Economic Development and Growth Part 2 Flashcards

Question 1

Q

Name the paper and the year of the Diamond Hypothesis

Answer

A

Diamond, Jared (2002), “Evolution, consequences and the future of plant and Animal domestication”, Nature, Vol. 418

Question 2

Q

Diamond, Jared (2002), “Evolution, consequences and the future of plant and Animal domestication”, Nature, Vol. 418
Main research question

Answer

A

Why did domestication occur in a select few areas of the world? Why did people choose to domesticate? Why are some countries rich today and others are poor?

Question 3

Q

Diamond, Jared (2002), “Evolution, consequences and the future of plant and Animal domestication”
Hypothesis of Diamond:

Answer

A

Domesticated plant species and animals → mostly present in Eurasia → east west axes made it easier to spread across continent → food surplus → elite formation → earlier neolithic transition → larger population → better technologies → less hunter and gatherers → more used to diseases

Question 4

Q

Which paper tests the diamond hypothesis?

Answer

A

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor. Proceedings of the National Academy of Sciences, 101

Question 5

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor.
Research question:

Answer

A

Why are some countries rich and others poor? Is the diamond hypothesis true?

Question 6

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor.
Hypothesis:

Answer

A

Testing of the Diamond Hypothesis: Differences in geography -> Differences in the number of wild plants and animals that could be domesticated (biogeography) -> Differences in the timing on the Neolithic transition -> Differences in current prosperity

Question 7

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor.
Identification strategy:

Answer

A

Model when the different regions reached the transition date, where they move from hunter-gathering to agriculture.

The model assumes: technological change -> emergence of agriculture (supply-push) rather than need for food from population growth (demand-pull)

Question 8

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor.
Data:

Answer

A

Geography - climate, latitude, East-West orientation
Biogeography - Number of wild plants suited for domestication (cereals), Number of wild animals suited for domestication (terrestrial
Quality of institutions (quality of bureaucracy, rule of law, corruption, risk of expropriation, risk of government repudiation of contracts)

Question 9

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor.
Main Regression:

Answer

A

Y: level of technology by hunter gatherers in region n at time t
X: potential maximum level of technology, which depends on biogeography

the level of technology reaches the threshold level A^A, which is where the level of technology is high enough for the emergence of agriculture.

Question 10

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor.
additional regression:

Answer

A

They also regress biogeography on current prosperity, controlling for geography and institutions

Question 11

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor
Main findings:

Answer

A

They find 98% of the geographic variation in the timing of the Neolithic transition explained by biogeography

The model implies that the two best endowed environments make the transition to agriculture comparatively early, as was the case in most Eurasia.

Even in the regions with less biogeography potential, technological progress occurred. Hunter gatherers gradually exploited their environment’s low productive potential. But progress is slow and endowments are so impoverished that settled agriculture might never have been initiated in isolation.
Communities facing these circumstances (which include Australia, New Zealand, and most western North America) essentially remained hunter-gatherers until they were absorbed, colonized or exterminated by other states.

Question 12

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor
Main findings of the additional regression:

Answer

A

The index of geography (climate, latitude, east-west orientation) accounts for 80% of the variation in biogeography.
Geography is an important indirect determinant of the transition score.
The time of the neolithic transition (a proxy for biogeographical endowment) explains more than 50% of the differences in per-capita income today
Still significant even when institutions are added in

Question 13

Q

Hibbs and Olsson (2004). Geography, biogeography, and why some countries are rich and others are poor.
Challenges:

Answer

A

6 data points for calculating transition
The authors do not disentangle the effects of geography and biogeography
Only cereals are considered for biogeography
No intermediate steps

Question 14

Q

Name the title of the Cereals-Paper

Answer

A

Mayshar, Moav, Neeman and Pascali (2015). Cereals, Appropriability and Hierarchy. CEPR Working Paper 10742.

Question 15

Q

Mayshar, Moav, Neeman and Pascali (2015). Cereals, Appropriability and Hierarchy.
Research Question:

Answer

A

Q1: How did farming trigger the change that following the Neolithic Revolution some regions of the world developed complex hierarchies, leading to city-states and the great civilization of antiquity?
Q2: Why did some regions remain with only simple hierarchy, in spite of adopting farming?

Question 16

Q

Mayshar, Moav, Neeman and Pascali (2015). Cereals, Appropriability and Hierarchy.
Hypothesis

Answer

A

Q1) Neolithic Revolution → increased appropriability (more in regions suitable for cereals rather than roots/tubers) → cereals could be taxed → an elite that did not produce food could emerge (hierarchy) → emergence of the state.
Q2) Differences in land suitability for cereals/roots/tubers across regions → differences in appropriability → appropriability encouraged robbery → demand for protection → facilitated the finance of the elite and provision of protection→ hierarchical complexity

Question 17

Q

Mayshar, Moav, Neeman and Pascali (2015). Cereals, Appropriability and Hierarchy.
Identification strategy:

Answer

A

Y: jurisdictional hierarchy beyond the local community
X: Cereals present
IV: YieldCereals – YieldTubers

Question 18

Q

Mayshar, Moav, Neeman and Pascali (2015). Cereals, Appropriability and Hierarchy.
Challenges:

Answer

A

IV estimate of caloric yield might be correlated with geographic variables which would also affect the jurisdictional hierarchy.
For the panel estimate:
it happened 500 years ago but the productivity difference measure is from today.
For estimate of cereals and ancient civilizations:
They look at distance as a dependent variable: but distance might be correlated with latitude which affects the presence of cities
For panel data: the impact over time can be in the omitted variable

Question 19

Q

What is the paper on taxation in Congo called?

Answer

A

Sanchez de la Sierra (2015). On the Origins of States: Stationary Bandits and Taxation in Eastern Congo”, mimeo, Berkeley

Question 20

Q

Sanchez de la Sierra (2015). On the Origins of States: Stationary Bandits and Taxation in Eastern Congo”, mimeo, Berkeley
Research question:

Answer

A

Eastern Congo had a significant number of armed organizations along a continuum of organizational development, ranging from autonomous bandits, to large armed groups that resemble proto-states.
How does the transformation from banditry to rule under the monopoly of violence occur?
Why does it take place?
What are the implications for the population in terms of welfare?

Question 21

Q

Sanchez de la Sierra (2015). On the Origins of States: Stationary Bandits and Taxation in Eastern Congo”, mimeo, Berkeley
Identification strategy:

Answer

A

Diff-in-Diff
Price of Coltan and Price of Gold before and after shock in villages and in mines
Gold: easier to conceal and collected from rivers: harder to tax. Coltan: bulky and collected from mines: easier to tax.

Question 22

Q

Sanchez de la Sierra (2015). On the Origins of States: Stationary Bandits and Taxation in Eastern Congo”, mimeo, Berkeley
Main Findings:

Answer

A

Higher coltan price -> more attacks at villages and mines ->more state formation by bandits in villages. Higher gold price -> no effect by mines but more complex taxation systems in villages (e.g. taxing consumption)

Question 23

Q

What are the authors and the publication year of the “Out of Africa” paper?

Answer

A

Ashraf and Galor (2013), “The Out of Africa Hypothesis, Human Genetic Diversity, and Comparative Economic Development, American Economic Review 103.

Question 24

Q

Ashraf and Galor (2013), “The Out of Africa Hypothesis

Research question:

Answer

A

Can genetic diversity explain comparative economic development today?

Question 25

Q

Ashraf and Galor (2013), “The Out of Africa Hypothesis

Answer

A

Theory 1: migratory distance had an adverse effect on the degree of genetic diversity
Theory 2: there exists an optimal level of diversity for economic development
With a good amount of diversity: the people can take advantage of skills of the different people
Too little: only a limited set of skills (societies far away from the origin of humanity)
Too high: too much variation so that people can not organize themselves well (societies close to the origin of humanity)

Question 26

Q

Ashraf and Galor (2013), “The Out of Africa Hypothesis

Data

Answer

A

for genetic diversity: HGDP-CEPH Human Genome Diversity Cell Line Panel (53 ethnic groups)
for historical population density: McEvedy and Jones (1978)

Question 27

Q

Ashraf and Galor (2013), “The Out of Africa Hypothesis

Identification strategy and regression

Answer

A

simple regression:
Y Variable(s): population density in 1500CE, GDP per capita in recent years
Main X Variable: predicted genetic diversity

Question 28

Q

Ashraf and Galor (2013), “The Out of Africa Hypothesis

Main findings:

Answer

A

Variation in migratory distance from the cradle of humankind in East Africa affected genetic diversity leading to a long-lasting hump-shaped effect on economic development no matter geographical, institutional and cultural factors.

Question 29

Q

Ashraf and Galor (2013), “The Out of Africa Hypothesis

Challenges:

Answer

A

Many events throughout the century could also have affected the GDP/diversity etc.
Correlation with other factors: even though they control there will probably still be correlation
More observation in low homogeneity than in higher homogeneity (see graph)
Genetic diversity: the estimate is a bit questionable 🡪 what type of difference in genetics do they mean?
Only one regression to get such a strong conclusion

Question 30

Q

What is the name of the time preference paper?

Answer

A

Ozak and Galor (2017) “The agricultural origins of time preference”, American Economic Review.

Question 31

Q

Ozak and Galor (2017) “The agricultural origins of time preference”
Research question:

Answer

A

This paper attempts to explore the origins of this time preference parameter across countries. They argue that geography is a key determinant. Specifically, the natural return to agricultural investment had a persistent effect on the distribution of time preference across societies.

Question 32

Q

Ozak and Galor (2017) “The agricultural origins of time preference”
Hypothesis

Answer

A

Regions with high agricultural productivity experienced gradually increasing long-term orientations – this was passed on through generations through traits.

Question 33

Q

Ozak and Galor (2017) “The agricultural origins of time preference”
Identification strategy

Answer

A

Natural experiment: an exogenous shock to agricultural productivity through the Columbian exchange. Why? Columbian exchange randomly assigned superior crops to different regions of the world. Therefore, countries which were assigned higher yield crops should have higher time preference today than countries which didn’t get high yield crops. This corrects for sorting, and time invariant geographical characteristics (which could cause higher land productivity and higher time preference.

Question 34

Q

Ozak and Galor (2017) “The agricultural origins of time preference”
Data:

Answer

A

LTO measure varies from 0 to 100.

Potential crop yield and Potential crop growth (Food and Agri Agency + Global Agro-Ecological Zones (GAEZ) project)

Question 35

Q

Ozak and Galor (2017) “The agricultural origins of time preference”
Challenges:

Answer

A

Reverse causality between higher long-term orientation and the choice of agricultural technologies which are correlated with agricultural returns.
Sorting of individuals with long-term planning horizon into higher agricultural productivity regions.
Crop yield generates a higher level of urbanization/pop. density which causes greater time preference

Question 36

Q

Ozak and Galor (2017) “The agricultural origins of time preference”
Main Findings

Answer

A

Statically significant and positive effect of higher crop yields on higher long-term orientation at the individual, regional, and country level

Question 37

Q

Sachs, Jeffrey, “Institutions Matter, But Not for Everything” (2003)
Hypothesis:

Answer

A

Tropics have high incidence of infectious diseases, including ones that kills off plants and animals (frost can kill parasites and bacteria)
Good health -> high productivity -> high income -> expect
to live long -> high savings -> high investment -> high productivity and better health!
Poor health -> low life expectancy -> lower investment in education/saving and higher fertility

Question 38

Q

Sachs, Jeffrey, “Institutions Matter, But Not for Everything” (2003)
Research question:

Answer

A

Geography or institutions? Institutions are not the only determinant of development. Being a tropical vs temperate and landlocked country also matters for development

Question 39

Q

Sachs, Jeffrey, “Institutions Matter, But Not for Everything” (2003)
Main findings:

Answer

A

Countries can have:
Favorable institutions and geographies - high growth and wealth (Singapore, Korea, Malaysia)
Poor institutions but good geography (Eastern Europe) - here, institutional reform is important
Poor institutions and geography (Africa) - institutional changes are needed, but also investments and infrastructure to fight disease and break isolation

Question 40

Q

Which paper tests the hypothesis of Sachs 2003?

Answer

A

Melissa Dell, Ben Jones and Ben Olken (2009), “Temperature and Income”. American Economic Review Papers and Proceedings

Question 41

Q

Melissa Dell, Ben Jones and Ben Olken (2009), “Temperature and Income”
Research question:

Answer

A

Does historical fluctuations in temperature within countries have an effect on aggregate economic outcomes?

Question 42

Q

Melissa Dell, Ben Jones and Ben Olken (2009), “Temperature and Income”
Hypothesis:

Answer

A

warmer countries have lower economic development

Question 43

Q

Melissa Dell, Ben Jones and Ben Olken (2009), “Temperature and Income”
Data:

Answer

A

Construct temperature and precipitation data for each country and year in the world from 1950 to 2003 and combine this dataset with aggregate output

Question 44

Q

Melissa Dell, Ben Jones and Ben Olken (2009), “Temperature and Income”
Regression equation:

Answer

A

Y: log labor income
X: mean temperature, mean precipitation levels

Question 45

Q

Melissa Dell, Ben Jones and Ben Olken (2009), “Temperature and Income”
Main findings:

Answer

A

Large negative effects of higher temperatures on growth, but only in poor countries (rich countries can counteract the effects of climate change)
They estimate that a 1C rise in temperature in a given year reduced economic growth in that year by about 1.3-1.9 percentage points
This is a gigantic effect!
No effects in rich countries
Potential large impacts of global warming

Question 46

Q

What are the others and the year of the “Reversal of Fortunes” paper?

Answer

A

Acemoglu, Johnson and Robinson (2002), “The Reversal of Fortune”. Quarterly Journal of Economics 117

Question 47

Q

Acemoglu, Johnson and Robinson (2002), “The Reversal of Fortune”. Quarterly Journal of Economics 117
Research question:

Answer

A

If geography is the key determinant of development then why are regions which were poor in 1500 rich today? And why are regions which were rich in 1500 poor today?

Question 48

Q

Acemoglu, Johnson and Robinson (2002), “The Reversal of Fortune”. Quarterly Journal of Economics 117
Hypothesis:

Answer

A

Countries which were rich in 1500 had larger population densities and higher urbanisation rates. After contact with Europeans, these areas were more likely to be under extractive institutions because (1) Tax systems were likely already in place which could be easily adapted for extraction (2) There was abundance of labor which could be forced to work and an elite take the surplus (3) They were more difficult to settle because of lack of land (4) There were more diseases which stopped settlers. Therefore, these areas missed out on industrialisation and remained comparatively underdeveloped.

Question 49

Q

Acemoglu, Johnson and Robinson (2002), “The Reversal of Fortune”. Quarterly Journal of Economics 117
Data:

Answer

A

Data from Bairoch (1988) urbanisation rates data. Very strong correlation between urbanisation rates and income per capita.
McEvedy and Jones (1978) - population density of countries.
Maddison (1995) Income per capita
Polity IV data set for constraint on executive.

Question 50

Q

Acemoglu, Johnson and Robinson (2002), “The Reversal of Fortune”. Quarterly Journal of Economics 117
Identification strategy

Answer

A

2SLS

IV: Mortality of early settlers

Question 51

Q

Acemoglu, Johnson and Robinson (2002), “The Reversal of Fortune”. Quarterly Journal of Economics 117
Main findings:

Answer

A

Reversal of fortunes. Countries with worse institutions didn’t industrialize because manufacturing requires better property rights enforcing institutions.

Question 52

Q

Acemoglu, Johnson and Robinson (2002), “The Reversal of Fortune”. Quarterly Journal of Economics 117
Challenges:

Answer

A

Disease environment correlated with mortality of early settlers and the disease environment can clearly impact GDP through the geography hypothesis. Thus, the instrument fails the exogeneity assumption.
Problem with IV: European that settled in colonies might have brought with them not just their institutions, but also their human capital.

Question 53

Q

A farewell to Alms - Clark (2007)

Main message:

Answer

A

World is Malthusian until 1800 → historically European rich people were having more kids than poor people: survival of richest → genetic and cultural transformation: genes and values of the rich were passed down to the entire population →people became more patient, less violent, more hard-working, more literate → when the technology was ready for the IR: countries with the effective workers were able to take better advantage → reduction in within-society inequalities → great divergence btw countries
Why divergence:
1. End of Malthusian allowed existing diffs in labor productivity across societies to translate into much larger diffs in income.
2. Modern medicine has lowered the floor established through subsistence wage.
3. Tech developed since IR has made quality of labor more important.

Question 54

Q

Which paper tests the “A Farewell to Alms”

Answer

A

Ashraf and Galor (2011). Dynamics and Stagnation in the Malthusian Epoch. The American Economic Review 101.

Question 55

Q

Ashraf and Galor (2011). Dynamics and Stagnation in the Malthusian Epoch. The American Economic Review 101.
Data:

Answer

A

Income per capita, population density, technology (atlas of cultural evolution) in year 1 CE, 1000, 1500

Question 56

Q

A farewell to Alms - Clark (2007)

Research question:

Answer

A

Why did the industrial revolution happen in western Europe?

Question 57

Q

Ashraf and Galor (2011). Dynamics and Stagnation in the Malthusian Epoch. The American Economic Review 101.
Main findings:

Answer

A

Consistent with Malthusian predictions: positive effects of land productivity and tech level on population density in 1500 CE, 1000 CE and 1 CE
In contrast: the effects of land productivity and tech on income per capita in these periods are not significantly diff from 0

Question 58

Q

Ashraf and Galor (2011). Dynamics and Stagnation in the Malthusian Epoch. The American Economic Review 101.
Regression:

Answer

A

Y: population density as an indicator for economic devt
X: technology
Regressor: number of years since neolithic transition + set of covariates
Time of neolithic transition is a good proxy for tech development (Diamond)
Instrument: domesticable specifies

Question 59

Q

Ashraf and Galor (2011). Dynamics and Stagnation in the Malthusian Epoch. The American Economic Review 101.
Challenges:

Answer

A

Whenever you have a geographic instrument is hard to defend bc there might be omitted variables: domesticable species can have an impact on GDP not through technology (example disease environment) classic omitted variable problem
Small number of observations, so you have high likelihood of strong correlation. Big measurement error for per capita income, smaller measurement error for population density -> this could be driving results

Question 60

Q

Ashraf and Galor (2011). Dynamics and Stagnation in the Malthusian Epoch. The American Economic Review 101.
Main message:

Answer

A

The Neolithic Revolution triggered a cumulative process of economic development, conferring a developmental head start to societies that experienced the transition earlier.

The level of technological advancement does not matter for standard of living until 1500, it only affects population density

Question 61

Q

Acemoglu, Daron, Simon Johnson and James Robinson (2001). “The Colonial Origins of Comparative Economic Development: An Empirical Investigation”
Research question?

Answer

A

Does the risk of expropriation (better or worse institutions) help account for differences in incomes of countries that were colonized by Europeans?

Question 62

Q

Acemoglu, Daron, Simon Johnson and James Robinson (2001). “The Colonial Origins of Comparative Economic Development: An Empirical Investigation”
Hypothesis?

Answer

A

European colonies were either extractive colonies, where there was less protection for private property and higher risk of government expropriation, or ‘Neo-Europes’, where colonizers settled in areas and tried to replicate European institutions with private property and checks on government power.
If the disease environment was not favorable -> less chance of Europeans settling and setting up ‘Neo-europe colonies’, more chance of extractive colonies.
These colonial states have persisted and can explain some of the differences in income today
potential settler mortality -> settlements -> early institutions -> current institutions -> current performance

Question 63

Q

Acemoglu, Daron, Simon Johnson and James Robinson (2001). “The Colonial Origins of Comparative Economic Development: An Empirical Investigation”
Identification strategy?

Answer

A

2SLS
Main regression: per capita income on expropriation risk
IV: Mortality of early settlers

Question 64

Q

Acemoglu, Daron, Simon Johnson and James Robinson (2001). “The Colonial Origins of Comparative Economic Development: An Empirical Investigation”
Main findings?

Answer

A

Very large causal effects of institutions on long-run growth:
Differences in institutions account for over ¾ of the variation in income per capita today (long-run effect)
The estimate implies the 2.24 differences in expropriation risk between Nigeria and Chile translates into 8 fold difference in income. . . In practice, Chile is over 11 times as rich as Nigeria

Answer 65

A

As usual, is settler mortality really exogenous to current GDP?
Direct effect: settler mortality -> more savings -> more investment and capital -> higher GDP today
Disease could also affect GDP today.
No formal test of how institutions persist

Answer 66

A

What is the impact of institutional differences at the local level?

Answer 67

A

The paper examines the long-run impacts of the Mita mining system, which was a forced labour institution that persisted between 1573 and 1812 in Peru and Bolivia.
Idea: areas with the Mita would have lower development from worse institutions developing than areas without Mita

Answer 68

A

Regression discontinuity design which exploits a quasi-natural experiment in the boundary of the Mita mining institutions. Mita boundary was exogenously decided by Spanish based on altitude. Dell finds area where altitude is equal, but Mita was imposed on one side of the boundary and not imposed on the other.
One side of the boundary, there are villages that are “treated” and on the other side of the boundary there are “non-treated” villages. If these villages are similar in all other characteristics apart from the treatment then the difference in outcomes between the villages can be explained by the treatment. There can also be no selective sorting!

Answer 69

A

Treatment of the Mita has a large negative and statistically significant impact on household consumption today (25% lower) and positive significant impact on stunted growth of children (6%)

Answer 70

A

Self-selection - richer people could afford to move across to the villages outside the border (BUT you would expect rich residents to not be affected by Mita anyway)

Other spill-over effects between town

Answer 71

A

Land tenure: Mita effect leads to lower number of haciendas → land reform gives hacienda land to farmers in non-Mita area -> more land inequality today in Mita area
Public Goods: No elite landowners to push for access to education or better roads → less integrated into road networks + lower human capital
Sectoral composition: less human capital → in Mita districts more likely to be subsistence farmers

Answer 72

A

Dell (2010) “The persistent effects of Peru’s mining Mita”

Answer 73

A

What is the importance of property rights enforcing institutions vs contracting institutions in determining long-run economic outcomes?

Answer 74

A

States can both facilitate transactions and act as an instrument for transferring resources. By unbundling the state institutions into “contract” and “private property” institutions, we can see which type is more conducive to economic development. (North (1990))
In theory private property institutions should be more important since poor contract institutions can be circumvented. In the case of no checks and balances on the state there isn’t much citizens can do if the state decides to renegade on debt

Answer 75

A

2SLS with 2 instruments:
Regress outcome variable (e.g. income) on both private property institutions and contracting institutions
Instruments:
Settler mortality -> private property institutions
Legal origin -> contracting institutions

Answer 76

A

Polity IV’s constraint on the executive measure
Index of legal formalism (no. of formal legal procedures needed to resolve a simple case of an unpaid check). Index of procedural complexity

Answer 77

A

Contract enforcing institutions have no effect on long-run growth, investment, and overall financial intermediation (some effect on stock market capitalisation).
Property right institutions have positive significant effects on growth, investment, and financial development.
Possible channel: more debt than equity in bad contract institutions countries because debt is cheaper to enforce. Once this adjustment is made then bad contracts don’t matter.

Answer 78

A

Overlap between both types of institutions. Is the data really capturing separate institutional effects or is it a combination/bundle effect?

Legal origin can affect other variables such as financial development which influence development outcomes independent from contracting institutions. Rebuttal: then the effect of the contract should be biased upwards and therefore the lack of results is actually an upper bound.

More evidence needed for the channel hypothesis. What does the micro level data say on contracts?

Settler mortality is correlated with geography characteristics which could have a multitude of effects on development.

Answer 79

A

What are the consequences of radical, externally imposed reforms on subsequent economic growth?

Answer 80

A

Exploit variation in institutional reforms created by the French Revolution in Europe, in particular within Germany.
The French imposed in the territories they conquered a series of extensive and radical reforms:
- imposition of the civil legal code
- abolition of guilds
- abolition of the remnants of feudalism
- introduction of equality against the law
- massive reduction of aristocratic privileges

Sizable effects of institutional reforms on subsequent growth

Answer 81

A

Reduced form regression:
urbanization regressed on time and polity fixed effects interacted with number of years of French presence

2SLS:
Reform index on urbanization rates
Instrument: French occupation for reform index

Answer 82

A

Reduced form regression:
No evidence for pre-trends. In the 18th century areas that will be conquered by the French were growing less than the control group
19 years of French presence imply 12 %-points higher urbanization rates
→ more rapid industrialization in areas that underwent more significant reforms because of the French occupation and invasion

2SLS:
Imposing external legal reforms seem to have an impact on economic outcomes
Fully implementing the reforms (moving to a value of the index from 0 to 100) implies an increase in urbanization rates in the order of 20-30%)
→ positive effect of French reforms on economic development

Answer 83

A

treatment group isn’t random

the french occupation can have an impact on urbanization without the reform

Answer 84

A

Tests Malthusian hypothesis (Clark 2007): birth rate is increasing and death rate is decreasing with living conditions, living standards declines as population increases.
Long-run growth in living standards is impossible. The problem comes from population growth and diminishing returns to labor.

Answer 85

A

How do institutions affect cultural norms? Is the impact long-lasting?

Answer 86

A

study the impact of the Habsburg Empire (gone since 1918) on trust and corruption today, using the ancient border as an exogenous source of variation. Habsburg was more centralized and predictable

Answer 87

A

Y: measure of trust
X: dummy that identifies regions that have been under the Habsburg at least once in their history

Answer 88

A

Comparing individuals left and right of long-gone Habsburg border, people living in locations that used to be territory of the Habsburg empire have higher trust in courts and police.
These trust differential also transform into real differences in the extent to which bribes have to be paid for these local public services.

Answer 89

A

2006 Life in Transition Survey (LiTS)

Answer 90

A

Becker, Boeckh, Hainz, and Woessmann. 2014. “The Empire is Dead, Long Live the Empire! Long-Run Persistence of Trust and Corruption in the Bureaucracy”

Answer 91

A

How did Europe develop institutions emphasizing rule of law?

Answer 92

A

Geography—>more small countries —> more wars—-> demand for raising taxes and credit —-> representative medieval constitutionalism —> training camp for liberal democracy —> rule of law —-> growth.

Answer 93

A

2SLS

Instrument: gender of first born child. Female first born = more chance of war

Answer 94

A

Estimates show that exposure to one additional conflict:
- a 2.6 percentage points increase in the probability that citizens elect the council without interference of the local ruler,
- an expansion of the council by approximately three members
- an increase in the probability of a guild representation in the council by 17 percentage points.
Also find that the tax system became more developed as a result of war.
Increase in public spending.

Answer 95

A

Large encyclopedia of history of German towns and cities. Use this to identify conflicts, institutional features (degree of political representation), tax system, public spending.
Peerage project: dataset on nobility.

Answer 96

A

What caused the boom of the first era of trade globalization in 1870-1913? What was the role of the steamship? What were the effects on economic development?

Answer 97

A

Steamship was important for the globalization
Look at wind patterns worldwide to see where trade used to be possible. With the invention of steamships, other routes became available

Answer 98

A

Compute optimal routes between any pair of countries by both sail and steam vessels (matrix)
Novel data on trade for approx. 100 countries,
Traditional data on income, urbanization, institutions, population, soil.

Answer 99

A

1) Estimated the timing and the relevance of the shift from sailing vessels to steam vessels in maritime transportation
2) Estimated the impact of changes in geographical isolation of a country (time-to-sail to other countries) on trade: regress exports (per capita/share of GDP) on the change in distance to trade
3) Estimated the effect of trade on economic development:
2SLS
instrument: predicted trade routes using sail/steam (gravity equation)

Answer 100

A

1) Shift to steam happened around 1870
2) The shift to steamship accounts for about 50% of increase in trade from reduced distance
3) Trade was negative for economic development
Channels?
- Countries with good institutions benefitted from more trade

Answer 101

A

They are interested in showing how institutions are endogenously determined. Specifically, initial factor endowments determine the initial level of wealth inequality - which determined the institutions set up by colonizers - which determined the long-run development of the colony

i. e. regions good for sugar, coffee - high economies of scale -> more wealth concentrated in small group
vs. regions growing wheat - low economies of scale -> more equality

Answer 102

A

The reason for the variation in development comes from the colonial era through the economic activity of the colonizers (argument of Engerman and Sokoloff (1997 and 2002)):
Classify colonial activities into three categories: good, bad, ugly
bad: displayed economies of scale, relied heavily on the exploitation of labor → bad economic development as argued by ES
good: no exploitation of labor such as cultivation of subsistence crops, cattle raising, manufacturing → positive long-run outcomes if they were practiced in small-scale production by independent proprietors (the case were there was no large native population) as argued by ES
ugly: areas with large native population, activities without economies of scale were typically performed in large-scale operations with forced labor. Relied primarily on the native population as an exploitable resource

Colonization led to a reversal of fortune (argument of AJR (Acemoglu, Johnson and Robinson (2002))

Answer 103

A

Bruhn and Gallego (2012). Good, Bad and Ugly Colonial Activities: Do They Matter for Economic Development?

Answer 104

A

Gains from trade are highest in places where products from one ecological zone can be traded for products from another ecological zone (Ricardian trade theory). We should see higher state capacity where the gains for trade are highest because the state’s main purpose is to provide the security for the free operation of exchange. Therefore, states should be more likely at where border different ecological area.
→ trade gave rise to states in sub-Saharan Africa

Answer 105

A

Dummies for 4 different colonial activities (good, bad, ugly, none) to see effect on measure of development

Answer 106

A

2SLS:
State centralization on gains from trade
Gains from trade proxied by ecological diversity, which was instrumented by rainfall measure

Answer 107

A

International trade led to an increased demand for growth-enhancing inclusive institutions but also led to a shift in the distribution of income that eventually allowed a group of increasingly rich and powerful merchants to capture a large fraction of the rents from international trade.

Institutional change is advanced by powerful special interests
trade growth affects income distribution and relative power of competing interests

Answer 108

A

Ecological diversity has a significant and positive correlation with state centralization

Answer 109

A

Real Wages (no change), Engel’s Law (worsening), Height (no clear increase), Working Hours (English in 1800 worked more than anyone in hist). 1800, 10,000 BC, 100,000 BC. Survival of richest: wills

Answer 110

A

No regression
Malthusian economy model to look at what determined who survived.

Usual Cobb Douglas production function Y=F(K, L, A) with constant returns to scale.
From 1800, capital markets were integrated, so only diffs in labor efficiency can explain diffs in income.
Northern Europe more labor efficient: better work values (e.g. England cotton mills vs. Indian)

Answer 111

A

Europeans could afford better standard of living compared to Asians although birth rates were not too different pre industrial rev (IR): by keeping birth rate down (controlling fertility) and death rate up (more wars, less hygiene).
Why lagged behind: before, similar standards of living but diff values that then became relevant with IR.
Interest rate fell, literacy and numeracy increased, work hours rose, decline in interpersonal violence
Changes seem to point towards a society becoming increasingly middle class in orientation: emergence of modern man
Why did England achieve Industrial Rev and not China, India or Japan: England established bourgeois society
Malthusian constraints operated stronger in England
Higher literacy in England
Diffs in fertility btw the poor and rich more pronounced in England: survival of richest stronger in E

Answer 112

A

Birth rate of society is increasing with living conditions
Death rate declines as living standard increases
Living standards decline as population increase (bc decreasing MPL)

Life expectancy is inverse of death rate and birth rate
Higher birth rates (or death rates): lower life expectancy

The subsistence income is the income at which birth rates equal death rates
The subsistence income does not depend on the technology of the society
In the long-run the economy converges to subsistence income
The subsistence income IS NOT the minimum income required for the population to survive

Answer 113

A

How do institutions affect the pattern of trade?

Answer 114

A

Institutions determine the ability of countries to enforce contracts. Some goods require better contract enforcement because they require relationship specific investments. Countries with better contract enforcement will have a comparative advantage in these goods.

Answer 115

A

2SLS:

legal origin as instrument for contract enforcement quality

Answer 116

A

Measure of “judicial quality” from a weighted measure of people perception of judicial effectiveness and predictability.

Measure of contract intensity for each good in an industry based on input goods and their contract intensities.

Trade, and control variables from standard sources.

Answer 117

A

At the country level, average contract intensity of production and of exports is positively correlated with judicial quality and contract enforcement.
At the country-industry level, the paper finds that countries with better contract enforcement export relatively more in industries for which relationship-specific investments are most important.

Answer 118

A

Can a positive historical shock generate long-term persistence in development?

Answer 119

A

Historical Atlas De Agostini (to identify cities that were a commune in 1176)
Measure civic capital today: number of non-profit associations, donation of blood or organs, existence in the town of organ donation associations, probability of cheating in math tests

Answer 120

A

The persistence of differences in development across Italian regions are due to differences in civic capital that are the result of a different incidence of free city states during the Middle Ages.

Answer 121

A

The formation of communes → population was involved in government decisions and executive power subject to courts of law → after Normans invaded, some comunes lost independence and returned to absolute monarchy (in the south of Italy) → the north began to confer life-long power to a single person → “Signoria” → several cases retained the fundamental institutions of the commune

Cities that became a commune (northern Italy) → Experienced democratic institutions → higher civil capital in medieval times → higher civic capital today → higher per-capita GDP

Presence of a bishop → reduced coordination costs (by providing moral sanctioning) → increases the probability of becoming a commune → increases civic capital (center-north), does not affect civic capital (south)

Answer 122

A

Y: measure of civic capita today
X: dummy that identifies commune in 1176

Answer 123

A

free city states were a transforming experience for some areas of the Center-North and those areas today are characterized by high civic capital.

In this paper, the authors disentangle the two channels by examining an institutional change, whose formal institutions have long gone: Italian free-city states
The evidence suggests the importance of culture in explaining persistent differences in economic development.

Answer 124

A

However, it can still be the case that free state experience is not random.
It is possible that those cities that became a commune were already characterized by higher levels of civic capital before becoming a commune.
It is possible that GSZ are capturing the effect of some geographic characteristics that affected civic capital 900 years ago and still affect civic capital today.

Answer 125

A

What matters for economic development? Institutions or
human capital?

Two views:

1) Good institutions -> higher human capital -> economic growth
2) High human capital -> good institutions and economic growth

Answer 126

A

Human capital causes democracy and checks on the executive

1) Educated people are more likely to resolve their differences through negotiation and voting (rather than violent disputes)
2) Education is needed for citizens to engage with government institutions
3) Education is needed to understand the quality of government.

Example: North vs South Korea

Answer 127

A

1) They should be permanent, to justify using history to instrument for institutional quality today
2) They should be measuring constitutions or electoral rules, not decisions of individual leaders

Answer 128

A

The measurements for institutional quality are unsuitable.

They are

1) highly volatile and increase with per capita GDP
2) uncorrelated with available constitutional measures constraints on the government from courts or electoral rules.
3) Some of them are correlated with electoral outcomes, or with dictators making good decisions
4) Initial levels of constraints on the executive power do not predict economic growth.

Answer 129

A

2SLS:
Regress years of schooling and quality of institutions on economic development today
2 instruments: settler mortality and french legal origin

Answer 130

A

1) The measurements of institutional quality used to show that institutions cause growth are constructed to be unsuitable for that purpose.
2) Some of the instrumental variable techniques used in the literature are flawed.

3) Basic OLS results, as well as a variety of additional evidence, suggest that
(a) human capital is a more basic source of growth than are the institutions,
(b) poor countries get out of poverty through good policies, often pursued by dictators
(c) subsequently improve their political institutions.

Answer 131

A

When running a horserace between 2 regressors, we need instruments that are uncorrelated with the other regressor. Here we don’t have that. Settler mortality -> could be correlated with both human capital and quality of institutions
Legal origin -> institutions? sort of? but could also be correlated with human capital through country origin

This paper is more showing how flawed AJR’s identification strategy was

Answer 132

A

Does fortune persist in the long-run and how?

Can a one-off historical human capital intervention have long-lasting effects?

Which specific transmission mechanisms can sustain such persistent outcomes?

Answer 133

A

Guarani Jesuit missions in South America from 1609 to 1767. These missions promoted education and skilled labor training in local populations.

Very remote, so intervention wouldn’t have effect on country institutions - can capture effect of human capital
Since these Jesuit missions had ‘last pick’, no selection effects

Answer 134

A

Median years of schooling or literacy or income in 2000 regressed on distance from missionary, controlling for geography and country FE

Answer 135

A

Placebo: abandoned Jesuit missions
Franciscan (no education focus) vs Jesuit
IV: exploratory routes

Answer 136

A

Missions resulted in 10-15% higher levels of human capital

Effects larger at the local level
Persistent through time: larger historically
Specific to Jesuit (as opposed to Franciscan) missions

Answer 137

A

1) The role of book content in economic, religious, and institutional development after the introduction of printing
2. The role of competition in determining the amount and content of local printing.

Answer 138

A

Content of books printed matters. More merchant manuals -> more city growth
More protestant books -> more institutional change

Competition lowers price, leading to more publications. It also can predict content of publications.

Answer 139

A

2SLS:
1) IV: merchant printer death on number of printers
Number of merchant printers on number of merchant publications

2) printer death on numbers of printers pre-reformation. Number of printers on number of protestant books

Regress merchant manuals on city growth, and regress protestant books on probability of passing a reformation law

Answer 140

A

Positive relationship between business education content and city growth

Positive relationship between Protestant content and institutional change

Competition predicts content

Casual relationships: competition-> content-> outcomes (using printer deaths as a source of exogenous variation).

Answer 141

A

What is the effects of skilled-worker immigration on host country technological progress?

Answer 142

A

Huguenot settlement in Brandenburg (Prussia) in 18th Century determined long-term effects on the productivity of textile manufactories

Immigrants use their human K or influence the accumulation of natives’ via knowledge transfers

Answer 143

A

IV: population losses during 30 year war and plague to instrument for share of Huguenots in town

regress productivity on share of Huguenots in town

Answer 144

A

Huguenot immigration lists from 1700

Prussian firm-level data on the value of inputs and outputs in 1802 (for all 750 textile manufactories in 1802)

Answer 145

A

Substantial long-term effects of Huguenot settlement on the productivity of textile manufactories.
Manufactories established in towns that were depopulated due to disease and plague during the war, and subsequently repopulated by the immigration of Huguenots, achieve a higher productivity in manufacturing textiles than other.
Supports the assumption of knowledge spillovers from specialized immigrants.

Answer 146

A

Do institutions matter for economic development? Or is it culture?

Answer 147

A

Natural experiment of history: Berlin conference and the design of African Borders

Ethnicities were split up between different countries. Can test if worse institutions lead to worse outcomes compared to same ethnicity with better institutions.

Answer 148

A

Ethnic boundaries (Murdock 1959)
Measure economic development: Luminosity (satellite light density)
National institutions (Rule of Law Composite Index WB, Control of Corruption Composite Index WB)

Answer 149

A

Regress economic development (light density) on institutions, and then control for ethnicity split effects to see if institutions still significant.

Y: Light density at night of ethnic group i in country c or light density at night of pixel p ethnic group i in country c

X: National institutional quality in country c

RD Analysis:
Y: light density at night of pixel p, ethnic group i in country c

X: dummy = 1 if the pixel falls in the country with relatively better institutions (aka higher institutions), controlling for the distance to the border

For each partition group 2 observation: in the biggest two areas that the ethnicity is split upon
Heterogenous effects:
Differentiate how far away from the capital you are.

Answer 150

A

Positive correlation between rule of law and regional development even when they condition on geography, location and other local effects
When you look at the same ethnicity, it doesn’t matter what institutions you have (even in RD analysis)
In Africa once geography-ecology and cultural-institutional ethnic specific traits are accounted for then national institutions play a lesser role.
National institutions are less relevant for the activities of partitioned ethnicities.
If you are closer to the capital, there is difference in luminosity dependent on the rule of law (but not if you are further away from the capital)

Answer 151

A

Maybe Luminosity is super concentrated, then in all the dark spots we are comparing 0 with 0 so clearly there is no effect.
There might be a different role of national institutions in areas close and far from the capital

Answer 152

A

Was Weber’s hypothesis that protestant work ethic and values lead to higher economic prosperity true? Or does being protestant lead to higher schooling than being catholic and then lead to higher economic prosperity?

Answer 153

A

Protestant areas are richer today than catholic areas.
Protestants may have acquired more schooling than Catholics for religious reasons (Luther encouraging education), and as a side effect, this higher schooling would then have transformed into higher economic prosperity

Answer 154

A

Distance to Wittenberg as an instrument for Protestantism. Distance from Wittenberg seems uncorrelated with proxies of economic development and no correlation to school variables

To single out the literacy: we would need another IV.
Our way out: rearrange the regression equation so that literacy is on the LHS and restrict the literacy effect to estimated coefficients that are consistent with evidence found in other, well-identified studies in the literature.
Then use bounded analysis, adjusting for literacy

Answer 155

A

Country-level census data from 1870s/80s, Denomination and literacy, economic outcomes, Data from Prussia

Answer 156

A

Y: Economic outcome variables (% in labor force, income tax revenue, income of mayors etc.)
X: % Protestant, % Catholics, % Literate, Distance to Wittenberg in km

Answer 157

A

Weber was right in observing that Protestant regions were economically more affluent than Catholic regions
But the thesis was wrong since the key channel is acquisition of literacy (and not work ethics)

Answer 158

A

Transformation started from a very central place in Europe, more people live in central Europe than further outside 🡪 maybe this is the fact that was captured
They tested if Wittenberg was important before the reformation but maybe during the Reformation it became more important

Answer 159

A

Can Africa’s current underdevelopment be explained by its slave trades?

Answer 160

A

Insecurity confined people between ethnic boundaries → slave trade resulted in weakened ties between villages → hindered the formation of large communities and broader ethnic identities
Pre-existing complex governance structures were destroyed
→ weak states and high level of ethnic fractionalization → lower level of GDP

Answer 161

A

IV’s: Distance from the main slave markets

Answer 162

A

Total number of slaves exported from each port: Eltis et al (1999), Elbl (1997), Austen (1992)
Ethnicity of slaves: Miscellaneous sources (records of sale, slave registers, slave runaway notices, court records, church records, notarial documents)
Ethnic boundaries in Africa: Murdock (1959)
GDP (2000): Maddison
→ rely on shipping data but account for landlocked countries numbers

Answer 163

A

Y: per capita GDP
X: total number of slaves exported between 1400-1900
C: Controls (geography, climate)

2SLS: instrument using distance to slave markets

Answer 164

A

Non-causal finding: OLS estimates show negative relationship between incidence of slave trade and economic development
OLS and IV results suggest that increased extraction during the slave trades resulted in worse economic performance
More the data, in line with historic accounts, suggest that: slave trade
->impeded the formation of broader ethnic groups
->ethnic fractionalization
->underdevelopment of political structures

Answer 165

A

How were gender roles determined?

Answer 166

A

Instrument: geo-climatic suitability for crops using plough
Need an IV because pre-existing gender roles could determine what agricultural strategy is used.
Identify ‘plough positive’ and ‘plough negative’ environments

Answer 167

A

FLFP, women in politics, women entrepreneurs

use of plough, geo-climatic suitability for crops using plough

Answer 168

A

Regress female labour force participation, share of firms with female ownership and females in politics on historical plough use

Answer 169

A

Historical plough use is negative on the 3 measures of female economic participation. More significant for FLFP, less significant for females in politics

Answer 170

A

Not a lot of variation in europe (almost all plough use)

division of task table doesn’t seem to support results

Answer 171

A

What are the conditions and mechanisms through which trade can foster lasting peace in poor and ethnically diverse society?

Answer 172

A

The presence of nonreplicable and nonexpropriable sources of interethnic complementarity
Access to a nonviolent mechanism to redistribute or share the gains from trade between groups
These two conditions fosters the development of “institutions” that reinforce incentives for peace

when different ethnicity do the same thing → they start fighting → bad

Hindu-muslim relations: muslims had access to network from pilgrimages so easier to trade -> less conflicts

Answer 173

A

There are only two key robust determinants of medieval port location: coastal towns and medieval era natural harbors.
In contrast, colonial-era port location seems to be unrelated to the presence of natural harbors.
Natural harbor as IV estimate to check robustness of regression of number of riots on medieval port

Answer 174

A

This theory is tested using evidence from Hindu-Muslim interaction in South Asia.

Answer 175

A

Y: Number of riots
X: Medieval port

Answer 176

A

Summary Statistics:
Medieval ports exhibit strikingly lower incidences of religious violence compared to other towns
Medieval ports are poorer and have more mixed religious population
Regression:
Medieval port → less riot
Interethnic medieval trade has left a lasting legacy on violence.
In the ports of the medieval Indian Ocean, Islam, by making trade accessible to all Muslims satisfied two conditions that support peaceful coexistence:
the provision of a nonreplicable nonexpropriable complementarity service
a means to more equitably share the surplus from trade
Notice: the existence of robust complementarities and a sharing mechanism are not unique to the Indian Ocean
-> Sephardic Jews benefited from valuable trading networks in the 15th and 16th centuries that rendered them welcome arrivals in Ottoman ports in the Mediterranean.

Answer 177

A

A lot of different omitted variables (like police presence) → hard to make causal interpretation

Answer 178

A

What are the economic underpinnings of the phenomenon that Anti-Semitism happens in the same places through time?
What is the relationship between the division of labor along ethnic/religious lines and the geography of anti Semitism in German history?

Answer 179

A

Investigate the impact of the Protestant Reformation on 1. pogroms, 2. attitudes towards the Jews, 3. Jewish demography → Diff-in-Diff: before vs. after Reformation
Investigate role of money lending in shielding (or not) the Jews from killings and expulsions → Diff-in-diff-in-diff (before vs after Reformation; Catholics vs Protestant; need for finance)
Investigate the impact of the Protestant Reformation on the specialization of Jews in the lending sector → 2SLS estimates (using a geographical instrument)

Answer 180

A

City level data (panel: 2000+ cities, 1300 1900)
Published books (panel: 1450 1600)
Prussian county level data (cross section, 1882)
Jewish Encyclopedia
measure for attitudes towards jews: by looking at the abstract of the books published in each city

Answer 181

A

Diff-in-Diff:
Y: Pogrom in the city
X: City being protestant before and after the reformation

Answer 182

A

In the debate on the determinants of anti Semitism economics seems to matter after all.
The geography of anti-Semitism is related with the geography of economic interactions between the Jewish minorities and the rest of the population.
The ethics of usury gave the Jews a comparative advantage in the money lending activity in Catholic regions. This produced a complementarity between Jews and Catholics, which contained anti Semitism, compared to Protestant regions.

Answer 183

A

in high-antisemitic places there will be low pogrom since there will be little number of jews.
triple Diff: might also be due to differences in the jewish community
IV: full of problems (different economic composition of the city might drive the different effect of a reformation)

Answer 184

A

Wider question: What is the impact of innovation on economic development?
Specific question: What was the effect on growth in cities which adopted the printing press in the 1400s?

Answer 185

A

Positive externalities of the printing press have been missed by previous statistical analysis.

The key point is that cities that adopted print media benefited from localized spillovers in human capital accumulation, technological change, and forward and backward linkages.

These spillovers contributed to city growth by exerting an upward pressure on the returns to labor, making cities culturally dynamic and attracting migrants.

Answer 186

A

Compare cities which were “treated” with printing press to those which did not get the printing press.

IV: regress Log City Growth on Print Adoption in 1450-1500 (dummy) with distance from Mainz as an instrument.

Mainz was where the first printing press was developed - the technology diffused away from Mainz so cities which were close to Mainz were treated

Answer 187

A

Log city growth over 100-, 200-, and 300-year periods show that cities that adopted the printing press in the late 1400s grew no faster than other cities 1400–1500, but enjoyed very large and significant growth advantages after 1500.

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