Topics in Economic History
Lightning Round SessionSunday, Jan. 5, 2025 10:15 AM - 12:15 PM (PST)
- Chair: Santiago Pérez, University of California-Davis
Bonds of Love: Social Contract, Patriotism and the Rise of Modern Banks
Abstract
This study explores historic China between 1902 and 1926, a time characterized by the birth of modern banks and dynamic state-civilian relations, to assess the role of patriotism in cultivating banking development. Patriotism is a reflection of social contract which conceptualizes the state as a contract between people and the government - the state provides protection and rights in exchange for civilians’ efforts in state-building. We find that modern banks, initially concentrating on underwriting government bonds, expanded more rapidly in areas with a greater number of patriots subscribing to these bonds. Our study contributes to understanding the role of social contract in shaping financial development as patriotism complements trust. We also shed light on how trust, a pivotal factor in banking evolution, was initially established.To draw causality, we employ a DiD method. We leverage the outbreak of WWI (1914) as a shock to the Chinese fiscal system in that the cessation of Western financial support prompted the Chinese government to launch its domestic government bond market. As a proxy for the ex-ante cross-regional strength of social contract awareness, we utilize the frequency of anti-tax unrests occurring in late Qing. We show that these protesters tearing up the old contract with the Qing court were likely to engage in building the new Republican regime, evident in voluntary enrollments in military academies and the formation of political societies and charities.
The DiD results indicate that, despite the new government's unproven creditworthiness, patriotic civilians invested in government bonds, thereby nurturing the growth of nascent modern banks that underwrote these bonds. Moreover, the effects transitioned from the official banking sector to the private banking sector, illustrating the evolution of trust in the new financial institutions. To further address potential endogeneity concerns, we employ the frequency of early Qing massacres as an instrumental variable.
Coalitions, Retaliation, and Whistleblowing: Evidence from Memorials of Qing China
Abstract
Whistleblowing by senior local officials is pivotal for monitoring official behavior and suppressing corruption. Yet, the act of reporting is a strategic decision, entangled with complex considerations such as the risk of retaliation by those being reported and the gains from collusion. Despite its importance, there's a notable gap in research on the strategic behavior of whistleblowers.This paper taps into historical evidence from Qing China’s memorials, which served as a confidential channel between the emperor and high-ranking local officials. Our focus is on memorials concerning natural disasters, specifically investigating whether officials obligated to report such disasters immediately would instead choose to form alliances to withhold information.
We introduce a theoretical model to examine how coalitions among top local officials like governors and viceroys influence the whistleblowing. The model suggests that local officials are prone to underreporting when they are further from the years of reassignment or when they expect more collaboration opportunities in the future. A critical determinant in an official’s decision to disclose disaster information is the fear of peer retaliation; The more easily identifiable the whistleblower or the higher and politically stronger the position of their peers, the more likely underreporting becomes.
Using data from memorials between 1723 and 1909 during the Qing dynasty, our empirical analysis corroborates our hypothesis: officials more distant from reassignment years tend to underreport disasters, with the probability of underreporting increasing by 2.5% for each year further from evaluation. Subsequent analysis dismisses other potential reasons for underreporting, including officials seeking personal gain from disaster relief or considering minor disasters unworthy of reporting, thus reinforcing the credibility of our conclusions. Our paper also highlights the consequences of the absence of whistleblowers: namely, more famines and a greater number of popular uprisings.
Decolonization and Fiscal Capacity: Event Study Evidence from Africa
Abstract
The determinants of variation in governments’ fiscal capacity is a central question in the study of taxation and economic development. The impact of past foreign rule — as widely experienced by many developing countries — on fiscal capacity is unclear both conceptually and empirically. This paper uses a recently-constructed dataset on the fiscal history of African countries over 1900-2015 to analyze the impact of decolonization on tax revenue and fiscal capacity. The analysis uses a staggered difference-in-difference approach, implemented using a stacked event study. It finds no strong pre-trends in fiscal capacity prior to decolonization. There is a substantial increase in fiscal capacity starting about 7-8 years following decolonization. This suggests that colonial rulers, on balance, invested less in fiscal capacity than did post-independence governments. We show that this effect is not due to democratization events in independent African states. Our conceptual framework instead posits that post-colonial states were able to increase tax revenues because their higher degree of legitimacy improved citizens’ tax morale, which allowed the new governments to enforce tax payments at a lower cost. We offer historical evidence that is consistent with this channel.Mapping Invisible Threads: Unveiling Economic Landscapes through Micro-Level, High-Frequency 19th-Century Postal Data
Abstract
This study explores socio-economic and political activities across the United States from 1849 to 1871, focusing on regional disparities and market boundaries beyond conventional confines. Utilizing 191,928 town-level postal revenue records from the Official Register of the United States, it transcends traditional economic geography, providing insight into market dynamics through dense human activity. The research employs postal data's detailed granularity, uniformity, and digital compatibility to map economic markets' geographic outlines. The approach adopts digitizing, cleaning, and geocoding a comprehensive biannual dataset of postmaster compensation, serving as a proxy for postal revenues based on a Federal Government formula. This analysis spans all towns and cities with post offices in the United States from 1813 to 1881.Central to this investigation is clustering techniques to analyze regional economic disparities. Through innovative use of postal data, the study reveals the spatial dynamics of 19th-century American markets, offering insights into their formation and endurance. This research contributes to economic history, macroeconomics, and regional economics, establishing postal data's role in economic historiography and enhancing understanding of economic integration and regional variation in a historical context. Furthermore, this study employs artificial intelligence for the linking of complex historical data, a methodological innovation with significant implications for scholars in the field of economics aiming to enhance their research methodologies.
Navigating the Pathways of Civilizational Progress: A Seven Millennia Analysis of Natural Routes and Location of Economic Activities in China
Abstract
The rise of cities marks a key step in human civilization. Roads link cities, turning them into centers for spreading information, goods, and technology. Studying how cities and roads are spatially placed in relation to each other throughout history shows us how societies have interacted and evolved. However, the scarcity of information on urban sites from periods before recorded history complicates efforts to incorporate the uneven spatial distribution of contemporary economic activities into a long-term perspective. Advances in Chinese archaeology offer new avenues for such spatial analyses. This study assesses natural routes in China and constructs a database that includes historical cities and all archaeological settlements with fieldwork. Here we show that the relationship between the location of cities and natural routes has changed over time. We find that a notable decline 4500 years ago coincided with a major global climate event, possibly indicating a climate shock triggered transition from hunter-gatherer communities to fully self-sufficient agrarian societies. In the past 150 years, the Industrial Revolution has significantly reshaped the economic geography. Excluding the shift 4500 years ago and the recent change in the past 150 years, variations in this pattern often align with China's dynastic cycles. Our results suggest that transitions in modes of production and political regimes are key factors driving changes in urban locations. Interestingly, between 4500 and 3500 years ago, a key time for state formation in China, we found no significant link between natural routes and archaeological settlements. This suggests that spatial interaction alone does not fully explain how states originated. We anticipate that our findings will provide a new foothold for further interdisciplinary studies on the evolution of human civilization.Persistence, Shocks, and Reversal: Evidence from China since the Neolithic Revolution, 5000 BCE–2000
Abstract
This study investigates the persistence of the spatial structure of the economy established in early history amidst different shocks. We focus on China, which has systematic records of economic activities after the Neolithic Revolution (5000 BCE–2000 BCE), which marked the first economic revolution in human history with the advent of agriculture. Drawing on a unique dataset that combines archaeological and historical records, we demonstrate that regions with more concentrated economic activities following the Neolithic Revolution consistently exhibited higher population densities over the past six millennia. This pattern persisted even in the face of war-related shocks. However, the forced opening and modernization of China since the mid-19th century resulted in the emergence of new economic agglomerations in trade-favorable areas, permanently disrupting the spatial equilibrium that had persisted since the Neolithic. To establish causality, we employ a Difference-in-Difference strategy, using the opening of China in the 19th century as an exogenous shock and the density of Neolithic sites at the regional level as the treatment variable. Additionally, to address endogeneity concerns, we incorporate the shortest distance to ancient rivers and lakes that have since disappeared as an instrumental variable.We attribute the emergence of the Neolithic pattern to favourable agricultural locational fundamentals and the persistence of this pattern to investments in state-building, such as administrative cities and transportation routes that led to path dependence. However, the reversal of this pattern since the 19th century suggests that a significant shock in productivity can alter the value of locational fundamentals and reshape long-standing historical spatial patterns. Our study contributes to understanding how locational fundamentals and path dependence could dynamically influence the persistence of spatial equilibrium under shocks. Additionally, we shed light on the mechanisms that facilitate or terminate the long-lasting impacts of the Neolithic Revolution and other shocks on productivity spanning millennia.
Quantifying the Legacy of Trauma: The Long-Term Impact of the African Slave Trade on Contemporary Firm Corruption
Abstract
We investigate the long-term effects of African slave export—a profoundly traumatic historical event—on firm corruption and related outcomes. Analyzing data from over 30,000 firms across 41 African countries spanning 2006-2021, our findings suggest a positive association between historical slave export and present-day corporate corruption. This association is both statistically and economically significant and remains robust after various identification and robustness checks. Further analysis reveals a positive correlation between slave export and perceptions of corruption at both the country and individual levels. Three potential channels emerge from our results linking historical slave export to modern firm-level corruption: ethnic fractionalization, diminished trust, and weak institutions. Notably, we identify firm-reported corruption primarily as a demand-side issue. In countries with extensive historical slave export, firms are more likely to avoid taxes, circumvent interactions with government officials, and operate without registration due to rampant corruption. Overall, our research sheds light on the long shadow of history, elucidating the historical roots of firm corruption and related outcomes in Africa.The Impact of Radical Redistribution on Economic Growth: After World War II
Abstract
The previous studies explained radical redistribution, such as land reform, brings about rapid economic growth. However, they did not provide a statistical model to support these arguments. We extend the previous studies by providing a statistical model to generalize the relationship. The model uses the cumulative GDP per capita rate of 30 countries during the period 1960 to 1990 as the dependent variable. Additionally, the model utilizes radical redistribution during the 1940s to 1950s as an independent variable. The control variables include the average inflation rate, average life expectancy, average population, and average GINI coefficient from World Bank Data. The result shows that successful radical redistribution in a capitalist country leads to a 1,977% to 2,099% increase in GDP per capita over the periods with a 99.9% confidence level.The Long-Run Effects of Teacher Shortages: Evidence from World War II
Abstract
Teacher shortages are a common policy problem, yet little is known about how they affect students and human capital development. I study the long-run effects of teacher shortages on students who were in school during World War II, the largest teacher shortage in American history. Men teachers left the profession at higher rates than women to join the military, meaning that states with more pre-war men teachers were more likely to be affected by these wartime shortages. I combine pre-war men teacher shares and the national decline in the number of teachers during the war to create a plausibly exogenous measure of “missing teachers” for each state, which can be interpreted as the teacher shortage intensity. I find that students exposed to a more severe teacher shortage have lower educational attainment and worse labor outcomes compared to students from less-exposed states and less-exposed birth cohorts. These students are less likely to graduate from high school and college, have lower earnings as adults, and are less likely to become teachers themselves. I find teacher quality to be the key mechanism that explains these long-run effects. States with more severe teacher shortages were more likely to hire teachers on emergency certificates during the war and in the immediate post-war years. Between 1940 and 1950, states with worse wartime shortages were less likely to hire teachers with college experience. Consistent with prior work on marriage bars, I find that states with worse shortages were more likely to hire married women during this period, though these women were less likely to have college experience.JEL Classifications
- N0 - General