction effort of any developing world region ever afflicted by a natural disaster. We show that this effort triggered higher long-term economic output than would have happened in the absence of the tsunami.


Protecting Infants from Natural Disasters: The Case of Vitamin A Supplementation and a Tornado in Bangladesh
Snaebjorn Gunnsteinsson et al.
NBER Working Paper, June 2019

Abstract:
Severe environmental shocks have grown in frequency and intensity due to climate change. Can policy protect against the often devastating human impacts of these shocks, particularly for vulnerable populations? We study this question by leveraging data from a situation in which a tornado tore through an area involved in a double-blind cluster-randomized controlled trial of at-birth vitamin A supplementation in Bangladesh. Tornado exposure in utero and in infancy decreased birth size and physical growth, and increased the incidence of severe fevers. But infants who received vitamin A supplementation, which boosts immune system functioning, were protected from these effects. Tornado impacts and protective effects were both substantially larger for boys. Our results suggest that wide-scale supplementation policies would generate potential health benefits in disaster-prone areas of low-income countries.


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