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Chrisopher Hansman, Jonas Hjort, Gianmarco Leon
Abstract
Regulations that constrain firms' externalities in one dimension can distort incentives and worsen externalities in other dimensions. In Peru's industrial fishing sector, the world's largest, fishing boats catch anchovy that plants along the coast convert into fishmeal. Matching administrative daily data on plant production, ground-level air quality data, hospital admissions records, and survey data on individual health outcomes, we first show that fishmeal production worsens adult and child health through air pollution emitted by plants. We then analyze the industry's response to a 2009 reform that split the Total Allowable Catch (TAC) into boat-specific, transferable quotas (ITQs) to preserve fish stocks and reduce overcapacity. As predicted by a two-sector model with heterogeneous plants, on average across locations, fishmeal production was spread out in time, for two reasons: (i) boats' incentive to "race" for fish was removed, and (ii) inefficient plants decreased production and efficient plants expanded production (across time). The reform greatly exacerbated the industry's impact on health, causing e.g. 55,000 additional hospital admissions for respiratory diseases. We show that the reason is that longer periods of moderate air pollution are worse for health than shorter periods of higher intensity exposure. Our findings demonstrate the risks of piecemeal regulatory design, and that the common policy trade-off between duration and intensity of pollution exposure can be critical for industry's impact on health.
CGEG Faculty Associate Katharina Pistor has published a new book, The Code of Capital: How the Law Creates Wealth and Inequality. This book argues that the law selectively “codes” certain assets, endowing them with the capacity to protect and produce private wealth. With the right legal coding, any object, claim, or idea can be turned into capital – and lawyers are the keepers of the code. Pistor describes how they pick and choose among different legal systems and legal devices for the ones that best serve their clients’ needs, and how techniques that were first perfected centuries ago to code landholdings as capital are being used today to code stocks, bonds, ideas, and even expectations – assets that exist only in law.
Columbia SIPA faculty will visit the National School of Public Administration in Zagreb, Croatia, to conduct a program on European monetary and banking union May 13 and 14.
BRICLab is pleased to be joined by two journalists from Brazil, Gabriela Sa Pessoa and Juliana Gragnani, for the 2019 year.
On May 1st, the Center on Global Economic Governance at Columbia University hosted David Woo, head of Global Interest Rates, Foreign Exchange, Emerging Market Fixed Income and Macroeconomic Research at Bank of America. Woo, who obtained his PhD in Economics from Columbia University and is considered one of Wall Street’s top investment and macro strategists, manages a team of 50 analysts around the world.
Government economic policy aims at improving people’s lives. This is true for emerging markets and advanced economies, and is potentially now more important than ever before.
Douglas Almond, Hongbin Li and Shuang Zhang
Abstract:
Following the death of Mao in 1976, abandonment of collective farming lifted millions from poverty and heralded sweeping pro-market policies. How did China’s excess in male births respond to rural land reform? In newly-available data from over 1,000 counties, a second child following a daughter was 5.5 percent more likely to be a boy after land reform, doubling the prevailing rate of sex selection. Mothers with higher levels of education were substantially more likely to select sons than were less educated mothers. The One Child Policy was implemented over the same time period and is frequently blamed for increased sex ratios during the early 1980s. Our results point to China’s watershed economic liberalization as a more likely culprit.
Published in Journal of Political Economy, Volume 127, Number 2 | April 2019
On Wednesday, March 27th, the Center on Global Economic Governance at Columbia University hosted World Bank Economists David Gould and Daria Taglioni as they presented on the World Bank’s recent report titled “Critical Connections: Promoting Economic Growth and Resilience in Europe and Central Asia”.
Tommaso Porzio and Gabriella Santangelo
Abstract
We show that the global schooling increase during the 20th century affected structural transformation by changing the supply of agricultural labor. We develop an analytical model of frictional labor reallocation out of agriculture to infer changes in birth-cohort characteristics from observed data on agricultural employment. Bringing the model to microdata from 49 countries, we find that the increase in schooling was accompanied by a large shift in the labor force’s comparative advantage away from agriculture. We provide empirical evidence to suggest this relationship was causal. With fixed prices, the resulting decrease in the supply of agricultural workers can account for almost half of the observed reallocation out of agriculture. However, in general equilibrium, the net effect is ambiguous.
On Thursday, February 22nd, the World Leaders Forum and the Center on Global Economic Governance at Columbia University hosted European Parliament President Antonio Tajani as part of the Ambassador Donald and Vera Blinken Lecture Series.
Abstract
Does industrial development change gender norms? This is the first paper to causally explore the local effects of a continent-wide exogenous expansion of a modern industry on gender norms. The identification strategy relies on plausibly exogenous temporal and spatial variation in gold mining in Africa. The establishment of an industrial-scale mine changes local gender norms: justification of domestic violence decreases by 19%, women have better access to healthcare, and are 31% more likely to work in the service sector. The effects happen alongside rapid economic growth. The findings are robust to assumptions about trends, distance, and migration, and withstand a spatial randomization test. The results show that entrenched gender norms can change rapidly in the presence of economic development.
Guilherme Hirata and Rodrigo R. Soares
Abstract
According to Becker’s (1957) theory of taste-based employer discrimination, pure economic rents are necessary for discrimination to be observed in the labor market. Increased competition and reduced rents in the market for final goods should therefore lead to reduced labor market discrimination. We look at the natural experiment represented by the Brazilian trade liberalization from the early 1990s to study the effect of increased competition in the market for final goods on racial discrimination in the labor market. Changes in tariffs and initial employment structures are used to show that, in locations where there were relatively larger increases in exposure to foreign competition between 1990 and 1995, there were also relatively larger declines in the conditional racial wage gap between 1991 and 2000. As predicted by theory, the initial wage gap and its decline were more pronounced in regions with more employment in concentrated sectors. The effect of increased competition on the racial wage gap was not driven by changes in returns to productive attributes, in the structure of employment, or in other labor market outcomes. We find robust evidence of a negative and permanent effect of increased competition in the market for final goods on discrimination in the labor market.
Daron Acemoglu, Suresh Naidu, Pascual Restrepo, James A. Robinson
Abstract
We provide evidence that democracy has a significant and robust positive effect on GDP. Our empirical strategy relies on a dichotomous measure of democracy coded from several sources to reduce measurement error and controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy on economic growth. Our baseline results use a linear model for GDP dynamics estimated using either a standard within estimator or various different Generalized Method of Moments estimators, and show that democratizations increase GDP per capita by about 20% in the long run. These results are confirmed when we use a semiparametric propensity score matching estimator to control for GDP dynamics. We also obtain similar results using regional waves of democratizations and reversals to instrument for country democracy. Our results suggest that democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest. We find little support for the view that democracy is a constraint on economic growth for less developed economies.
Published in Journal of Political Economy, Volume 127, Number 1, February 2019
Rajeev Dehejia, Cristian Pop-Eleches, and Cyrus Samii
Abstract
We study issues related to external validity for treatment effects using over 100 replications of the Angrist and Evans (1998) natural experiment on the effects of sibling sex composition on fertility and labor supply. The replications are based on census data from around the world going back to 1960. We decompose sources of error in predicting treatment effects in external contexts in terms of macro and micro sources of variation. In our empirical setting, we find that macro covariates dominate over micro covariates for reducing errors in predicting treatments, an issue that past studies of external validity have been unable to evaluate. We develop methods for two applications to evidence based decision-making, including determining where to locate an experiment and whether policy-makers should commission new experiments or rely on an existing evidence base for making a policy decision.
Douglas Almond, Janet Currie, Valentina Duque
Abstract
That prenatal events can have life-long consequences is now well established. Nevertheless, research on the Fetal Origins Hypothesis is flourishing and has expanded to include the early childhood (postnatal) environment. Why does this literature have a “second act?” We summarize the major themes and contributions driving the empirical literature since our 2011 reviews, and try to interpret the literature in light of an overarching conceptual framework about how human capital is produced early in life. One major finding is that relatively mild shocks in early life can have substantial negative impacts, but that the effects are often heterogeneous reflecting differences in child endowments, budget constraints, and production technologies. Moreover, shocks, investments, and interventions can interact in complex ways that are only beginning to be understood. Many advances in our knowledge are due to increasing accessibility of comprehensive administrative data that allow events in early life to be linked to long-term outcomes. Yet, we still know relatively little about the interval between, and thus about whether it would be feasible to identify and intervene with affected individuals at some point between early life and adulthood. We do know enough, however, to be able to identify some interventions that hold promise for improving child outcomes in early life and throughout the life course.
Published in Journal of Economic Literature, Vol. 56, No. 4, December 2018