The road to greatness
Does European development have Roman roots? Evidence from the German Limes
Journal of Economic Growth, September 2017, Pages 313–349
This paper contributes to the understanding of the long-run consequences of Roman rule on economic development. In ancient times, the area of contemporary Germany was divided into a Roman and a non-Roman part. The study uses this division to test whether the formerly Roman part of Germany are more developed than the non-Roman part. This is done using the Limes Germanicus wall as geographical discontinuity in a regression discontinuity design framework. The results indicate that economic development — as measured by luminosity — is indeed significantly and robustly larger in the formerly Roman part of Germany. The study identifies the persistence of the Roman road network until the present as an important factor causing this developmental advantage of the formerly Roman part of Germany both by fostering city growth and by allowing for a denser road network.
Historical Antisemitism, Ethnic Specialization, and Financial Development
Francesco D’Acunto, Marcel Prokopczuk & Michael Weber
NBER Working Paper, September 2017
For centuries, Jews in Europe have specialized in financial services. At the same time, they have been the victims of historical antisemitism on the part of the Christian majority. We find that present-day financial development is lower in German counties where historical antisemitism was higher, compared to otherwise similar counties. Households in counties with high historical antisemitism have similar savings rates but invest less in stocks, hold lower bank deposits, and are less likely to get a mortgage – but not to own a house – after controlling for wealth and a rich set of current and historical covariates. Present-day antisemitism and supply-side forces do not appear to fully explain the results. Present-day households in counties where historical antisemitism was higher express lower trust in finance, but have levels of generalized trust similar to other households.
The Origins of Financial Development: How the African Slave Trade Continues to Influence Modern Finance
Ross Levine, Chen Lin & Wensi Xie
NBER Working Paper, September 2017
We assess how the African slave trade — which had enduring effects on social cohesion — continues to influence financial systems. After showing that the intensity with which people were enslaved and exported from Africa during the 1400 – 1900 period helps account for overall financial development, household access to credit, and firm access to finance, we evaluate three potential mechanisms linking the slave trade to modern finance — information sharing institutions, trust in financial institutions, and the quality of legal institutions. We discover that the slave trade is strongly, negatively related to the information sharing and trust mechanisms but not to the legal mechanism.
Industrial Development and Long-Run Prosperity
Raphaël Franck & Oded Galor
NBER Working Paper, August 2017
This research explores the long-run effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, the study establishes that while the adoption of industrial technology was conducive to economic development in the short-run, it has had a detrimental effect on standards of living in the long-run. Exploiting exogenous geographic and climatic sources of regional variation in the diffusion and adoption of steam engines during the French industrial revolution, the research establishes that regions in which industrialization was more intensive experienced an increase in literacy rates more swiftly and generated higher income per capita in the subsequent decades. Nevertheless, intensive industrialization has had an adverse effect on income per capita, employment and equality by the turn of the 21st century. This adverse effect reflects neither higher unionization and wage rates nor trade protection, but rather underinvestment in human capital and lower employment in skilled-intensive occupations. These findings suggest that the characteristics that permitted the onset of industrialization, rather than the adoption of industrial technology per se, have been the source of prosperity among the currently developed economies that experienced an early industrialization. Thus, developing economies may benefit from the allocation of resources towards human capital formation rather than towards the promotion of industrial development.
British economic growth since 1270: The role of education
Jakob Madsen & Fabrice Murtin
Journal of Economic Growth, September 2017, Pages 229–272
This paper constructs an original database on physical capital, labor, education, GDP, innovations, technology spillovers, and institutions to analyze the proximate determinants of British economic growth since 1270. Several approaches are taken in the paper to tackle endogeneity. We show that education has been the most important driver of income growth during the period 1270–2010, followed by knowledge stock and fixed capital, while institutions have not been robust determinants of growth. The contribution of education has been equally important before and after the first Industrial Revolution. Overall, the results give strong support to the predictions of Unified Growth Theories.
Individualism, democracy, and contract enforcement
Brandon Cline & Claudia Williamson
Journal of Corporate Finance, October 2017, Pages 284-306
We examine a potential link between culture and financial development by considering culture's influence on contract enforcement regulation. Specifically, we investigate the role of individualism in determining the variation in enforcement costs across countries. Individualism positively and significantly relates to efficient contract enforcement, an association that is independent of a particular political system. Interaction effects, however, suggest that democracy magnifies individualism's influence on the contract enforcement efficiency. These results provide insight into how culture can shape financial outcomes. It further suggests that culture serves as a constraint on policymakers, as any given policy or formal institutional structure will function very differently depending on the cultural environment.
The Myth of the Democratic Advantage
Studies in Comparative International Development, September 2017, Pages 261–277
Existing research points to a democratic advantage in public good provision. Compared to their authoritarian counterparts, democratically elected leaders face more political competition and must please a larger portion of the population to stay in office. This paper provides an impartial reevaluation of the empirical record using the techniques of global sensitivity analysis. Democracy proves to have no systematic association with a range of health and education outcomes, despite an abundance of published empirical and theoretical findings to the contrary.
Political Institutions, Economic Liberty, and the Great Divergence
Journal of Economic History, September 2017, Pages 724-755
I argue that Europe's political fragmentation interacted with her political innovations — self-governing cities and national parliaments — to facilitate “economic liberty,” which in turn unleashed faster and more inter-connected urban growth. Examining urban growth over the period 600–1800 ce throughout Eurasia, I show that inter-city growth correlations were positive and significant only in Western Europe after 1200 ce. Within Western Europe, I show that growth correlations were greatest in the most fragmented and parliamentary areas, individual cities became significantly more tied to urban growth when their realms became parliamentary, and spillover effects (due to competition between rulers) were significant.
High sex ratios in rural China: Declining well-being with age in never-married men
Xudong Zhou & Therese Hesketh
Philosophical Transactions of the Royal Society: Biological Sciences, 19 September 2017
In parts of rural China male-biased sex ratios at birth, combined with out-migration of women, have led to highly male-biased adult sex ratios, resulting in large numbers of men being unable to marry, in a culture where marriage and reproduction are an expectation. The aim of this study was to test the hypotheses that older unmarried men are more predisposed to depression, low self-esteem and aggression than both those who are married, and those who are younger and unmarried. Self-completion questionnaires were administered among men aged 20–40 in 48 villages in rural Guizhou province, southwestern China. Tools used included the Beck Depression Inventory, the Rosenberg's Self-esteem Scale and the Bryant-Smith Aggression Questionnaire. Regression models assessed psychological wellbeing while adjusting for socio-demographic variables. Completed questionnaires were obtained from 957 never-married men, 535 married men aged 30–40, 394 partnered men and 382 unpartnered men aged 20–29. After adjusting for socio-demographic variables, never-married men were more predisposed to depression (p < 0.05), aggression (p < 0.01), low self-esteem (p < 0.05) and suicidal tendencies (p < 0.001). All the psychological measures deteriorated with age in never-married men. In contrast, married men remained stable on these dimensions with age. Never-married men are a psychologically highly vulnerable group in a society where marriage is an expectation. Since the highest birth sex–ratio cohorts have not yet reached reproductive age, the social tragedy of these men will last for at least another generation.
Why Did Drug Cartels Go to War in Mexico? Subnational Party Alternation, the Breakdown of Criminal Protection, and the Onset of Large-Scale Violence
Guillermo Trejo & Sandra Ley
Comparative Political Studies, forthcoming
This article explains why Mexican drug cartels went to war in the 1990s, when the federal government was not pursuing a major antidrug campaign. We argue that political alternation and the rotation of parties in state gubernatorial power undermined the informal networks of protection that had facilitated the cartels’ operations under one-party rule. Without protection, cartels created their own private militias to defend themselves from rival groups and from incoming opposition authorities. After securing their turf, they used these militias to conquer rival territory. Drawing on an original database of intercartel murders, 1995 to 2006, we show that the spread of opposition gubernatorial victories was strongly associated with intercartel violence. Based on in-depth interviews with opposition governors, we show that by simply removing top- and midlevel officials from the state attorney’s office and the judicial police — the institutions where protection was forged — incoming governors unwittingly triggered the outbreak of intercartel wars.
Women Political Leaders, Corruption, and Learning: Evidence from a Large Public Program in India
Farzana Afridi, Vegard Iversen & M.R. Sharan
Economic Development and Cultural Change, forthcoming
We exploit randomly assigned political quotas for women to identify the impact of women’s political leadership on corruption and on the governance of India’s largest poverty-alleviation program to date. Using survey data, we find more program inefficiencies and leakages in village councils reserved for women heads: political and administrative inexperience make such councils more vulnerable to bureaucratic capture. This is at odds with claims of unconditional gains from women assuming political office. A panel of official audit reports enables us to explore (a) whether newly elected women leaders in reserved seats initially perform worse; (b) whether they partly catch up, fully catch up, or eventually outperform (male) leaders in unreserved seats; and (c) the time it takes for such catch-up to occur. We find that women leaders in reserved seats initially underperform but rapidly learn and quickly and fully catch up with male politicians in unreserved seats. Over the duration of their elected tenure, we find no evidence of overtake. Our findings suggest short-term costs of affirmative action policies but also that once initial disadvantages recede, women leaders are neither more nor less effective local politicians than men.
Opportunistic Accountability: State–Society Bargaining Over Shared Interests
Shelby Grossman, Jonathan Phillips & Leah Rosenzweig
Comparative Political Studies, forthcoming
Conflicting preferences between the state and society underpin most accountability mechanisms by providing a credible way for society to impose costs on the state. Adapting a classic bargaining framework, we argue that broader conditions can support state–society bargaining. Policies that both the state and society value can also enhance society’s negotiating power, provided society has a relatively lower valuation and is more patient than the state. By threatening to sabotage their own interests but hurt the impatient state even more, citizens can compel the state to deliver broader policy benefits. We illustrate this logic with the case of polio vaccination in northern Nigeria, where entire communities have resisted the vaccine as a strategy to bargain for more desired services. To resolve and preempt noncompliance, the Nigerian government has enhanced service delivery in other areas, demonstrating the opportunity for improved accountability in the presence of shared-interest policies.
From Darkness to Light: The Effect of Electrification in Ghana, 2000–2010
George Akpandjar & Carl Kitchens
Economic Development and Cultural Change, forthcoming
This article examines the relationship between electrification, the structure of employment, and the structure of the household using the rollout of electricity in Ghana between 2000 and 2010. We find, using the 10% microsamples of the Ghana census, that residential electric access led to movements out of agriculture and toward higher-skilled wage-earning occupations. Within the household, electrification resulted in a shift away from the use of wood fuels, reduced fertility, and led to larger investments in the education of existing children.