4. Institutions, Political Economy, Persistence

[jhconning]

Hi,

As you may have noticed by now, The GC is closed on 9/16 so our next class meeting will not be until Thursday 9/23.

These are the readings for then. Links to PDFs for all the readings at the syllabus where you will also find links to related optional readings.

4. INSTITUTIONS, POLITICAL ECONOMY, AND PERSISTENCE

• North, Douglass. 1990. “An Introduction…” chapter 1 in Institutions, Institutional Change, and Economic Performance. Cambridge; New York: Cambridge University Press.
• Binswanger, H.P., K. Deininger, and G. Feder. "Power, Distortions, Revolt and Reform in Agricultural Land Relations." Handbook of development economics 3 (1995): 2659-2772. (read only to p2682)
• Dell, Melissa 2010. "The Persistent Effects of Peru's Mining Mita." Econometrica 78, no. 6 1863-903
• Nunn, Nathan. 2008. “The Long-Term Effects of Africa’s Slave Trades.” The Quarterly Journal of Economics 123 (1): 139–176

Past notes/slides posted to the DevII website).

"Institutions" play a fundamental role in many development theories, so it will be important to understand what's meant by institutions (and 'organization'). North provides a classic broad introduction. Binswanger et al (1995) survey the large literature on induced institutional and technological change focusing in particular on the origins and evolution of property rights to land and patterns of production organization (a topic we'll dig into deeper later). The last two empirical papers look at natural experiments to examine the possibility of long-term persistence of historical events. Dell (2010) looks uses a spatial research discontinuity design to study the persistent effects of centuries-old compulsory labor institutions, and Nunn (2008) uses an IV approach to identify long-term causal effects of the slave trade. If you found the Robert Allen Global Economic History useful, you might find his chapters on Africa and The Americas (particularly section on Colonial Economy of Latin America) optionally useful as concise added background to the Nunn and Dell papers.

see you next week

Jonathan Conning

P.S. -- I will post messages like this as issues to github.com/jhconning/DevII-fall21/issues. In order to receive email notifications you will need to 'Watch' the repository (top right on github). You can choose notification options at github.com/settings/notifications

[Emanuel-Agu]

Binswanger, H.P., K. Deininger, and G. Feder (1995)

1. It’s not clear to me whether the authors try to explain lower levels of development by stating that a large proportion of the workforce is trapped into the agricultural sector that works at low productivity because of the implementation of simple technology. This paper assumes the use of “simple” technology in agricultural exploitation, which was the situation of the developing world until the early 20th century. Nowadays, however, it is not always true that large farms don’t implement technology at the international technology frontier. In other words, there are countries where large farms (either landlord states or haciendas) implement the highest level of technification available (that’s even less labor intensive than the manufacturing industry, so a reflux from unemployed workers in urban areas isn’t likely to happen). Then, since it’s hard to think that small farms can achieve such technification without large subsidies, it’s not straightforward that reallocating property rights will solve the development trap.

2. Upon the end of the selected reading, the authors acknowledge the asymmetric power of landlords and tenants. They also mention dynamic inefficiencies associated with taxes and tributes. How can this be conciliated with the authors’ assertion that large farms have larger supervision costs than family farms. Is this true for the current state of agricultural exploitations?

[alexkmc33]

1. In Dell (2010), one suggestive result is that long-term presence of large landowners provided a stable land tenure system that encouraged public goods provision. This is because non-mita district large landowners have more incentive to invest in public goods, which will lead to an increase in today's productivity and income. As the author says, this is somewhat different with previous literature as Binswanger (1995) that claim large inequality in land results in low gdp growth today. I did not understand how to incorporate the two points.

2. Some technical questions. In Nunn (2008), why does the inclusion of small island might hamper the estimation? In Dell (2010) page 1884, "give that in-migration in non mita districts is about 4.8% higher than in mita districts, I omit the 4.8% of the non-mita smaple". Why do we need this and is it the right way?

[TaeLee1085]

1. Dell(2010), used the RD model with the functional form assumption. Is there any potential problem caused by functional form assumption in RD model?

2. Nunn(2008), says that “The further inland a slave originated, the longer the journey was, and the more likely it was that he or she died along the way”. Then, does the slave traders tried to ship the slaves more from the coastal countries? If this is true, can this cause another potential selection bias?

[VictorZhang0413]

1. North, Douglass. 1990. “An Introduction…” chapter 1 in Institutions, Institutional Change, and Economic Performance. Cambridge; New York: Cambridge University Press.

In context, author mentioned the word “constraints” several times, especially “informal constraints”, and there must be a counterpart to this which is “formal constraints”. So, what is difference between “formal constraints” and “informal constraints”? Are there any specific examples about these two terms? Can we understand the “formal constraints” could be law and consider the “informal constraints” as morality?

2. Binswanger, H.P., K. Deininger, and G. Feder. "Power, Distortions, Revolt and Reform in Agricultural Land Relations." Handbook of development economics 3 (1995): 2659-2772.

“To get free peasants to move to the manorial estate required lowering expected utility or profits in the free peasant sector in order to reduce peasants' reservation utility - expected utility from family farming, including the risk attributes of the corresponding income stream - or shift their labor supply curve to the right. This was achieved through four mechanisms: ……”

Throughout China's thousands of years of feudal history, almost every feudal dynasty has seen serious land annexations before collapsing.

In general, at the beginning of the dynasty, farming was dominated by free farmers, which facilitated direct taxation by the state. In the late dynasty, the problem of land annexation arose:

1. most of those who annexed land were the ruling class, who had the privilege of tax exemption, resulting in less land for direct taxation; free farmers became tenant farmers and attached to large landlords, making it difficult for the government to collect poll tax.

2. The more serious the land annexation, the more tenant farmers were attached to landlords, and the fewer free farmers were under the direct control of the state, which was not conducive to the mobilization of the people for construction and military service; however, it was beneficial to the local magnates.

3. The process of land annexation was accompanied by illegal appropriation and favoritism, which led to class conflicts and corrupted the legal system and social morality.

[rojas8]

1. North (1990) mentions ...Although formal changes may change overnight as the result of political or judicial decisions, informal constraints embodied in customs, traditions, and codes of conduct are much more impervious to deliberate policies...How can we change these informal constraints? If it's even possible to change them. I think that it may take some generations to see a true change in those negative characteristics that restrict in some way economic development.
2. Nunn (2008) mentions ...societies that were most violent and hostile, and therefore the least developed, were often best able to resist European efforts to purchase slaves...Does this mean that Europeans took those African people that were less violent and "more developed"? Do we know the percentage of slaves that Europeans took with respect to the total population of Africa? And with respect to the population of each country or of each ethnic group? Can we assume in some way that most of the ethnic groups that remain completed were already the least developed and in certain way they remain like that?