Institutions and Economic Growth

Paper Session

Friday, Jan. 6, 2017 8:00 AM – 10:00 AM

Swissotel Chicago, Zurich C
Hosted By: American Economic Association
  • Chair: David Weiss, Tel Aviv University

Women’s Liberation as a Financial Innovation

Moshe Hazan
,
Tel Aviv University
David Weiss
,
Tel Aviv University
Hosny Zoabi
,
New Economic School

Abstract

Property rights are at the heart of capitalism's ability to efficiently allocate resources. Historically, married women have been one of the groups with the greatest legal disabilities in this regard, to the benefit of their husbands. Starting in the second half of the 19th century, common law countries, which were entirely dominated by men, gave married women property rights. Before this "women's liberation," married women were subject to the laws of coverture. Coverture had detailed laws as to which spouse had ownership and control over various aspects of property both before and after marriage. These laws created a strong disincentive for women to invest in financial assets, such as stocks, bonds, and even bank deposits. This paper develops a general equilibrium model with endogenous determination of women's rights in which these laws affect portfolio choices, leading to inefficient allocations. We show how technological advancement eventually leads to men granting rights, and in turn how these rights affect development. Exploiting cross-state variation in the timing of rights, we show that increases in non-agricultural TFP predict the granting of rights. The granting of rights in turn leads to a dynamic labor reallocation towards the non-agricultural sector, representing further development. Finally, we show that women's rights are associated with lower interest rates and greater financial intermediation, consistent with an increase in the supply of credit.

Roots of Autocracy

Oded Galor
,
Brown University
Marc Klemp
,
Brown University

Abstract

This research explores the origins of the variation in the prevalence and nature of political institutions across globe. It advances the hypothesis and establishes empirically that variation in the inherent diversity across human societies, as determined in the course of the exodus of Homo sapiens from Africa tens of thousands of years ago, shaped the nature of political institutions across regions and societies. The study establishes that, while human diversity has amplified the beneficial effects of institutions, mitigating the adverse effects of non-cohesiveness, its simultaneous contribution to heterogeneity in cognitive and physical traits has fostered the scope for domination, leading to the formation and persistence of autocratic institutions. A larger degree of human diversity within societies diminished cohesiveness and therefore stimulated the emergence of institutions that have mitigated the adverse effects of non-cohesiveness on productivity. However, the dual impact of human diversity on the emergence of inequality and class stratification have diverted the nature of the emerging institutions towards extractive, autocratic ones.Developing a novel geo-referenced dataset of genetic diversity and ethnographic characteristics among ethnic groups across the globe, the analysis establishes that genetic diversity contributed to the emergence of autocratic pre-colonial institutions. Moreover, the findings suggest that the contribution of diversity to these pre-colonial autocratic institutions has plausibly operated through its dual effect on the formation of institutions and class stratification. Furthermore, reflecting the persistence of institutional, cultural, and genetic characteristics, the spatial distribution of genetic diversity across the globe has contributed to the contemporary variation in the degree of autocracy across countries.

A Theory of Conservative Revivals

Murat Iyigun
,
University of Colorado-Boulder
Jared Rubin
,
Chapman University

Abstract

Why do some societies fail to adopt more efficient technologies and institutions in response to changing economic conditions? And why do such conditions sometimes generate conservative ideological backlashes and, at other times, progressive social and political movements? We propose an explanation that highlights the interplay --- or lack thereof --- between new technologies, ideologies, and institutions. When new technologies emerge, uncertainty can result from either a greater inherent riskiness associated with the technology or from a lack of understanding how the technology will fit with the prevailing ideologies and institutions. In our model, uncertainty about the benefits of new technologies can discourage investment in both institutions and the cultural capital necessary to take advantage of new technologies. Accordingly, increased uncertainty during times of rapid technological change may generate a conservative ideological backlash that puts a higher premium on traditional beliefs and values, with such movements typically resisting ideological updates in light of changing economic circumstances. Hence, only when the superiority of new technologies outweighs their inherent risks does the pace of institutional change accelerate in conjunction with a more progressive ideology that deemphasizes traditional beliefs. We apply the theory to numerous historical episodes, such as the Ottoman reform initiatives, the Tongzhi Restoration in Qing China, and the Japanese Meiji Restoration, when the interplay between ideologies and institutional adaptation in the face of rapid technological progress influenced long-run economic outcomes.

The Origins and Long-Run Consequences of the Division of Labor

Emilio Depetris-Chauvin
,
Pontifical Catholic University of Chile
Omer Ozak
,
Southern Methodist University

Abstract

This research explores the deep historical roots and persistent effects of the division of labor in pre-modern societies. It advances the hypothesis, and establishes empirically that population diversity had a positive causal effect on the division of labor. Based on a novel ethnic level dataset combining geocoded ethnographic, linguistic and genetic data, this research exploits the exogenous variation in population diversity generated by historical migratory patterns to causally establish that higher levels of population diversity were conducive to economic specialization and the emergence of trade-related institutions that, in turn, translated into differences in pre-modern comparative development. Additionally, this research provides suggestive evidence that regions historically inhabited by pre-modern societies with higher levels of economic specialization have higher levels of contemporary occupational heterogeneity, economic complexity and development.
Discussant(s)
David Weiss
,
Tel Aviv University
Marc Klemp
,
Brown University
Murat Iyigun
,
University of Colorado-Boulder
Omer Ozak
,
Southern Methodist University
JEL Classifications
  • N2 - Financial Markets and Institutions
  • O4 - Economic Growth and Aggregate Productivity