Economics of Culture and Institutions
April 9, 2016
Konrad B. Burchardi, Stockholm University; Thomas Chaney, University of Chicago; and Tarek Alexander Hassan, University of Chicago and NBER
Burchardi, Chaney, and Hassan use 130 years of data on historical migrations to the United States to show a causal effect of the ancestry composition of U.S. counties on foreign direct investment (FDI) sent and received by local firms. To isolate the causal effect of ancestry on FDI, the researchers build a simple reduced-form model of migrations: migrations from a foreign country to a U.S. county at a given time depend on (i) a push factor, causing emigration from that foreign country to the entire United States, and (ii) a pull factor, causing immigration from all origins into that U.S. county. The interaction between time-series variation in origin-specific push factors and destination-specific pull factors generates quasi-random variation in the allocation of migrants across U.S. counties. The authors find that a doubling of the number of residents with ancestry from a given foreign country relative to the mean increases by 4.3 percentage points the probability that at least one local firm invests in that country, and increases by 36% the number of employees at domestic recipients of FDI from that country. This effect operates mainly through the descendants of migrants rather than migrants themselves and increases in size with the ethnic diversity of the local population, the distance to the origin country, and the quality of its institutions.
Alberto F. Alesina, Harvard University and NBER; Salvatore Piccolo, Catholic University of Milan; and Paolo Pinotti, Bocconi University
Alesina, Piccolo, and Pinotti investigate how criminal organizations strategically use violence to influence elections in order to get captured politicians elected. The model offers novel testable implications about the use of pre-electoral violence under different types of electoral systems and different degrees of electoral competition. The researchers test these implications by exploiting data on homicide rates in Italy since 1887, comparing the extent of 'electoral-violence cycles' between areas with a higher and lower presence of organized crime, under democratic and non-democratic regimes, proportional and majoritarian elections, and between contested and non-contested districts. The authors provide additional evidence on the influence of organized crime on politics using parliamentary speeches of politicians elected in Sicily during the period 1945-2013.
Jeremiah Dittmar, London School of Economics, and Ralf Meisenzahl, Federal Reserve Board
What are the origins and consequences of the state as a provider of public goods? Dittmar and Meisenzahl study legal reforms that established mass public education and increased state capacity in German cities during the 1500s. These fundamental changes in public goods provision occurred where ideological competition during the Protestant Reformation interacted with popular politics at the local level. The researchers document that cities that formalized public goods provision in the 1500s began differentially producing and attracting upper tail human capital and grew to be significantly larger in the long-run. They study plague outbreaks in a narrow time period as exogenous shocks to local politics and find support for a causal interpretation of the relationship between public goods institutions, human capital, and growth. More broadly, they provide evidence on the origins of state capacity directly targeting welfare improvement.
Sara Lowes, Harvard University; Nathan Nunn, Harvard University and NBER; James A. Robinson, University of Chicago and NBER; and Jonathan Weigel, Harvard University
Lowes, Nunn, Robinson, and Weigel use variation in historical state centralization to examine the impact of institutions on cultural norms. The Kuba Kingdom, established in Central Africa in the early 17th century by King Shyaam, had more developed state institutions than the other independent villages and chieftaincies in the region. It had an unwritten constitution, separation of political powers, a judicial system with courts and juries, a police force and military, taxation, and significant public goods provision. Comparing individuals from the Kuba Kingdom to those from just outside the Kingdom, the researchers find that centralized formal institutions are associated with weaker norms of rule-following and a greater propensity to cheat for material gain.
Enrico Spolaore, Tufts University and NBER, and Romain Wacziarg, University of California at Los Angeles and NBER
Spolaore and Wacziarg investigate the historical dynamics of the decline in fertility in Europe and its relation to measures of cultural and ancestral distance. They test the hypothesis that the decline of fertility was associated with the diffusion of social and behavioral changes from France, in contrast with the spread of the Industrial Revolution, where England played a leading role. The researchers argue that the diffusion of the fertility decline and the spread of industrialization followed different patterns because societies at different relative distances from the respective innovators (the French and the English) faced different barriers to imitation and adoption, and such barriers were lower for societies that were historically and culturally closer to the innovators. The authors provide a model of fertility choices in which the transition from higher to lower levels of fertility is the outcome of a process of social innovation and social influence, whereby late adopters observe and learn about the novel behaviors, norms and practices introduced by early adopters at the frontier. In the empirical analysis the researchers study the determinants of marital fertility in a sample of European populations and regions from 1830 to 1970, and successfully test their theoretical predictions using measures of genetic distance between European populations and a novel data set of ancestral linguistic distances between European regions.
Christian Dippel, University of California at Los Angeles and NBER; Stephan Heblich, University of Bristol; and Robert Gold, Kiel Institute for the World Economy
Dippel, Heblich, and Gold identify the causal effect of trade-integration with China and Eastern Europe on voting in Germany from 1987 to 2009. Looking at the entire political spectrum, the researchers find that only extreme-right parties respond significantly to trade integration. Their vote share increases with import competition and decreases with export access opportunities. The authors unpack mechanisms using reduced form evidence and a causal mediation analysis. Two-thirds of the total effect of trade integration on voting appears to be driven by observable labor market adjustments, primarily changes in manufacturing employment. These results are mirrored in an individual-level analysis in the German Socioeconomic Panel.