Juhasz (2018)

Question 1

What was Juhasz (2018) about?

What are the findings of the paper?

Answer 1

This paper uses a natural experiment to estimate the causal effect of temporary trade protection on long-term economic development. I find that regions in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803–1815) increased capacity in mechanized cotton spinning to a larger extent than regions which remained more exposed to trade. In the long run, regions with exogenously higher spinning capacity had higher activity in mechanized cotton spinning. They also had higher value added per capita in industry up to the second half of the nineteenth century, but not later.

Impact of increased spinning capacity due to Napoleonic blockade on industrial value-added is positive and significant in 1860, but not thereafter. No effects of blockade on agriculture services.

Evidence supports infant industry argument that import protection stimulated development of French cotton industry.

Question 2

What was the OLS strategy for Juhasz (2018)?

What are the limitations of OLS?

Answer 2

After Napolean Blockade was imposed, the British cotton producers had to instead ship to 1 of the 4 neutral / British controlled ports and smuggle to France, hence increasing trade costs to ship cotton to France.

North France saw the highest increase in trade cost relative to South France, and authors test whether this induces cotton-spinning technology to develop more quickly in North France.

Naïve OLS: OVB

But she included additional controls such as coal, literacy, etc. and found Including any controls do not have major impacts on estimates!

Question 3

What are the limitations of Juhasz (2018)?

Answer 3

Paper is not a cost-benefit analysis. Paper is not saying blockade is good for a country, due to the costs involved.

Question 4

describe the diff-in-diff strategy of Juhasz (2018)

Answer 4

Diff-in-diff estimation strategy:

refers to one of the 109 departments (cities) of French empire, while t is time (pre-blockade 1803, and post-blockade 1812)

– time-invariant reg. effects, – effect of aggregate shocks

effective distance of the department at time t from London.

Controls: Coal, Streams, Market potential, Knowledge access, Literacy

Outcome: – number of spindles – NOT MACHINES(because machines with more spindles have more production capacity). production capacity mechanized cotton spinning before (1803) and towards end of blockade (1812) using prefectural reports.

The estimation strategy compares outcomes in regions of the French Empire which received a large trade cost shock to regions which received a smaller shock before and after the disruption to trade.

Question 5

how did Juhasz (2018) robustify the paper’s findings

Answer 5

Author further robustified her findings by demonstrating the trade cost shocks did not have an effect before the blockade, neither did it have an effect on other industries during the blockade.

Question 6

How did Juhasz (2018) study the long-run effect of the blockade?

What was the challenge to identification?
What did the paper find?

Answer 6

Use change in effective distance as instrument for spindles at the end of blockade (1812). Run IV estimation on specification .

Identification challenge: Unobserved shocks to French Economy that affect outcome of interest and are correlated with trade cost shock.

Find statistically significant effect of Spindles in 1812 on Spindles in 1840 and 1887. 1 additional spindle leads to 2.7 more spindles in 1840. – proliferation and cumulate of advantage.

Author then finds industrial value added also increases significantly up until 1896, however no evidence the effect persisted until 20^th century.