« Back to Results
Marriott Marquis, Torrey Pines 2
American Economic Association
Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PDT)
- Chair: John Parman, College of William and Mary
Long-Run Persistence of Habsburg Military Colonialism on Institutions in Post-Transition Europe
AbstractIn this paper we use geographical regression discontinuity design (RDD) to estimate the effect of a long-gone Habsburg military colony---the Military Frontier---on present institutions in post-transition Europe. The Military Frontier was a militaristic establishment ruled from Vienna with a purpose to stop the Ottomans from breaching further into Europe. The population of the Frontier consisted of natives, dominantly Catholic Croats, and immigrants, mostly Orthodox Serbs, that were granted royal benefits to populate the military colony and serve in the war against the Ottomans. The former border of the Frontier cut through parts of present-day Croatia, and after existing for more than 350 years, was disbanded almost 150 years ago. The exogenous variation defined around the no-more-existing border enables us to use RDD to study within-country differences in socio-economic outcomes. Using three waves of the Life in Transition Survey which records attitudes, opinions and values in post-transition countries, and the municipality of residence, we identify our treatment and control groups and measure the causal effect of military colonialism on modern-day European institutions. Besides determining that the territory of the ex-military colony is still underdeveloped when compared to the control group, we also explore possible channels of the established economic downturn. We will run a number of robustness checks and falsification tests, while a separate section will tackle the most obvious confounding element in our analysis, that of the war for Croatian independence and the establishment of the Republic of Serbian Krajina in the 1990ies that partially overlaps with the territory of the former Military Frontier. Finally, we believe that our findings from massive directed migrations in European history could have implications for modern east-to-west migrations and with it associated European policies.
Political Instability as Financial Information: Terrorism, Unrest, and Markets in Tsarist Russia
AbstractGood institutions are necessary to disseminate information to financial markets, but even in the absence of a strong institutional structure, financial markets may still behave efficiently if information is given freely. Political volatility such as terrorism is a form of readily available information, conveying news about future government policies, and thus financial markets should react accordingly. I test this hypothesis on data from Tsarist Russia, well-known for having weak political institutions but paradoxically also home to a strong and vibrant financial sector. Amassing a new, comprehensive, and unique monthly database on finance and political instability in Russia from 1788 to 1914, and using an Asymmetric Component GARCH-in-Mean (ACGARCH-M) model coupled with event study methodology, the results show that markets were consistently discriminating in their perceptions of terrorism. In particular, various financial instruments acted in different ways depending upon the type of political instability and their potential consequences. Even in the face of major acts of terror or unrest, there was at most a short-term effect in depressing Russian financial markets. However, there were sizable longer-term effects on financial volatility, and capital markets in particular were sensitive to terrorism.
The Benefits of Statehood: An Analysis of the Growth Effects of Joining the United States of America
AbstractThis paper quantifies the economic benefits of joining the United States. To this end, we construct a novel state-country matched dataset measuring long-run development for the period 1840-2016. Adapting extant static synthetic control models into a dynamic model similar to Arellano-Bond approach, we are able to construct the counterfactual growth paths of Texas, California, Arizona and Nevada had they not joined the USA. Using other countries as a control sample, we show that the real growth path outperforms the counterfactuals substantially in all cases. In the same way, we construct counterfactual growth paths of Puerto Rico, the Dominican Republic, Cuba and the Philippines in the scenario where they joined the USA at times in history where this might have been a (remote) possibility. We find counterfactual growth to be substantially higher than the actual growth. Having established the positive economic effects of US membership, we subsequently assess the sources of this added growth, distinguishing between a class of explanations related to internal market access and a class of explanations related to institutional quality. Using a large number of determinants of institutional quality, we find that the institutional quality of the USA as a whole matches the quality predicted for New England most closely. This suggests that upon accession, states imported the institutional quality of New England, which was typically superior to what they would have likely developed by themselves. We show that this institutional bonus accounts for the bulk of the growth benefits of US accession. The estimated growth benefits of the accession are robust across a variety of estimation techniques, sample selection checks and large-sample covariate balance tests.
The Effects of Banking Competition on Growth and Financial Stability: Evidence from the National Banking Era
AbstractHow do restrictions on banking competition affect credit provision and economic output? How do they affect financial stability? To identify the causal effect of banking competition, we exploit a peculiarity of bank capital regulation in the National Banking Era: opening banks in towns with more than 6,000 inhabitants required twice the equity as in towns below this threshold, thus leading to a locally exogenous variation of entry barriers. We construct a novel comprehensive data set comprising the annual balance sheets of all national banks and link it with the results of the decennial census. We show that banks operating in markets with lower entry barriers extend more credit and choose a higher leverage. The resulting local credit boom, in turn, is associated with an expansion in the local manufacturing industry. However, banks in markets with lower entry barriers are also more likely to default or go out of business during a major financial crisis. Altogether, we provide causal evidence that credit growth can cause both economic growth and financial instability.
The Long-Run Effects of Private Rule in the Colonial Era: Evidence from Java
AbstractDespite a growing literature on the effect of historical institutions on long-run economic development, the role of private rule during that era remains largely unexplored. This paper exploits spatial variation in the extent to which certain areas (plantation estates) in Java were controlled by private, foreign enterprises during the Dutch colonial period, to investigate long run effects on economic outcomes and institutions. Preliminary results suggest that development indicators are worse in places that belonged to private estates. Further, we find that the legacies of the private rulers - in particular, the institutional features historically imposed by them - persist to this day.
- N0 - General