The Power and the Money

The roots of making America in Argentina

Last post presented evidence that upward mobility was quite widespread in late 19th-century Argentina. The question is why? What made it so easy for immigrants to make America? Leticia Abad (Middlebury) and Blanca Sánchez-Alonso (UCEU) give one plausible answer.

But first, Prof. Abad shoeing me her childhood home in Buenos Aires. When she was growing up, the neighborhood was downright slummy. Now it is merely somewhat run down. I give it another ten years before the first yoga studios open up and she learns the exquisite pain I feel visiting Prospect Heights or Windsor Terrace.

And now, the reasons why immigrants to Argentina made America so successfully. In 1895, native-born Argentines still earned more on average than Spanish and Italian immigrants. Italians, though, managed to outperform Spaniards despite being rather less literate (78% versus 88%) and mostly farmers (69% versus 41%) when they got off the boat. Not to mention the language barrier; it is easy for an Italian speaker to learn Spanish, and you can hold simple conversations across the line, but the two languages are not identical. I have held conversations with people across the Spanish-Italian barrier, the first time on a crowded train from Glasgow to London in 1990. I could nonetheless not possibly hold a professional conversation in Italian. 

Yet despite these disadvantages  somehow Italians sorted into higher-paying occupations. How?

The authors’ explanation is that the Italians established deeper and better networks. Basically, once Italians got a foothold in high paying occupations, it became more likely that later arrivals would follow in their footsteps and sort into those occupations. These networks raised both groups’ wages, but the Italians were better at it. (The below map shows the concentration of Italians in Buenos Aires neighborhoods in 1895.) 

So there you have it! The immigrants were able to make America so successfully because they stuck together and helped their countrymen, even after multiple generations in the New World. We don’t know if these ethnic networks were stronger or lasted longer in the Argentine Republic than they did in the United States, but it is certainly possible. Half a cheer for assimilation, then! Sometimes it’s a good thing if the melting pot doesn’t quite melt completely.

But there is another, slightly more depressing, explanation for the why the immigrants made America in the Río de la Plata. One that might also possibly explain some of Argentina’s (and indeed, the whole Cono Sur’s) relative failure. 

Hacerse la América en Argentina

Argentina, it is probably unnecessary to say on this blog, is a country of immigrants. Moreover, it is a country of immigrants from almost the same places as Brooklyn got immigrants back in the day, as this photograph shows. 

Argentines had an awesome expression to mean that you were doing well in the New World: “Hacerse la América.” It translates to “making América.” Not “making it in América” but “making América,” as in “making partner” or “making tenure.” How awesome is that?

But how many people really did make América? Sure, unskilled laborers could earn higher wages in Argentina just by getting off the boat from Italy or Spain or Syria or Russia ... but that’s not making América. Making América is doing better the longer you’re in the New World and seeing your children do better still. How common was that?

Well, two new papers can now tell us. The first is by Santiago Pérez (U.C. Davis); the second by Leticia Arroyo Abad (Middlebury) and Blanca Sánchez-Alonso (UCEU). Today I will talk about the first.

Pérez matched individual immigrants and their children across the 1869 and 1895 censuses. He also matched immigrants from arrival data collected in 1882-84 to the 1895 census. And what did he find?

Immigrants moved up the occupational ladder faster and farther than native-born Argentines. That is, if you were an unskilled laborer in 1869 and you were an immigrant, you had a 23% chance of making it to a white-collar profession by 1895. For the native born, that same chance was only 8%. Immigrants also showed significantly higher wage growth than natives. Except, for some reason, the Swiss. That country appears to have sent a bunch of slackers to the Southern Cone.

As for the people who arrived in 1882-84, fully 75% of them upgraded their occupations by 1895, a rate considerably faster than in the United States. And unlike the United States, there was remarkably little immigrant downgrading, the 19th-Century equivalent of having the former Russian brain surgeon driving a cab in Houston.

What about the children? If you were the native-born son of an unskilled worker, you had only a 10% chance of making into the ranks of the white-collar class. But if you were the son of an immigrant unskilled worker, well, then you had a 36% chance of moving on up, to the top, to a deluxe apartment in the sky. And that result holds controlling for parental literacy, earnings, and access to property.

Better opportunity than in the United States! There are two potential explanations, though, which I may get to in another post. One of which is based on the immigrants ... the other on how Argentina differed from the U.S. and Canada at a deep structural level, and not in a good way.

Observatorio Argentino 36: What happened to the Afro-Argentines?

Today Argentina is not known for having a large black population.  

Being a country of Europeans is a deep part of Argentina’s national identity. The census stopped recording race in 1869. A bit more than 80 years later, when Josephine Baker visited, she was surprised at the absence of black people. So she asked Ramón Carilio, the dark-skinned minister of public health, where the black population lived. Carilio felt free to joke, “There are only two — you and I.”

When Era Bell Thompson visited Argentina in 1973 to report on the black population there, she recorded one Argentine’s ironic complaint about the United States: “Argentines are lumped in with all the rest of the Spanish-speaking peoples, even though we are white.” She had no problem finding black people, but she described them as “Not a viable, but a vanishing black people: relatively few in numbers, relatively free of racial discrimination and relatively content.”

Even now, some Argentines still joke — admittedly with some accuracy — that an Argentine is an Italian who speaks Spanish and wants to be British. This view of Argentines is not only in Argentina: in 2001, when María Lamadrid visited Panama in 2001, immigration officials refused to believe that a black woman could actually be Argentine.

But  we know that colonial Argentina was heavily African! A census of Buenos Aires held in 1778 revealed a black population of 35%. (See Luis Wainer, La Ciudad de Buenos Aires en los Censos de 1778 y 1810.) As late as 1855, local B.A. surveys recorded race. George Andrews (page 41) estimated the total African population of Argentina in 1800 to be 69,000, roughly 22% of a total population around 310,000. 

So what happened to all the black Argentines? In comments, Luciano suggests that Argentine governments may have engaged in genocide, conscripting blacks to disproportionately fight in the War of the Triple Alliance and live in disease-ridden neighborhoods. 

The genetic ancestry data cited in the last post, however, shows only about a 4% presence of African genetic markers. That is a lot less than 22%! Does that provide evidence of some great genocide or expulsion in 19th-century Argentina?

Possibly not.

The Argentine-born population of Argentina grew by about 2.0% per year between 1800 and the first national census in 1869. (The link goes to the census; the data on the Argentine population is on page 686.) That is only slightly lower than the 2.2% rate of natural increase in the United States between 1800 and 1870, as estimated by Michael Haines. (See Table 1.) We know that the rate of natural increase in Argentina was 1.3% per year in 1869-95 and 1.6% per year in 1895-1947, so 2.0% for 1800-69 is likely on the high end. (We have no direct observations of the 1800 population; the 310,000 is an educated guess.)

If you assume that the Afro-Argentine population should have grown at the same rate of natural increase as the overall population, then you would have expected about 1.1 million Afro-Argentines by 1947, roughly 7% of the total population of 15.9 million. Intermarriage would not change the expected prevalence of African genetic markers: it does not matter if 7% of the population is of purely African descent or if the entire population has 7% of their ancestors from Africa. In other words, the mass immigration from Europe and the Levant can explain 15 percentage points of our estimated 18 point drop in the proportion of African ancestry. 

That still leaves a mystery, because 4% is lower than 7%. But it is a much smaller mystery. One possibility, of course, is that Afro-Argentines suffered differentially high mortality due to actions by the Argentine state.

But there are other possibilities that should first be eliminated before we conclude that President Domingo Sarmiento presided over a great crime. It may be that the 4% estimate of the proportion of African ancestry in the Argentine population is too low. More likely, our estimate of the 1800 population may be too low: if there were actually 450,000 people in the country in 1800, then the expected proportion of African ancestry would be 4% today. 

There is a lot of room for more scholarship. But the mystery is smaller than the headline figures would indicate ... and there may well be no mystery at all. 

How is Argentina like Puerto Rico?

Mostly, it isn’t.

But there is a sign of a disturbing history deep in the genetic heritage of most Puerto Ricans. And contrary to the popular belief, there may be some trace of the same history in Argentina. 

Some background. Over on Twitter, the great Pseudoerasmus and the great Gabriel Mathy began a debate over why North America saw relatively little intermarriage between Europeans and Native Americans compared to elsewhere. Pseudoerasmus argued that it was all about initial conditions. The Iberians migrated in smaller numbers to areas with bigger indigenous populations and in a heavily male-heavy environment. Gabe, conversely, argued that it was all about cultural norms. The English did not intermarry in significant numbers even in places with high numbers of indigenous and skewed sex ratios. 

It was an interesting discussion which I hope is put into a blog post. I participated for a bit but dropped out; Pseudoerasmus and I get along brilliantly, but in the heat of tweeting innocent responses can come across as more than slightly hostile. Moreover, the long threads are impossible to follow, quite unlike comment threads on a blog or the old newsgroups. (or ... gulp ... Reddit.) These are two of the reasons why I think Twitter is useless (at least for me) and am leaning towards quitting the platform, but I digress. If you must, try here and here. 

What does any of this have to do with Puerto Rico? Well, early DNA studies, from back when such things were new and neat, showed something a bit creepy. Mitochondrial DNA (mtDNA), which is passed down through the female line, skewed Native American. But Y-chromosomes were entirely European and African. The implication is that something awful happened to the entire male Taino population; they were either killed or denied the possibility of procreation. Likely both.

Later studies upheld the results. Here is one from 2014, which sampled 326 people and found mtDNA that was 60% indigenous, 25% African, and 15% European, whereas the male Y-chromosomes were 85% European and 15% African.

Argentina is typically thought of as a European settler offshoot, and with good reason. In 1895, 25% of the population was foreign-born, overwhelmingly from Europe and the Levant. By 1914, that figure was up to 30%. Gross immigration between 1857 and 1914 came to 4.6 million people; net immigration ran about 3.0 million. (Pages 201-02 of the 1914 census.) All this with a population of only 7.9 million in 1914! Add in the Argentine-born children of those 3.0 million post-1857 immigrants, and you have a veritable transformation of the population. You might reasonably expect Argentines to have a similar genetic makeup to, say, white people in the northeastern United States or Ontario.

But there is some evidence that you would be wrong. 

A 2010 study found that 54% of Argentine mtDNA came from indigenous sources while 94% of Y-chromosomes traved to Europe. These results are strikingly close to Puerto Rico (minus the large African admixture on the island) ... shockingly so for a country which received mass immigration from Europe in relatively recent times.

So what explains the result?

Well, first, maybe it is wrong. It is one study of 246 individuals and sampling issues are not small. I suspect that the prevalence of indigenous mtDNA it is more-or-less correct; the result has been corroborated in multiple studies. The Y-chromosome part is dicier.

Second, another study added a wrinkle: half of the indigenous South American DNA appears to have originated outside the modern borders of Argentina. That opens up the possibility that at least half of the result may be driven by migration from Paraguay, Bolivia, and Peru. As the authors write, “We did not collect bio-geographic information for most of the donors of our samples, and this is information was not available for most of the data collected from the literature; therefore, some donors could be in reality Native American immigrants (or descents form parents) from neighboring countries.”

Finally, European immigration to Argentina skewed male. (See page 271; it goes to CICRED 1974.) In 1869-1914, 1.7 males arrived for every female. That could explain some of the disproportionate prevalence of European Y-chromosomes compared to mtDNA without the specter of a Puerto Rican style past holocaust.

Nonetheless, the prevalence of native American ancestry in Argentina — and its apparent concentration in maternal ancestral lines — is a bit of surprise! There is a lot we do not know about the Argentine past ...

What is the cost of an independent Canada?

In the last post, I discussed Canada’s mysterious productivity gap with the United States. It appears to have been rather long-lasting. The current explanation is that the gap derives the fact that Canada is a smaller market and firms therefore have trouble reaching the optimal size and specialization. The implication is that had Canada been part of the United States, it would be more productive today. 

But does the gap really exist? Might the whole post be based on a misconception?

Vincent Geloso suggested that the gap may be driven by Quebec, but that does not match the data. The income gap with the U.S. holds for Ontario back to the 1870s. Moreover, we have detailed firm-level data for 1871 which shows that Ontarian firms were about 3-5% less productive than their Michigan equivalents. That is not to say that Quebec wasn’t a laggard! It is to say that the gap, inasmuch as it exists, is not due to backwardness in Quebec or the Maritimes. 

Randy McDonald, however, suggested that we might be asking the wrong question. Maybe the question shouldn’t be “Why are Canadian firms less productive than American firms?” but rather “Are Ontarian firms less productive than firms in the Great Lakes states?”

After all, were Canada part of the United States, then modern Ontario would be the State of West Canada with a northern border somewhere between Lake Nipissing and the Albany River. West Canada would be just another Great Lakes state. If real genuine Ontario has been consistently less productive than the Great Lakes states, then we can conclude that there is some Canadian factor holding firms back. But if it is not, then we might want to doubt the entire premise.  

It is easy enough to get regional GDP per capita for 1997-2016. Now, GDP per capita is a highly imperfect proxy for productivity. It does not account for differences in age structure, labor force participation, or work hours. But it is what I have. The data for the U.S. comes from the BLS. The Ontarian data is converted to U.S. dollars using the OECD PPP exchange rate. 

And so:

Wow! Ontario was ahead of the Great Lakes states in the late 1990s, falling behind only after 2003. It fell behind Michigan only in 2010. This makes me wish for a longer time series. Is 1997 or 2016 the aberration? Has Ontario basically looked like a Great Lakes state since 1871? There is a paper for an enterprising graduate student here. 

In fact, there are two different axes upon which to compare real Ontario with counterfactual West Canada. The intensive axis is productivity. Would workers and firms be more productive in Ontario had they enjoyed the same access to the American market as firms in the Great Lakes states? Did the value of being American, if any, change over time? The question is interesting in-and-of itself, but it also might shed light on the putative benefits of European union.

But there is an extensive axis as well! Before 1879, the problem with being Canadian was that the United States imposed high tariffs on Canadian exports. After 1879, however, the National Policy also imposed very high tariffs on American and British exports to Canada. Canadian firms still lacked access to American markets but they no longer had to worry about American (or British) competition.

If the policy worked, then firms would be created in Canada that otherwise might not have existed. Those firms would require workers. Where would those workers come from? They could come from farms, but the Canadian farm sector was still growing fast. They could come from existing firms, but that would raise wages. In an age of open immigration, high wages should have attracted more immigrants. As the industrial heart of Canada, Ontario should have had more firms and more people than it would have had it been West Canada, just another Great Lakes state. (If I had to guess, I would imagine that Wisconsin might be the best parallel for counterfactual West Canada, despite its closer proximity to Michigan.) 

But did the National Policy work as advertised? And if so, how much bigger is Canada’s population? And what were its costs and benefits relative to (1) the reality of American and Canadian protection; (2) a counterfactual of American protection and Canadian openness (i.e., no National Policy); (3) a counterfactual of American and Canadian openness (i.e., annexation or a North American customs union); and (4) a counterfactual of American protectionism but Canadian openness only to Britain (i.e., some sort imperial federation)?

If anyone knows of a literature, please point me to it! And if there is not a literature, then somebody should get on it! Economic history, like most things, needs more Canadian content.

Three worthwhile Canadian puzzles

So, to continue with my recent interest in Canadiana, impelled by, well, being in Canada!

There is an interesting puzzle about Canadian economic development. Well, there are many many interesting puzzles, but what particularly grabs my attention at this moment is why Canadian productivity has persistently lagged the United States.

Below I show Canadian total factor productivity (TFP) as a percentage of American TFP between 1950 and 2014. Save for a few halcyon years in 1973-80, Canada has consistently lagged the United States. Moreover, the gap turned into a chasm in the 1980s and grew even larger after the Great Recession. 

The productivity gap predates WW2. After World War 2, Canada lagged the United States in total factor productivity. That is to say, a Canadian worker in the same industry with the same skills and working on the same machinery produced less than her American equivalent. In the early 20th century, the superficial gap was just as large: the average Canadian worker added only 81% as much value per hour as his counterpart south of the border.* (Table 6 on page 25.**) Canadian workers, however, used rather less machinery than their American counterparts, so TFP closed to about 94% of the U.S. level ... remarkably similar to the gap in 1950-67.

In fact, the gap widens if you go further back. In 1900, GDP per capita (the crudest measure) in Canada ranked only 80% of the United States. In 1870, it was 70%. Canada appears to have had more-or-less that income gap with the United States back to 1820. 

Heck, the gap goes back to even before the existence of either the United States or Canada! Vincent Geloso (Texas Tech) has a paper comparing 18th-century Quebec with New England and finds that living standards were about 31% lower in what eventually became Canada. (Remember, there was no settled European population in modern Ontario back then.) 

So what caused the gap? A seminal 1964 paper by H.E. English pinned the gap on American protectionism: Canadian businesses operated at too a small scale and tried to produce too wide a variety of products. In other words, Canada wasn’t big enough. (You can find a 1980 study making the same argument here.)

This seems plausible. And as theories go, it has the advantage of explaining why the United States has enjoyed such a lead for so long over so many places. Everywhere else is too small! There are just too many damn countries in the world. Those of you who have read my opinions about  secessionism will know that I would find this a very gratifying conclusion.  

But the scale explanation does not seem to fit with the big widening of the gap since free trade.

Or does it? It is true that trade costs between the U.S. and Canada are still pretty high. And it is true that interprovincial trade barriers place even bigger obstacles on Canadian firms than American protectionism.  And it is true that the returns to scale in Canadian businesses are pretty high. (Page 130 of the 2009 World Development Report.) Canada has lots of small firms compared to America (consistent with the scale economy argument) and those small firms tend to be less productive than their American counterparts (sort of maybe could-be consistent with the scale economy argument). 

Statistics Canada ran an interesting thought experiment to test the hypothesis. They found that if you altered the size mix of Canadian firms to look like American ones you would close the productivity gap by 5 percentage points while if you made Canadian small firms as productive as American ones you would close it by nine. (Table 6, counterfactuals one and two.) Fixing both effects would close two-thirds of the gap, call it 16 points.

But that is not the entire gap. In fact, it leaves an unexplained gap bigger than the total gap in the 1950s.

Or the 1870s, for that matter. Kris Inwood (University of Guelph) and Ian Keay (Queen's University) conducted a similar exercise for Canada in 1870. They could get Canadian TFP to rise from 93% of the U.S. level to 97%, which cuts most of the gap. (You can find an outline of their paper here; the main one is paywalled.) Strangely, they downplay their finding, which seems like a very Canadian thing to do. The punchline is not that a gap remained, the punchline is that they explained more than half of it!

So the fact that Canada had a protected small market explains a little more than half the 19th century gap and about two-thirds of the modern one. But that still leaves two puzzles. First, what explains the rest of the gap in both periods? And second, why has the gap grown so much larger recently, despite NAFTA and all the ways modern communications should make service exports easier?

It is a great pair of questions.

But I mentioned three in the title, no? What’s the third puzzle?

I will post on that later, but it’s even weirder than the productivity gap ... it’s that median incomes in Canada may have finally pulled even with the United States. That is to say, for the first time ever it matters not to most Canadians that they live in a fundamentally less-efficient economy than their southern neighbors. And that’s the biggest puzzle of all.  

* The gender shift is deliberate.

** John Baldwin and Alan Green, “The Productivity Differential Between the Canadian and U.S. Manufacturing Sectors: A Perspective Drawn from the Early 20th Century,” The Canadian Productivity Review (Statistics Canada: December 2008).

Some random research links

Department of It’s a Little Better Than You Feared: Most research into intergenerational mobility in the United States looks at parents and children; a few look at grandparents. Well, what about great-grandparents? Turns out that is complicated, but there is no real evidence of a great-grandparent effect. But remember, this is an independent effect. So if you have successful grandparents but messy screwed-up parents, then your successful ancestors won’t advantage you. Similarly, if you have awesome parents who made it out of a terrible situation, then their humble roots won’t disadvantage you. But any benefit passed on from great-grandparent to grandparent to parent, well, it’s hella likely that such benefit will help you too.

But it gets complicated. Go read the paper.

Department of Mixed Blessings: What effect to booms and busts have on mortality? Once again, turns out to be complicated! Using 200 years of data, it turns out that growing up during a boom is good for you. On the other hand, being an adult during a boom isn’t all that good. The explanation? Well, a boom increases the ability of your parents to invest in you and reduces the incidence of painful social situations. All good! But they also make it easier for those same adults to consume too much booze and cigarettes and expose them to more pollution. Nothing is ever simple, is it?

Some benefit to the Great Sloppification

It is fairly well undeniable that sartorial standards have collapsed over the past half-century. It has been hard for me to see the benefit. I understand that most people I know in Florida disagree that a long-sleeved lightweight cotton jacket or shirt is more comfortable than a terrible looking T-shirt in the heat. But that does not mean that I understand their disagreement. 

And when it comes to the collapse in standards in more temperate climes, I am utterly befuddled. At least in cold weather people still look somewhat dignified when being sloppy. But once it hits about 60, well, it is possible to dress informally and look good but most Americans do not bother. 

Plus, you really can look quite good and be comfortable in the Miami heat if you know what to buy, even in dark colors:

But finally now I have found a possible benefit! In 1965, women spent 48 minutes a day on laundry and men spent ... uh ... one. By 2012, that was down to 19 minutes for women and up to ... uh ... five minutes for men. (Table 2.1.) So it is possible to argue that the Great Sloppification freed women from the drudgery of washing men’s clothing and allowed men to get away with increasing their laundry time from basically nothing to merely risible. 

Might it be just the spread of washing machines what let people spend less time on laundry? Nope. Household penetration in America hit 75% by 1950. (See Table I.)

Clothes dryers, on the other hand, might account for some of the decrease: they were introduced in 1950 and only hit 50% in 1972. (Same table.)

Still, while I cannot eliminate the hypothesis that the fall in joint laundry activities from 49 to 24 minutes a day might be due to cheaper clothes dryers, I have my doubts. I suspect that the effect is indeed due to the Great Sloppification. 

So there you have it. The world is an uglier place, people no longer show each other respect when going out in public, and is damnably hard for young up-and-comers to signal seriousness. But assuming that men should be spending at least 19 minutes a day on laundry, all those people wandering around in T-shirts with logos on them have a little more than 1½ extra hours a week that I am sure they are spending very well on personal advancement and societal improvement. 

Uruguay and New Zealand: Never alike?

So here I am in Uruguay! Getting here was a bit more involved than I had hoped. My Copa flight gave me 45 minutes to change planes in Panama City, but thunderstorms delayed our departure from Dulles for about that long, and that was that. Overnight in Panama.

In a previous post, I showed evidence that Uruguay and New Zealand were very similar in terms of their geographic endowment (meaning lots of great grazing lands) but Uruguayan farners failed to adopt technological innovations that their New Zealander cousins took up with abandon. I asked why and got two good hypothesis: Shah8 suggested that New Zealanders were more integrated with Australia and had access to cheaper capital, while Sam pointed out that Uruguayans were far less educated than New Zealanders in 1900.

Well, there is another possibility. In the late 19th and early 20th centuries there were two ways to generate large-scale energy: burn a fossil fuel or dam a river. But Uruguay is flat, with no natural lakes, and it receives only 75% as much rainfall. Moreover, that rainfall is more erratic. Reto Bertoni and Henry Willeband (Universidad de la República) noticed that difference, and gathered hydro cost data for the two countries. And they found this circa 1920 (page 25):

Capital costs for hydropower in Uruguay were triple their level in New Zealand; operating costs (for all electric power plants) were double. And if you consider Shah8’s conjecture that capital was scarcer in Uruguay, then the levelized capital cost relative to N.Z. will be even higher than these figures imply.

New Zealand and Uruguay were very much unalike in one key respect — hydropower resources. But two quibbles. First, hydro was not the only source of power. The Uruguayans could have burned coal. Second, did energy matter that much? Sure, it cost more than in New Zealand, but that does not mean that those higher costs mattered in countries dependent on agriculture. 

Thoughts?

Was the French Empire predatory?

There is a long debate over colonialism, particularly the late-19th-century variant. Most of the literature focuses on long-term effects. So it often loses sight of a simple question: did imperial institutions function basically the same as capitalist institutions in non-colonized places or did they serve to transfer resources to the metropole? That is, did colonialism simply bring areas into the modern world economy (for better or for worse) or did it directly suck resources out of the colonies?

This is not an easy question to answer. In a classic work, for example, Davis and Huttenback showed that British colonial enterprises were less profitable than similar British enterprises at home, in the Dominions, or in the Americas. But profitability tells us little. Imagine that British colonial enterprises had been phenomenally profitable. Would that have meant that they were bad for the colonies? Clearly not! Some other measure is needed. 

So here comes Federico Tadei (Universitat de Barcelona) with an obvious measure: did colonial commodity producers receive the same price for their goods as producers elsewhere, accounting for differences in transportation and insurance costs? 

In a bit more detail, here is what he does:

1. Gather prices at French ports for each commodity between 1898 and 1959. Also gather producer prices (what African farmers received at the farm gate) at African ports. Tadei can do the latter because French African statistics broke port out trade costs from producer prices; 
2. Construct estimates of trading costs including Atlantic shipping, insurance, inland transportation, port charges, and export taxes;
3. Calculate (1) − (2) to get what producer prices should have been under non-predatory institutions;
4. Compare (3) to the actual prices received by African farmers;
5. Check the results by comparing (1) against producer prices for U.S. cotton and wheat exporters or European settlers in Africa to see if American producers selling to Britain were as disadvantaged as French African producers selling to France;
6. Check the results by seeing how much of an increase in world prices is passed on to French African producer prices, plus a few more abstruse checks.

Here is the headline result, as a % of prices:

And here is French Africa compared to the United States for cotton:

Moreover, there is a plausible mechanism for extraction: monoposonistic trading companies and compulsory harvest quotas. The effect of the former is obvious; the effect of the latter was to prompt African producers to grow more than they would have in a competitive market. In addition, poll taxes might have induced African workers to enter the labor market, driving down production costs for African farmers and thereby prompting them to grow more. (Forced labor may have had the same effect, inasmuch as it also drove down costs for African producers.)

What I would like to see is the same method applied to Latin American and Asian producers. Brazil, Ecuador and various Caribbean countries exported cocoa; China exported peanuts; Brazil exported cotton. As for palm oil … well, forget that. (United Fruit introduced it into Guatemala, Panama and Honduras in the 1920s without much success. I was involved in a failed effort to introduce it to Chiapas in 1999.) But it is a way of stress-testing the hypothesis. If producers in Latin America and China faced similar extraction rates, then formal imperialism might not have been the problem.

Thoughts?

Selection bias

 There are a lot of papers in the “history only happened once” genre, where somebody examines an event that happened hundreds of years ago and proclaims that the effects persist today. Some are truly excellent and tell us things we did not know. They find a correlation most did not expect, use unassailable data, and have a testable explanation of why the effect persists. Some are very neat but may have other explanations. Some are trivial: they use fancy methods to reaffirm persistence that had an obvious origin and is well-known to even casual observers. And some are rather contentious: the data and results are not as clean as the authors would claim. 

Now we have a paper claiming that it matters whether an area fell under Dai Viet rule in Vietnam before 1833. The Dai Viet state, the paper claims, was organized along Chinese lines with strong village councils. Those areas today (and under South Vietnam) were places where “citizens have been better able to organize for public goods and redistribution through civil society and local government.” 

I have to wonder: what happens to all the papers that find no effect from long-ago events? Other than the ones on strategic bombing, they never make it to publication. What would a meta-analysis find? Maybe there really is no there there. 

Did Britain unify Germany?

With the U.K. on its way out of the European Union, now seems like the time to ask!

I am not talking about 1989. Rather, I am talking about 1871. Did the emergence of a unified German nation state owe itself to British policy?

In an entertaining tour-de-force, Thilo Huning and Nikolaus Wolf of Humboldt University argue yes, yes it did! The inituition is fairly simple. In 1815, the U.K. pressured Prussia into accepting large territories in western Germany rather than Saxony. That gave Prussia sway over the large river systems than carried German commerce. When the Zollverein came along, many of the smaller German states joined because there was not really much of a cost: Prussia controlled most of their commerce anyway. So by 1835 you had the Zollverein and (eventually) a unified German Empire.

But what if the Prussians had got their way and annexed Saxony instead of Westphalia? Well, the authors construct a series of low-cost trade routes and measure how much joining the customs union would have benefited the various German states. They then measure how much control Prussia had over the state’s commerce anyway. They find that the tradeoff predicts the decision to join the Zollverein pretty well: the less control a state had to lose, the more likely it was to join.

They then run the model using a hypothetical Prussia that controls Saxony but has no western territories. They find that no state south of the Main would have had incentives to join. Zollverein expansion peters out in the early 1830s with a map including only the blue-shaded areas below:

How would later German history have been different?

What can we learn from Huey Long?

Back during the Obama administration, critics always used to say that there was too much “uncertainty.” Business executives being fragile flowers and all, they could not be expected to make tough decisions without absolute 100% certainty about everything.

That argument made no sense back then. After all, the Obama administration was well inside American norms during 2009-10 … and hamstrung afterwards. You can make a case that the DAPA order pushed executive action too far, but that’s really not what people were complaining about. Anyway, investment steadily rose during the Obama administration while the cost-of-capital remained low, meaning that the whole premise of the argument that “uncertainty” mattered was based on nothing.

The Trump administration, however, has brought the whole argument over “uncertainty” roaring back! Here we are, a month in, and you’ve got political uncertainty galore. Will Obamacare survive? Will the administration survive? Will it lash out? What norms will be broken? How can you trust a government that lies with such ease about everything? How bad will corruption get? Will we have a trade war? A real war? Civil unrest? Impeachment? WHO KNOWS! RUN FOR THE HILLS! CASH UNDER THE MATRESSES!!!

Or maybe let’s take a deep breath and ask if there is anything that history can tell us. Turns out that there is! In the 1930s, Huey Long ran a very Trumpian administration in Louisiana. Governor Long was, in fact, the model for an American dictator in It Can’t Happen Here. (A novel I recommend, by the way. Free at the link.)

The picture, yes, is of Texas, not Louisiana. I was just in Austin and will be returning fairly often. I’ve only been to Louisiana once, in 2004, when I stopped outside Baton Rouge on my way to Boston from Mexico City. (I also drove through New Orleans in 1996, on my way from Florida to California.) The place seemed crazy, but then again I was idiotic enough to decide to stop into a biker bar outside the city. I’m fairly certain that my Army Reserve ID was the only thing that kept me from severe physical harm.

But I digress. Let’s return to Huey Long. His regime really was that wild, wilder than any 2004 biker bar. In 1928, he won election. He then trampled over what little civil service there was in Louisiana, firing opponents and forcing state employees to donate to his campaigns. He passed out jobs to active legislators. (Really. He did that.) He imposed taxes on political opponents. In fact, he threatened to impose taxes that business people considered tantamount to expropriation. In return, they had to negotiate with him. When one opponent complained by saying, “Maybe you’ve heard of this book. It’s the Constitution of the State of Louisiana,” Long replied, “I’m the Constitution around here now.”

It got wilder. In 1930, he won a Senate seat but postponed taking it while remaining as governor. He then installed a puppet, Oscar Allen, who won in a massively fraudulent election. Allen was such a puppet that Long’s brother said, “A leaf once blew in to Allen’s office and fell on his desk. Allen signed it.” The legislature, meanwhile, turned into a Soviet rubber-stamp: the governor’s bills passed in minutes. He passed a newspaper tax he called the “tax on lying.” On 1934, he strengthened the Bureau of Criminal Identification, an agency empowered to make warrantless arrests throughout Louisiana. In 1935, the opposition was reduced to organizing a paramilitary to seize the Baton Rouge courthouse, prompting Senator Long to declare martial law. To cap it off, he established a state printing board that could effectively shut down any newspaper in the state.

Finally, Carl Weiss shot him on September 10, 1935.

So talk about uncertainty! That was American uncertainty. If uncertainty matters, we should see it in Louisiana under Long.

So Gabriel Mathy (American University) and Nicolas Ziebarth (Auburn) went looking to see what uncertainty did to the Louisiana economy under Long! In a forthcoming paper for the Journal of Economic History, they constructed uncertainty measures for Louisiana and found … nothing. All the uncertainty had remarkably little economic impact.

That should not make you complacent about the future of the Trump administration. Quite the opposite, in fact. First, the result may be specific to the southern United States. One of the best parts of a great paper is where they look for border effects with Mississippi. Mississippi didn’t get a Huey Long, but maybe markets thought that it might: the craziness was already priced in. If that’s the explanation, then the U.S. may be in a for sudden crash.

But that seems unlikely. (The paper uses multiple methods, all pointing the same direction.) What’s more likely is that you can’t trust the markets to discipline the a truly-erratic administration until it is too late. If you want to make sure that the Trump administration doesn’t wreck American governance  then you’ve got to act yourself and act politically.

Go see and join the debate at this post.

Cuba without Fidel, a retrospective counterfactual

A few months ago, I complained about an article that asked what effect independence had on Ireland without addressing how the country would have done under continued Home Rule. Doug Muir stepped up to the plate with a simple counterfactual: imagine that the Irish civil war depressed GDP about 20% and that the country would have grown at U.K. rates as part of the U.K. 

Is there another way? Well, yes there is! For a research project, I’ve been learning about a technique called “synthetic controls.” Normally we can’t run an experiment in which we take a country just like Ireland but keep it inside the U.K. while comparing it to the one outside. We can look for countries that look like Ireland, but countries rarely have a convenient twin sitting around for comparison. So what to do?

Well, one is to do the best we can with the comparison’s available. This will often take you fairly far.

Another is to compare the country in question with itself before the event you’re interested in. This can also take you fairly far, but of course raises all sorts of problems. For example, it assumes that past performance predicts future results, which is not always true. It also assumes that the changes you’re interested in (in the Irish case, income levels) are not caused by the same underlying forces that caused the event you’re interested in (in the Irish case, independence). 

The final one is to use synthetic controls. When used for cross-country estimates, a synthetic control takes a bunch of countries that look more-or-less like the country that you’re interested in and calculated a weighted average of those countries that looks as close as possible like the country you’re interested in. You can then see how that mythical control country performed after a treatment compared to the real country. For example, if you wanted to see the effect of Irish independence, you could take a weighted average of British regions that looked very close to Ireland in 1914, and then compare real Ireland to the performance of that weighted average of British regions. In that case, the experiment would be with remaining fully in the U.K. rather than Home Rule, but it could still tell you quite a bit. (Hey! Anyone want to write that article with me?) 

It turns out that someone has run that study for Communist Cuba! In 2013, Felipe Ribeiro, Guilherme Stein, and Thomas Kang did just that. They created a synthetic Cuba that was 55% Mexico, 15% Honduras and 30% El Salvador. These were not the countries that I would have imagined, but they were what provided the best fit with the real existing Cuba between 1929 and 1959. They then compared the GDP per capita of synthetic Cuba with real existing Cuba and found this:

By 1970, the GDP per capital of real Cuba is half that of synthetic Cuba. (The right axis is logged.)

What are the problems with this analysis? Well, three. First, while they got a good match on GDP per capita and the terms of trade, they do not come as close on two other key indicators. Synthetic Cuba had a lot more people in agriculture than real Cuba (68% versus 41%) and much higher illiteracy (65% versus 35%). Second, Mexico in particular was subject to radically different trade shocks than non-Communist Cuba would have been, whereas the analysis assumes that all post-1959 external shocks are identical. Finally, it is not clear that a non-Communist Cuba would have followed the same mix of extreme protectionism and hostility-to-FDI that Mexico followed between 1964 and 1974. (Plus, once the Cubans begin receiving large-scale Soviet subsidies around 1968, then the whole analysis goes out the window.)

That said, most of the problems cited above point to a real non-Communist Cuba outperforming synthetic Cuba. They are not fatal. And the authors admit that their study measures only counterfactual GDP per capita; educational attainment grew faster in Cuba than anywhere else. (Although Costa Rica matched Cuba in terms of reducing illiteracy.)

In short, they find about what you would expect: the Revolution made Cuba poorer by a large amount. What that does not measure, however, is the well-being of poorer Cubans as opposed to the poorer residents of synthetic Cuba. That experiment remains for another day. 

P.S. I almost called this post a “tribute,” but Fidel was at the end of the day a bloody dictator and doesn’t deserve one. So I called it a “retrospective” instead. 

The importance of counterfactuals

Here is a paper which attempts to assess how Ireland has done since separating from the United Kingdom. It’s title: “The Old Connection Sundered? Ireland and the U.K. since 1916.”

The problem is that the only counterfactuals posed are the expectations of three independence-era economists. Which tells you precisely nothing, save that Ireland became neither a socialist country nor practiced strong import-substitution. There is no attempt to answer the question posed in the title: how would Ireland have performed had it remained part of the United Kingdom?

I am disappointed. 

Inequality in American history

The Piketty results are well-known, but new research casts some doubt on them. But the debate is not over: some of the new data make his hypotheses stronger. (Hat Tip: Bradley Hansen.) 

The paper everyone should read is by Richard Sutch (UC-Riverside). He concludes that Piketty’s estimates for wealth inequality between 1810 and 1910 are unreliable. The catch? Sutch’s data show bigger swings: a higher rise during the Gilded Era, a steeper fall during the Great Depression, and a bigger recent increase. 

I am not sure why this would change Piketty’s overall conclusions.

There is also a paper by Carlos Góes (IMF) that essentially says that increases in r−g do not, empirically, lead to increases in income inequality. It is a good paper, but I doubt the conclusions. VAR models estimate the correlation between multiple variables and their lagged values. They are theory-free, by definition! Which means that when Góes finds that increases in r−g  do not lead to increases in the returns to capital, there are two reasonable responses:

1. Doubt the data. See his definition on page 6; it certainly is not clear that r is correctly measured. (He uses a better measure in the robustness checks.)
2. Ask why the relationship does not seem to work. If it is because market forces push r back down, then Piketty has a problem. If it is because institutions react to redistribute wealth and income when r rises, then he does not. For an example of a great paper that explores the latter, see here. 

After all, it is basically an identity that the proposition that a rate of return on capital higher than the growth rate of income will lead to a higher income share for capital, ceteris paribus. The empirical debate does not really revolve around the truth of that identity; rather, it revolves around (1) whether r > g is true; (2) if #1 is true, what other things might cancel out the relationship between r−g and inequality.

You can find a great example of the a Piketty critique along these lines here, by Daron Acemoglu and James Robinson. They do not stop with the long-term data showing that the identity does not seem to hold; they dive into the examples of Sweden and South Africa to show why and how it does not hold. 

Conclusion: this debate ain’t over yet!

The great stagnation on the farm?

There has been a lot of discussion lately about the Great Stagnation: the apparent slowdown in productivity growth in rich countries since 1970. The phenomenon is indisputable, but mysterious, since it parallels the rise of computers and the internet, both of which should have saved a lot of resources in the production and distribution of goods and services. Maybe the robots will usher in a huge productivity increase, even if it has not quite happened yet. 

Oddly, there has been a running debate over whether agricultural productivity has suffered a similar decline. Well, now Julian Alston (U.C. Davis), Matt Andersen (Wyoming) and Phil Pardey (Minnesota) have taken a closer look! Now, calculating multifactor productivity (MFP) in agriculture is not as simple as it sounds, especially across a century, but they have done it. Here are their results:

Eyeballing the log scale gives you their main result: continuing productivity growth, but a clear acceleration in the 1930s and a slowdown around 1980. 

So what happened? They offer two hypotheses. First, stagnation in R&D spending:

As Julian Alston has pointed out, agriculture faces a Red Queen’s Race: the co-evolution of pests and diseases means that you have to keep running as fast as you can just to stay in the same place. Moreover, private spending does not necessarily compensate for public for the simple reason that the time horizons involved in developing agricultural technologies are very long. As a result, very high ultimate cost-benefit ratios (21 for state efforts and 18 for federal ones) translate into much more modest internal rates of return (19%). That is still a high return, no doubt, Panama Canal high ... but nothing like what you would expect from the size of the long-term payoffs. 

The second (related) hypothesis is that the big acceleration in productivity was a one-off from a few mid-century inventions:

The implication, of course, being that GMOs don’t hold a candle to hybrid corn (which is quite reasonable) ... or maybe that we haven’t seen nothing yet. In fact, all we can really say is that the argument Robert Gordon has advanced in his seminal work may apply to agriculture as much as manufacturing and services. 

What I really want to know, though, is what the hell was up with rural telephones?

Lessons from Irish economic history?

 There is a great new paper that links inequality in infant health to later outcomes across 19th and 20th century Irish history.

I wonder if one could use the paper for other countries to back out the impact of direct and indirect discrimination? By direct, I mean discrimination that effects the recipient as an adult; by indirect I mean an unequal division of public investment that affects the individual as a child. 

Democracy is bad for capitalism?

 The answer is no, not really. But it is interesting that democracies show no sign of the Marxist definition of exploitation, whereas non-democracies do. 

In need a new tag for posts like this one.

Uruguay and New Zealand: no copying allowed?

 I am currently starting a project that will (well, may) end with a comparison of Argentina and Canada. Along with Argentina and Australia, that is a comparison that many scholars have noted, even if the literature so far has shed less light on the mystery of Argentine failure than one might have expected. 

A recent paper by Jorge Álvarez Scanniello, however, notes an even better comparison: Uruguay and New Zealand. (Apologies to all for also putting this post under the “Argentina” tag. I did it for future reference, at least until Typepad develops a widget for nested topic searches. In my defense, many Argentines are still unclear on the fact that Uruguay is a country.) Moreover, the paper focusses in on livestock. So it is a one-industry comparison between two like countries. 

How similar were they? Well, here is chart of livestock exports as a % of all exports:

OK, so far, so similar. But maybe they exported to different markets or had different trade preferences, and therefore maybe experienced different economic shocks? Well, here are their terms of trade:

Pretty correlated until the 1990s, by which point Uruguay had already fallen from 80% of New Zealand’s income per capita circa 1925 to only 50%.

Well, maybe New Zealand was just a better place for cows and sheep?

 

Line 1 is the ratio of New Zealand’s “meat equivalent” per hectare to Uruguay’s. It is about the same until 1930, which is when (not coincidentally) N.Z. starts to pull away in the income tables. The other three measures do not go back as far (for details, page 6) but show the same post-1930 trend. Basically, the two places look about as good for cows until 1930, when New Zealand becomes a lot better.

So what happened?

Well, the paper has only hypotheses, but they are interesting. In New Zealand, university botanists in 1920-40 developed better strains of ryegrass combined with clover that could fix nitrogen and reduce fertilizer use. So, better pasture. Then, in 1940-66 the country started using aerial topdressing (dropping fertilizer from airplanes) combined with a great deal of government investment in things like rural roads and electrification. 

In Uruguay, well, they saw what was happening in New Zealand. In 1951, Uruguay sent a team of experts to New Zealand to copy their technology for improving grasslands, but it never really went anywhere, with improved lands stalled out at 12% if the total around 1975. (Graph 10.) Why? Well, results on improved lands seemed to fall behind those in New Zealand. Since farmers were not really making more money, they stopped bothering.

In other words, something stopped Uruguay both from developing its own indigenous technology and from successfully adopting techniques from New Zealand.

What could that block have been?

The new California minimum wage in historical perspective

 This is not all the historical perspective that I would like. I would love to get some periodic estimates of the wage distribution. What percentage earned the minimum? How many jobs bunched up at the minimum? How did that vary across industries? There is a lot that you could do.

But in lieu of that, I will just give here the real California minimum wage from its beginning in 1918 to the final phase-in of the new plan to raise it to $15 nominal by 2022. (See the text of the bill here.) All numbers are in 2015 dollars. The wage is deflated by the California CPI back until 1956, and the U.S. CPI before that.  

An explanation is in order for the projections. Note how the real minimum wage blips downwards in 2023 before stabilizing? That’s because the law has scheduled the wage to reach $15 nominal in January 2022 for large employers (barring a recession) but doesn’t start automatic inflation adjustments until August 2023. (See 1182.2, subdivision (c).)

I will admit to being very surprised that the minimum wage was that high in the 1920s and 1930s. 

History happens more than once

 In the realm of economic history, I have come across a few recent papers that take on the view that far-off history explains everything. 

The first argues that Catholicism had a causal effect in holding back Irish development. That sounds controversial, but the paper does two additional things. One, it establishes plausible mechanisms: lower illiteracy and savings. Two, it shows, as you would expect, that the effect has been dramatically weakening over time. Moreover, read the conclusion: it is probably not what you would expect. (That said, I would not call the paper outstanding; right now, it is just interesting.)

Outstanding is a paper by Jeremiah Dittmar (LSE) and Ralf Meisenzahl (Federal Reserve) called “State capacity and public goods: institutional change, human capital and growth in early modern Germany.” Let me go to the abstract:

What are the origins and consequences of the state as a provider of public goods? We study legal reforms that established mass public education and increased state capacity in German cities during the 1500s. These fundamental changes in public goods provision occurred where ideological competition during the Protestant Reformation interacted with popular politics at the local level. We document that cities that formalized public goods provision in the 1500s began differentially producing and attracting upper tail human capital and grew to be significantly larger in the long-run. We study plague outbreaks in a narrow time period as exogenous shocks to local politics and find support for a causal interpretation of the relationship between public goods institutions, human capital, and growth. More broadly, we provide evidence on the origins of state capacity directly targeting welfare improvement.

They do not push the analysis to the modern day, but they do cover a 300-year span. In a sense, they are rehabilitating the idea that culture matters and pushing back (a little) against the idea that European state-building was all about war and the preparation for war. 

Interesting stuff!

What Napoleon did and what he (maybe) did not

 Economic historians have jumped on a trend of pinning differences today to events that happened hundreds of years ago. In some cases, the empirics are convincing and there is a theory to explain why it is not just a coincidence. (Coincidences happen!) Two examples: the roots of German anti-Semitism and the effects of the slave trade on Africa. 

But sometimes the effect is either trivial to those who know the history (the ejido in Mexico) or simply hard to fathom. One of the latter is a famous finding by Daron Acemoglu (MIT), Davide Cantoni (Ludwig-MaximilliansUniversität), Simon Johnson (MIT) and Jim Robinson (Harvard) on the effects of French expansion during the Napoleonic Wars. Where the French army went in Germany, they find, urbanization increased later. The proposed mechanism are the reforms the French brought. Vive la révolution!

Or perhaps not. In an intriguing paper, Ece Guleryuz shows that urbanization also increased faster in the French departments closer to the Franco-German border. Since all of France underwent French revolutionary reforms, this result cast some doubt on the importance of Napoleon to later German economic growth. 

The below map (I think, I dashed it off myself using the definitions in Appendix A) shows the areas under French influence in blue. The provinces that the authors of Acemoglu et. al. used as controls are in brown and red. (They used two different control areas.) The areas under French occupation are unsurprisingly closer to the postwar Franco-German border.

Since the article appeared in the American Economic Review, it has been taken as the canonical case that it is at least possible for foreign armies to impose long-lasting institutional change. But perhaps it is not so certain.

Thoughts?

California’s new minimum wage is not quite unprecedented

 California just announced that it will raise the minimum wage to $15 per hour by 2022. It will go up from $10 now to $10.50 in 2017, increase by another 50¢ in 2018, followed by one-dollar increments until it hits $15. After that, it will be fixed to inflation.

Assuming that inflation runs at 2% per year between now and 2022 (using the IMF projection), the new minimum wage will be only 8% above its 1968 peak in 2015 dollars, using the California CPI:

To be fair, the minimum wage was only briefly in that range, so it is quite possible that it will have bad effects on California’s economy. But it is not as unprecedented as it looks if you remember that American inflation in not likely to drop to zero over the next six years.

Fear of a Black Canada, part 2

 I am working on a research project with that title. Genesis can be found here. And a (not particularly deep) look at the topic (that misses the most interesting parts) just appeared here.

The second link discusses, of course, Americans thinking about moving to Canada if the Donald wins the upcoming election. No one will, of course. But that didn’t stop people at a San Diego airport bar from talking about it on Saturday afternoon. (I was on my way back from a conference.)

The bartender said that his wife wanted them to move to Canada, so he proposed northern Washington as “almost Canada.” He was joking (I think, his delivery was drier than the surface of Mars) but the nice white Texans from Austin to my left and right were not. (My flight home went through Dallas.) Well, their tone was not joking. The substance, not as much. One woman had a son at U.T. and a daughter starting her first job in Houston; I have trouble imagining her packing up for Canada. A young man had a daughter of his own on the way and a good job as an animal trainer. Maybe that is the sort of career where you can just pack up and jump international borders ... but I have some doubts. A third Texan, to my right, could have been Californian: his affect was totally SoCal bro. But he was studying petroleum engineering. And while Alberta isn’t quite in free-fall, Texas is doing rather better. 

I really wish liberals would stop it with the whole  “I’m to moving to Canada” schtick. It’s only slightly less annoying than the conservative “time to secede from the Union” crap. 

Although, really, it is weird that there are any labor market restrictions between the U.S. and Canada at all, no? 

Reihan Salam needs to read the papers he cites

 I am generally in sympathy with Reihan Salam. (DISCLOSURE: I went to high school with his older sister, Rifat.) He’s an old-fashioned non-crazy conservative. I am not, but I sympathize with his pro-natalist and mildly-nationalist priors. I certainly support his skepticism about  government intervention and his arguments against zoning laws. And he wants to abolish Stuyvesant! What’s not to like?

But sometimes the poor guy just has to twist himself into knots in order to convince himself that the “conservative movement” to which he’s hitched his professional wagon isn’t batshit crazy. You can see him attempting to justify the recent nativist turn in the GOP here. 

Much of Salam’s article isn’t crazy. In fact, the entire first section is quite well argued. He says that the rise of Donald Trump is troubling and that the Republican leadership has no idea how to discuss immigration in an intelligent way.

If he had said the following in the second section I might disagree with the conclusion but not the analysis:

1. Admitting poor immigrants is not in the national interest;
2. It’s perfectly fine for Americans to want lower levels of immigration for whatever reason;
3. The current immigration backlash ain’t got nothing on the events of 1917-31, which gave us such gems as the Asiatic Barred Zone Act and mob killings of Filipinos;
4. So the GOP should favor a Canada-style system with a lower overall cap and strict employment enforcement.

But that wasn’t the argument that Reihan made in the second section. Rather, his piece suddenly made a 90-degree turn and started to argue that the descendants of the post-1965 wave of immigration aren’t following the path of their predecessors from the Ellis Island wave.

Lest I be accused of misrepresenting his argument, let me quote him: “Why haven’t less-skilled immigrants followed the path of the less-skilled Europeans who settled in the U.S. in the late 1800s and early 1900s?”

His argument has two parts: one about economic mobility, the other about social assimilation. I’m going to focus on social assimilation, which Reihan states is happening much more slowly for current immigrants than for their European predecessors. We’ll briefly discuss the economics at the end.

1. Reihan Salam’s argument

One what does Reihan blame this alleged slow assimilation? Well, he asserts, “The most important reason that today’s immigrants have had such a different trajectory from those of earlier eras is that in 1921 and 1924, Congress passed legislation that sharply curtailed immigration.”

Reihan goes on to talk about the Italians, who did indeed arrive in a single relatively short wave. (See the above figure.) Reihan: “The end of immigrant replenishment led to sharp increases in inter-ethnic marriages for Italian Americans and other white ethnics. Mexican Americans, in contrast, are part of an ethnic community that until recently was constantly being replenished by new Mexican arrivals, which in turn has sharpened the distinctiveness of Mexican identity.” The, same, he says, is happening to other goups. “Over the course of the 1990s, the percentage of Asians marrying whites, and Hispanics marrying whites, fell sharply.”

In other words, the reason behind the alleged difference between earlier immigration waves and the current one is that the current ones are continuously replenished by new immigrants. His sources are a book by Tomás Jiménez (Stanford) and a 2007 article by Zhenchao Qian (Ohio State) and Daniel Lichter (Cornell). Jiménez has an article that summarizes his main findings here.

And now comes the fisking you’ve all awaited. It is not that Jiménez, Qian and Lichter are bad scholars. They are great scholars. (Particularly Jiménez.) Reihan just gets their work wrong.

In fact, he gets their work so wrong that it’s hard to believe that he read them. (Rifat is a good sociologist — can I blame her for not schooling her little brother?)

2. Social assimilation

Let’s start with Jiménez. Jiménez has elsewhere pointed out the astonishingly high outmarriage rates of Mexican-Americans! Moreover, Jiménez points out that those outmarriage rates have risen for second and third-generation Mexican-Americans, despite the continual waves of new immigration. In other words, Mexican exogamy has proven resilient to replenishment.

Jiménez’s argument is that replenishment inflames native-born non-Mexican irritation at new Mexican arrivals, which spills over into over into continued prejudice directed at native-born Mexican-Americans. Let me quote Jiménez’s three conclusions:

1. “First, non-Mexicans’ expressions of nativism sharpen inter-group boundaries.” Reihan could have said that immigration makes natives act like racist basterds, and it is a bad thing to be a racist basterd, so to discourage racist basterdism we should cut immigration. That is a perfectly legitimate argument. But it makes the GOP base look bad, so Reihan doesn’t make it.
2. “Second, immigrant replenishment bolsters the salience of race in the lives of respondents. In a context of heavy Mexican immigration, non-Mexicans use racial markers as proxies for a combination of ancestry, nativity, and legal status.” Again, this makes the GOP look bad, so Reihan misrepresents Jiménez’s argument.
3. “Finally, Mexican-immigrant replenishment sharpens intra-group boundaries by informing the criteria for ‘authentic’ expressions of ethnic identity. Mexican immigrants and the young second generation have come to define and police ‘Mexicanness,’ which entails, at the very least, speaking Spanish and having non-Anglo American tastes. Mexican immigrants and young second-generation individuals call into question respondents’ authenticity for not being able to openly display the cultural characteristics that might ‘prove’ their ethnic authenticity. Mexican Americans respond to these boundaries by attempting to avoid them altogether, and by providing a corrective to those who impose such boundaries. Respondents attempt to avoid inter-group boundaries by emphasizing their American national identity.” And that italicized conclusion is the opposite of what Reihan implies Jiménez argues.

Aaargh!

To be fair, Jiménez does argue that Mexican migration is unlike the Ellis Island waves that produced the Brooklyn I grew up in. But Jiménez is not arguing that there is anything unprecedented about the continuing stream of Mexican migration. Rather, he explicitly points out that both the Germans and the Irish immigrated in century-long waves; if you want historical parallels to Mexican-Americans, those two groups are the ones you should look to. And if you wanna talk about hard-to-assimilate waves of endless immigration, by a people who had no reluctance to use politics to cram multiculturalism down the throats of hard-working English-speaking Americans, then you really wanna look at the Germans. (You gotta scroll down at the link for the relevant information.)

Reihan writes, however, as if the Italians were the first immigrant group to get off the boat in America.

Hey, Reihan’s from Brooklyn, I’m from Brooklyn, to some extent it’s understandable. I went to college honestly believing that a third of all the white people in America were of Italian descent. I mean this literally: my friend Dev Patnaik cracked open an encyclopedia and disabused me of that notion. (For some reason, I knew that my personal experience about the number of Jewish-Americans was not representative, but it never occurred to me that this might also be true of the cujines.) I completely get why Reihan might assume that the Italian experience is the normal expected baseline for the American immigrant experience.

But I was 18 and a college freshman. Salam is 36 and a major public intellectual.

Now let’s move on to Qian and Lichter’s findings. Compare column (1) and column (2) below. For people aged 20-34, intermarriages among native-born Asian-American men fell from 50% to 46%, while intermarriages among Asian-American women rose from 58% to 60%.

This is not the decline Salam writes about.

Moreover, column (2) excludes multiracial people. If you classify anyone who checks off the boxes as half-white as minority — i.e., you classify people the way the 1990 census did — you would compare column (1) and column (4) and find that between 1990 and 2000 interracial marriages for native-born Asian-American men rose from 50% to 55% and for women from 58% to 67%.

Nor do Qian and Lichter believe that intermarriage rates have declined for Latinos. They spell out why on page 85, where they attempt to account for confounding demographic shifts. Bottom line: “Intermarriage with whites increased significantly among native-born Asian Americans and Hispanics, by 36 percent and 13 percent, respectively. Significantly, these multivariate results are different from the modest 1990s’ declines in intermarriage reported in Table 2.”

Heck, Qian and Lichter don’t even find a decline in intermarrige for foreign-born Asian-Americans! Page 86: “Intermarriage ratios with native-born whites declined by 19 percent for foreign-born Hispanics, from 27 to 22, and increased by only 11 percent for foreign-born Asians, from 28 to 31, during the 1990s.” It is true that Qian and Lichter find the increase in intermarriage rates for foreign-born Asians smaller than they would have expected given the increase in the number of foreign-born Asians: in other words, they did find that foreign-born Asian-Americans became somewhat less likely to marry non-Asian native-born Americans between 1990 and 2000 when you control for everything else. But that seems a pretty small reed upon which to argue that assimilation slowed down during the 1990s.

3. Economic mobility

Reihan also talks about the skill level of immigrants and their economic success, but he makes no explicit time-series comparisons. All he does is point out that immigrants are disproportionately poor after which he asks, “Why haven’t recent less-skilled immigrants followed the path of the less-skilled Europeans who settled in the U.S. in the late 1800s and early 1900s?”

But that question makes no sense unless and until you establish that current immigrant waves are moving up the occupational and wage ladder more slowly than previous waves! Reihan does not do this. So I don’t have that much to say, other than that there is in fact a big literature on these issues. A not-bad place to start. For some economic history on the Ellis Island wave, see here. For even better economic history on the same topic, see this paper by Ran Abramitzky, Leah Boustan and Katherine Eriksson. For a broader look at current assimilation, see this piece by the very same Tomás Jiménez. For a complex long-term view, see this 2006 study by Jacob Vigdor (currently at the University of Washington). See also this NBER chapter on Mexican-Americans. Finally, this is a great short book comparing Italians from 1900 with Mexican migrants today.

Ironically, that latter three provide some support for Reihan’s underlying argument. To which, I repeat, I have some sympathy and could be convinced to support.

4. Summing up

In short, I am disappointed. Immigration restriction is a reasonable position. And I generally like Salam’s positions. Repeal zoning! Tax the childless! Good stuff, logical, makes America better. But I am saddened by this piece. It misrepresents facts in order to allow Salam to call for the Republican Party to address a cultural assimilation crisis that does not exist, except inasmuch as immigration is generating a native-born white backlash.

There is nothing wrong with the GOP being the party of immigration restriction. There is a lot wrong with the insane racist way that immigration restriction has come out in the 2016 primary race. Maybe you can justify the insanity, but Reihan only does so by misrepresenting the works he cites. For a broader takedown, using sources that Reihan doesn’t cite, see Alex Nowrasteh here.

I wag my finger at you, Reihan Salam of Brooklyn! Or in our shared old school vernacular, “You serious, B? Gedouttahere.”

When Britain took back Newfoundland

 Lot of traffic from Facebook looking for socialist beer and the British Empire. Weird. 

This post is a brief comment on a weird episode in North American history. Basically, the Dominion of Newfoundland went bankrupt at the beginning of the Great Depression. The U.K. sent over an investigatory commission (its full report is here) which bizarrely ignored the fact that the country was, you know, hit badly by the Depression. Unsurprisingly, it recommended against default, since no part of the British Empire had ever defaulted. But it also recognized that Newfoundland could not pay. So it recommended that British taxpayers should assume future deficits ... in return for which the Dominion of Newfoundland would suspend democracy by putting the Governor (for some reason there was no “General” after Governor in the Dominion of Newfoundland) and a six-person Commission in charge of the country.

I managed to cobble together some statistics from various sources. (The link goes to the main one.) Looks like the Commission managed to reform bloody little.

First, British aid essentially matched Newfoundland’s interest payments: $20 million in aid against $21 million in interest. That was not a coincidence. Basically, Newfoundland ran at a primary surplus, just as it would have done had the country just up and defaulted. 

Second, the territory’s finances began to recover in 1935. (Page 390.) It would be nice to think that this was due to putting steely-eyed incorruptible Britons in charge of the financial system. Instead it seems to have come almost entirely due to an increase in customs revenue ... less than the increase in trade. Customs revenue went up 32% because imports went up 74%. That is, the economy recovered and so did revenues.

And what drove the economic recovery? Well, iron exports started to increase in 1935 and skyrocketed in 1937 ... driven by exports to Germany. Oh boy. More seriously, Newfoundland’s exports recovered because of  the U.S. devaluation in 1933-34. (Newfoundland used the dollar pegged one-to-one to the U.S. dollar; see comments.) The dollar plunged from £0.28 when Roosevelt took office in March 1933 to £0.20 when it finally settled down at the beginning of 1935. 

Third, public services did not really get better. Infant mortality skyrocketed from 106 per 1,000 in 1933 to 123 by 1937, before suddenly (and weirdly) plunging to 93 in 1938 and then rising back . (Page 258; it was 40 in the United States.) School enrollment went up a bit, from 67% in 1933 to 69% by 1940. (Page 67.) I think it would be unfair to blame the Commission for the first but also find it hard to credit them for the second. Would a self-governing country have done worse?

In short, the episode seems bizarre and pointless. I can understand why Newfoundland might have preferred British aid to default. And I can understand why Britain did want a Dominion to default and go off with its own unilateral devaluation. But the Newfoundland government had to spend as if it had defaulted and recovery happened because the United States devalued. And having British bureaucrats take over the government appears to have accomplished little. So as a lesson in the merits of modern-day imperialism, it is not.

Any implications for the European Union are left as an exercise for the reader.

How socialist beer destroyed the British Empire

 A long time ago, an internet forum that I was involved with considered how the world would have been different had the settler colonies of the British Empire been able to hold themselves together into some sort of federation. Imagine a 125 million-strong country consisting of Canada, the British Isles and Australasia. A federated Commonwealth might not quite have gotten out of World War 2 as a superpower but it would have been much more of an equal to the United States. 

To a casual observer, in fact, it seems a bit mysterious that the U.K. allowed colonies whose initial settlement came overwhelmingly from Britain (save Canada) to just drift away. Why not give them seats in Parliament and keep the new territories in the fold? 

Well, one thing that surprised me is just how early Britain began allowing the settler colonies to impose their own tariffs. Even before responsible self-government, for example, New South Wales began taxing imports from Great Britain. Up until 1843 imports from the U.K. received preferential access ... but they still paid tariffs. And after 1843, tariffs had to apply equally to imports from everywhere in the Empire. That had the effect of ratcheting up tariffs on British goods, rather than (as London seemed to hope) lowering rates on imports from India. 

One of the things that made Imperial Federation a nonstarter was that the Dominions, by the late-19th-century generally democratic and self-governing (I am going to ignore the abominable Union of South Africa) had little desire to fight the political battles necessary to create a common Imperial economic space. Moreover, the U.K. had pledged to defend them and was seen as unlikely to renege on that commitment. So why pay more for Imperial defense when the U.K. taxpayer was going to pay for most of your defense for you? Even in retrospect that proved to be a pretty good deal: sure, the U.K. failed to defend Australia in any serious way in WW2, but it seems unlikely that an Imperial Federation would have been able to devote more resources to the south Pacific than our far-less-organized British Empire actually managed. 

But how did those Dominions come to have their own trade policies? Well, here it gets strange: London seems to have actively encouraged them to tax imports and set up local industries.

Consider Australia. New South Wales (NSW) started taxing alcohol imports in 1800; alcohol was the obvious thing to tax and most booze was imported, so the tariffs were also, in fact, the first taxes in the country. (Raised to pay for a pair of jails, which seems somehow ironic.) The import taxes rapidly gave rise to import substitution ... directly financed by the government in London. “The introduction of beer into general use among the inhabitants would certainly lessen consumption of spiritous liquors,” wrote the colonial secretary in 1802 (page 7). “I have therefore in conformity with your suggestion taken measures for furnishing the colony with a supply of ten tons of Porter, six bags of hops and two complete sets of brewing materials.”

Sadly, the subsidized importation of brewing equipment by the authorities back in London failed, so the colonial government set up its own brewery in 1804. In 1821, the British Parliament cut the alcohol tax on alcohol distilled in NSW from £0.50 to £0.13 while leaving the tax unchanged on imported spirits. 

You got that right: parliamentarians in London kick-started import substitution in New South Wales. In 1827 they added insult to injury by taking a 5% duty on manufactured imports from places other than Britain and extending it to Britain. 

Er?

Eventually the Australian colonies gained self-government, but by the then the urge to protect was well-established. South Australia separated from NSW in 1836; by 1846 it had ad valorem tariffs on even more goods than NSW. Victoria separated from NSW in 1851; by 1859 it had an organized “Tariff League” and in 1866 there came an openly protectionist Customs Act designed to promote the local manufacture of textiles, hats, leather goods, woodenware, furniture, toys, woollen blankets and rugs, glass and glassware, earthenware and porcelain. (Page 9.) Cigarettes soon followed. 

By this point, Australia was clearly on its own economic policy path. Even had London been able to get its act together about inviting Dominion representatives into the Parliament, the negotiations would have been difficult. It is more surprising that the Australian colonies managed to knit themselves together into the Commonwealth of Australia than that they failed to build lasting economic links to Britain.

One has to wonder if things would have been different had British bureaucrats been more proactive about keep Oz and Albion in the same economic space. More concretely, I have to wonder why those self-same bureaucrats put Australia on the road to economic independence, to the point of passing an Act of Parliament. It seems strange and goes beyond simply wanting to make the Dominions self-financing. (Which they never were, if you count the cost of imperial defense.) 

I understand why once you had local booze, independence was near inevitable. What I don’t understand is why London wanted them to have their own booze. But either way, the first sign of the inevitable end of the British Commonwealth came when that first Ozzie cracked open that first locally-brewed government beer. 

An embarrassing oversight

 Dammit! I missed an opportunity, it seems.

Kevin Drum pointed out a great paper that demonstrates that Southern whites moved to the GOP for racial reasons. (Basically, the move is concentrated among people who told pollsters that they would never vote for a black man for President and invariant to other things.) 

Why am I annoyed? Because I was at the conference where that paper was first presented. (See photo above.) Bah!

A new category for this blog

 We now have an “economic history” tag in the category cloud. The plan is not to use it for posts about economic history that involve either our original research (be it from primary or secondary sources) or our own speculation. Rather, it’s a literature tag, used when we highlight work by others than either sheds light on the past or uses the past as a useful laboratory to understand broader economic issues. 

Does that explain what it is that economic historians do?

Well, if not, here is an explanation in cartoon form, created by a former graduate student of my friend Ran Abramitzky. Her name is Isabelle Sin. The explanation is brilliant. 

Captures it all, no? Become an economic historian!

What’s in a name?

 There is a broad literature that people with recognizably African-American names suffer from greater discrimination in the United States. (See here, here, here, here, and here.) Similar results have been found for Muslim names in France (here and here) and Sweden. In short, if you want your children to get ahead, even if you are a from a visible minority, give them a nondescript majority monicker.

There is some contrary evidence. Fryer and Levitt have argued that causality runs the other way, with black people trapped in the ghetto being more likely to choose distinctively black names than their middle-class counterparts. Their data, however, is only from California and is (as they admit) not conclusive. In addition, distinctive first names have become much more common in recent decades among all Americans, despite some evidence that people with such names face discrimination regardless of their race or religion. 

So far, so complicated. But wait, it gets worse! Before 1960, having a distinctively black name may have helped. All other things equal, in the century before 1960 black men and women with black names lived a year longer than their compatriots, conditional on having made it to age 10. 

In an amazing paper, Lisa Cook, Trevon Logan, and John Parman dug into the census data. First, they extracted a list of distinctively African-American names. Then they went through three million death certificates from Alabama, Illinois, Missouri and North Carolina between 1802 to 1970. Then they calculated differential death rates. Finally, they tried to see if having a distinctively black name was correlated with higher socio-economic status in any way. Overall, the reverse: as today, distinctive names were associated with lower status. In other words, the effect was even stronger than the headline numbers when you took other variables into account.

To be fair, it is still possible that there was name changing going on. But first, there is no evidence of such name-changing. And if there was, it would have to be mighty weird to change their results.

Their hypothesis is that having a distinctive name may have been a proxy for other, unidentifiable social capital: a strong sense of community, for example. And this was an age of open racial discrimination, during which assimilating to the dominant culture may have generated returns of zero (or negative, if white people reacted badly). So it may not have relevance for today.

But it sheds a fascinating look at the recent American past. Go, read. 

Refugees in Germany: lessons from 1945?

 As the New York Times notes this morning, Germany is being inundated with Syrian refugees. And while many of them are highly educated, most of them are not. The median refugee is a young Arabic-speaking man with limited job skills that are not up to German standards. 

This has happened to Germany before. After World War 2, the Soviets transferred large chunks of eastern Germany to the USSR and the Polish People’s Republic. Czechoslovakia and Hungary also expelled their German populations. Within two years, more than 7.0 million people had been expelled to what later became West Germany; ultimately 8.5 million refugees would settle there. (Another 3.5 million settled in the Soviet Zone.) 

The entire resettlement was chaotic, with refugees settling down wherever the Western occupation authorities decided to set up camps. These camps were located wherever it was most convenient. In the words of the U.S. military government: “Expellees of Eastern Europe have been settled, not where their skills could be best utilized, but in accordance with the availability of food and housing to meet their needs. Thus, labor supply is often remote from the centers of labor demand ... Most of these have been placed without regard to their skills, and many where there is no demand or material for them to pursue their trades.” Despite their awareness of the problem, American officials were more afraid of further disruptive population movements than they were of mass unemployment: they proceeded to deploy military forces along state lines to prevent refugees from moving. 

By 1948, refugees made up 25% of the population of Lower Saxony but only 8% of neighboring Nordrhein-Westfalen. Refugees were kept out of the cities of Bremen and Hamburg. Remarkably, there was no mass population redistribution once the situation settled down after 1948: as late as 1969, the distribution of the refugees had barely budged.

So what happened? Michael Peters (LSE) looked into the data and found something fascinating. Not unexpectedly, the former easterners were crowded into low-skilled  jobs: by 1960, almost 45% of the refugees worked in unskilled occupations, as opposed to only 18% of the same age cohorts of Western natives. (Page 21.) Also not unexpectedly, refugees aged 20 and older in 1945 earned about 10% less than natives in 1961 and 6% less than natives as late as 1970. (Pages 22-23.) Two-thirds of that difference was due to refugees being shunted into lower-wage occupations, rather than earning less than a native at the same job.

OK, fine, whatever. But then it gets weird. Sure, the refugees didn’t close the wage gap after even a quarter-century. But wages grew much faster in the unskilled occupations they flooded into than in other occupations. (Tables 9 and 11 on pages 24 and 26.) A 10% higher refugee share in 1950 increases wages by about 5% in 1975. 

Basically, firms in refugee-rich counties picked technologies that unskilled workers could learn to use on the job. Those workers then got better as they worked ... and their employers got better at deploying technologies suited to their (lack of) skills. The individual refugees never recovered from the trauma of their separation. But they led to technological innovation that benefitted those low down on the ladder.

So does this have any bearing on the current refugee inflow? Sadly, probably not. The first thing to note is that the distribution of human capital was about the same for the refugees and the natives. Circumstances pushed the refugees into unskilled jobs. They may have therefore been more equipped to learn on the job and help their employers innovate than a less skilled refugee wave would have been.

The second thing to note is times have indeed changed: deskilling might have been relatively easy to do in an industrial sector with no computers, but harder to carry out today, where (at least in theory) computer-controlled machines can purely substitute for labor. 

Finally, discrimination was minor for the earlier wave. Silesia, Pomerania, and East Prussia might have been different from the rest of Germany, but they were not Syria.

In short, the work opens up the possibility that the influx of unskilled refugees might unleash a wave of income-inequality-reducing innovation, even if the refugees themselves never catch up to the natives. But it only opens the possibility. There are, sadly, too many reasons to believe that this smaller influx will end less happily than the giant migration of 70 years ago.

There is still no good economic theory of the Scramble for Africa

 There is no commonly accepted explanation for why European powers carved up the African continent in the 1880s. Most historians today discount economic explanations: by the 1880s African commodity exports were a sideshow. Rather, the explanations have to do with prestige-seeking by European governments combined with the fact that military imbalances made annexation easy. Related explanations add two sorts of security dilemma: (1) the fear that if one country did not annex an area another would; and (2) local political crises driving expansion as the easiest solution. 

Now come Ewout Frankema (Wageningen University), Jeffrey Williamson (UW-Madison), and Pieter Woltje (Wageningen University) to show that African commodity prices enjoyed a sustained upturn between 1845 and 1885. Moreover, that upturn was stronger than for other regions.

This is pretty neat stuff, but as an explanation for colonialism it leaves a lot to be desired. No matter how you slice it, the profits from this trade were pretty small. In addition, we need to know how much of those profits were seized by Europeans even in the absence of formal control — my prior is that it would be a lot. Finally, we would need to know why the scramble waited until the 1880s: after all, the price rise started 40 years previously. (The authors partially address this with the point that French inland expansion started earlier.) 

That said, these results do blow a hole in the Hopkins thesis that declining commodity prices caused intra-African wars over the remaining rents, thereby opening the door to European conquest. Neat stuff. 

The reproductive revolution among postgrad women in historical perspective

 We have written that the fertility of postgraduate women has markedly increased among women born 1970-74 relative to earlier cohorts. Claudia Goldin’s (Harvard) work on college-educated women implies that the change is even greater than it seems. Now, Goldin is looking at all college graduates, not just women with postgraduate degrees ... but that makes her findings even more striking.

Among women born in the late 19th century, fully half of college graduates had no children. That fell over time (in part because, as per Gareth’s hypothesis many more women began to graduate college). Nonetheless, for women born in 1958-68 (cohort 5 in the above table) fully 26% of them had no children by age 40. 

Yet the cohort of postgraduate-educated women born just a few years later (1970-74) has a childlessness rate of only 20%. That puts them very near the rate experienced by the college-educated parents of the baby boom. For college-educated women childlessness has fallen even faster.

Something very dramatic is going on to make professional educated women who hit their peak childbearing years in the first decade of the 21st century choose both family and career. Bitsy makes too good suggestions in comments, although I am not sure how to test the first one. 

The big question, unanswerable until we have a handle on causes, is whether the fertility rise will continue in the next few decades.

Sometimes the Europeans could do no right

 There is an overwhelming amount of evidence that the European empires did very little right in Africa. I will admit that these results came as a surprise to me; my prior would have been that the Europeans would have left behind some institutional innovations or physical infrastructure of value. That case, however, turns out to be extremely hard to demonstrate outside of Southern Africa. 

The slave trade, of course, was one of the most egregious ways in which the Europeans managed to play havoc with Africa. It follows, of course, that ending it should have positive effects. And it did! The Middle Passage was a horrifying meatgrinder ... no possible cost could outweigh the reduction in human suffering from insuring that fewer people would suffer in it.

But the passage of the U.K. Slave Trade Act of 1807 may have had the consequence of boosting conflict in Africa. James Fenske (Oxford) amd Namrata Kala (Yale) argue that it did, by weakening the authorities whom had enriched themselves off slave exports. They take advantage of the fact that the British were rather more successful in reducing human trafficking from West Africa than elsewhere as a form of natural experiment to test their hypothesis.

The time series evidence is fairly compelling that something happened around then:

But I am not wholly convinced of the validity of their experiment. First, look at the above figure: there are a disconcerting number of zeroes among the controls. Second, look at the map to the right, which shows the treatment area in red and the control in blue. Are they really comparable regions?

The authors do vary the treated area and find the same result. In the map, the treated area consists of everything within 1,000 kilometers of a slave-trading port. They varied that distance to as low as 250 kilometers, with the same result. They also defined the treated zone as the current borders of countries with historical slave ports; again, similar results. Finally, they threw out the four territories annexed by European powers in 1807-40: Sierra Leone, Gambia, and Côte d’Ivoire. They also threw out Liberia for similar reasons. Again, the results hold.

Nonetheless, it still seems as though there may be a data problem: we know less about conflicts in the interior. And even if we did have comparable information, the interior likely had a radically different state structure and a much lower population density. The comparison seems forced.

Even without the experiment, the time series certainly make it seem like something happened to increase conflict in coastal Africa in 1807! The Slave Trade Act is the most probably culprit. Moreover, it is hard to argue reverse causality, i.e., that the Act was a response to rising levels of intra-African conflict. They do a good job of demonstrating that British interest in the slave trade had no correlation with interest in African conflict. (Google Ngrams is pretty neat.) In short, the experiment may be unconvincing ... but it also may be unnecessary. Read the paper!

But if they are right, it is depressing to think that ending the slave trade may have done as much to weaken African states as the trade itself. 

War in Africa before the Europeans

 There is a long literature stating that war contributed to state building. Here, for example, you can find a paper by Nicola Gennaioli (Bocconi) and Hans-Joachim Voth (Zurich). It argues that European states needed money to win wars. Thus, states got better at raising money or resigned themselves to irrelevance.

It a powerful thesis, so much that even Paul Collier alluded to the possibility that Africa might be better off if the post-1945 world allowed for violent border changes. Let Rwanda expand! In extremis, you might even want to create institutions (like the ones in the pre-1914 West) that would encourage cohesive states like Rwanda to expand. 

Or perhaps not. Did war encourage state-building in Africa before the Europeans invaded? If so, then it might be true that the continent would be better off had that process been allowed to continue. If not, however, then the implication is that European conquest did not abort local state building ... and unless something has changed radically, there would be little reason to believe that allowing that process to restart today would result in anything other than more death and destruction.

Mark Dincecco (Michigan), James Fenske (Oxford), and Massimiliano Gaetano Onorato (IMT Lucca) have done the work. They coded up 1,750 conflicts in Africa, Asia, and Europe between 1400 and 1799. In Europe and Asia, more war in the past predicted stronger and richer states in the present. But not in Africa! In Africa, more war before 1799 has no effect on economic development today ... and is in fact associated with more civil war.

The result is strong and intriguing. Go read the paper! Africa is different. Past war does not improve present results on that continent. The unanswered question is why. Section 6, where they try to address that question, is the weakest part of the paper. 

Any suggestions?

Long-ago history does not always matter

 There has been a recent spate of papers in the category of “history only happens once.” They generally take the form of showing that some long-ago historical event continues to reverberate in the present. Two of the best in the genre are Nathan Nunn’s (Harvard) work on the effect of the slave trade on Africa or Nico Voigtlaender (UCLA) and Hans-Joachim Voth’s (Zurich) work on the medieval origins of anti-semitic violence in Nazi Germany. I had the honor of criticizing an early version of the latter paper; the authors effectively dealt with all my complaints. Amazing work.

But sometimes it can go too far. For example, many have argued that Latin America’s extreme level of inequality has its roots in the colonial past, when my people (oh, my people, at least some of them) arrived and managed to botch everything up. Except here comes my friend and colleague Jeffrey Williamson (Harvard and UW-Madison) to point out that it isn’t true. From the abstract:

Most analysts of the modern Latin American economy have held the pessimistic belief in historical persistence — they believe that Latin America has always had very high levels of inequality, and that it’s the Iberian colonists’ fault. Thus, modern analysts see today a more unequal Latin America compared with Asia and most rich post-industrial nations and assume that this must always have been true. Indeed, some have argued that high inequality appeared very early in the post-conquest Americas, and that this fact supported rent-seeking and anti-growth institutions which help explain the disappointing growth performance we observe there even today. The recent leveling of inequality in the region since the 1990s seems to have done little to erode that pessimism. It is important, therefore, to stress that this alleged persistence is based on an historical literature which has made little or no effort to be comparative, and it matters. Compared with the rest of the world, inequality was not high in the century following 1492, and it was not even high in the post-independence decades just prior Latin America’s belle époque and start with industrialization. It only became high during the commodity boom 1870-1913, by the end of which it had joined the rich country unequal club that included the US and the UK. Latin America only became relatively high between 1913 and the 1970s when it missed the Great Egalitarian Leveling which took place almost everywhere else. That Latin American inequality has its roots in its colonial past is a myth.

In other words, something good happened in the North Atlantic during the 20th century. (Well, good in terms of inequality: there is evidence that it took a lot of depression and war to get there.) That good thing did not happen in Latin America. This is a very different view than one which dates the region’s inequality to the 16th century ... and a much more hopeful one, I think.

Gender shock

 We know that European colonization affected Africa in multiple ways. The direct effects were generally, well, at best neutral. Outside a few long-standing enclaves (like Dakar) and (maybe) Tunisia and South Africa, it’s difficult to imagine a counterfactual in which the Europeans never extend sovereignty and the Africans have a harder time of it in the 20th century.

One understudied way in which the Europeans might have affected Africa negatively is through gender norms. If there were benefits to, for example, learning English or French, but the colonial authorities only taught men, then gender inequality would increase. One can imagine many other channels in which this effect could have operated.

On the other hand, it is far from given that pre-colonial Africa was a paragon of gender equality, relative to Europe. It hard to see how colonization might have improved the situation, but it is possible.

So what was the effect? Well, Felix Meier (Utrecht)  and Jacob Weisdorf (Southern Denmark)  have an answer! It turns out that the Protestant churches in Kampala kept incredibly detailed occupational data going back to the 19th century. They found that the initial impact of colonialism was what you’d expect … but it didn’t last:

“We find that the arrival of Europeans in Uganda ignited a century-long transformation of Kampala involving a gender Kuznets curve. Men rapidly acquired literacy and quickly found their way into white-collar (high-status) employment in the wage economy built by the Europeans. Women took somewhat longer to obtain literacy and considerably longer to enter into white-collar and waged work. This led to increased gender inequality during the first half of the colonial period. But gender inequality gradually declined during the latter half of the colonial era, and after Uganda’s independence in 1962 its level was not significantly different from that of pre-colonial times. Our data also support Boserup’s view that gender inequality was rooted in indigenous social norms: daughters of African men who worked in the traditional, informal economy were less well educated, less frequently employed in formal work, and more often subjected to marital gender inequality than daughters of men employed in the modernized, formal economy created by the Europeans.”

In other words, the British conquest had little overall effect at the end of the day … or at least by the end of the 20th century. Thoughts?

Technology and social capital

 There are a lot of questions about how modern technology is transforming society and social interactions. (For modern technology, read smartphones mediated by social media software.) What is remarkable, however, is how little we really know about how older technologies affected society and social interaction. 

For example, television. How much do we really know?

Well, courtesy of Elisabeth Perlman, comes some evidence from Indonesia. From the abstract:

This paper investigates the impact of television and radio on social capital in Indonesia. I use two sources of variation in signal reception — one based on Indonesia’s mountainous terrain, and a second based on the differential introduction of private television throughout Indonesia. I find that increased signal reception, which leads to more time watching television and listening to the radio, is associated with less participation in social organizations and with lower self-reported trust. Improved reception does not affect village governance, at least as measured by discussions in village meetings and by corruption in village road projects.

That does not seem good. Maybe my Luddism does not go a far enough.

Elisabeth, I should add, has a neat paper on the effect of free rural mail service on politics in the early 20th century. From its abstract:

The rollout of Rural Free Delivery (RFD) in the early twentieth century dramatically increased the frequency with which rural voters received information. This paper examines the effect of RFD on voters’ and Representatives’ behavior using a panel dataset and instrumental variables. Communities receiving more routes experienced higher voter turnout and spread their votes to more parties. RFD shifted positions taken by Representatives to ones in line with rural communities, including increasing support for pro-temperance and anti-immigration policies. Our results are stronger in counties with newspapers, supporting the hypothesis that information flows play a crucial role in the political process

It is fascinating stuff.

Violent rebellion in theory and practice

 Many have speculated that drought set off the Syrian Civil War. We presented some evidence from Mexican history that supports the hypothesis ... but we also showed that the Mexican results were highly sensitive to how you defined “revolutionary activity.” 

Is there more evidence that drought causes unrest?

Cornelius Christian and James Fenske of Oxford University provide an interesting answer. In French West Africa during the colonial period, low rainfall or high temperature are associated with more unrest. Interestingly, however, they find that the effect is less in places where the French took over existing pre-colonial states. In those areas, the story goes, the French were able to use existing institutions to collect taxes even in the face of peasant resistance. In other places the state only arrived with the French, and resistance was commensurately higher.*

Does the same pattern hold in modern Francophone West Africa? No! First, they find some correlation for rainfall but none for temperature. In fact, for temperature the effect is sometimes reversed. Second, it no longer matters whether the area was part of a 19th-century kingdom; that part of the past really does seem to be past. 

I am not sure if the results have a direct application to Syria. The Syrian drought does appear to have been record-breaking; the West African shocks are not of the same magnitude. But they do imply that the correlation between unrest and drought is not one-to-one. They also provide a useful corrective to the recent spate of articles that in effect argue that history matters once: history matters, a lot, but its effects are not permanent.

If you impose capital controls, you need to take some risks

 Capital controls are state-imposed restrictions on moving money in or out of a country. If you have money inside a state with capital controls, then it is legally-difficult to lend that money to foreigners or use that money to buy foreign assets. In fact, to be binding, it even has to be difficult to use that money to freely import stuff. Otherwise you could move money out simply by buying something overseas on credit, importing it, and selling it to yourself at an inflated price.

Why might a government want to impose them?

1. Governments sometimes impose capital controls during economic crises. They might do this to stem a panic. Say that people have started dumping assets and taking the money out of the country. (If they are not doing that, then they are likely using the money to buy other assets, which is less of a problem.) The fire sale is driving down asset prices and pushing otherwise healthy companies towards insolvency. In that situation, capital controls basically stop the foreigners from being able to dump their assets. It’s a way of forcing everyone to calm down, the way a bank facing a run might stop withdrawals for a little while.  
2. Capital controls can also be used to give central banks the ability to fight a crisis without worrying about the exchange rate. They can prints lots of money and do other unorthodox things without the fear that people will start dumping the currency. In countries where lots of companies have foreign-denominated debt, that is a good thing.
3. Finally, governments can shift the pain of external adjustment by using controls. A collapse in the exchange rate has all sorts of distributional effects. If a government doesn’t like those effects, then it can use capital controls to shift them around. (Venezuela is doing this ... for so long that it long became massively counterproductive. But that is a different issue.) 

Kris James Mitchener and Kirsten Wandschneider have a good working paper on capital controls during the Great Depression. What did they find?

1. Controls worked on the most basic level, as in governments succeeded in making it hard to take money out of the country;
2. Controls abetted recovery from the Depression ... but no more so than in the countries that just let their currencies depreciate;
3. One of the reasons for (3) is that central banks seemed very reluctant to take advantage of the manuevering space that the controls provided. In short, they stuck with basically the same policies as the countries that let their currencies float, even though they no longer needed to. 

What are the implications for the current Russian predicament? I see two. If the crisis really is a panic-driven flight, then the controls may work well. The Russian government has been informally imposing such controls for several weeks, mostly by ordering state-owned businesses to refrain from taking money out of the country.  

On the other hand, if the crisis is more systemic, then the Russian government could use controls to keep the ruble from plunging further while it uses its foreign reserves to bail out various companies. That might be useful! It would keep import prices from spiking and keep various exporters solvent. But it is not clear that it would really produce less overall pain than just letting the ruble fall.

The problem does not seem to be driven by a short-term panic, so it seems that the Russia government has a difficult choice. But the lesson seems to be that capital controls do not do much good unless you have a plan for using the breathing room. Does anyone in Moscow?

How Many ‘White’ People Are Passing? with apologies to Henry Louis Gates

 Hella more than you think. Frank Underwood, certainly.

For most of its history, the stereotype of the racial line in the United States was the one-drop rule. You had any African ancestry and you were considered black.

Of course, the stereotype of the American caste system never really held. The United States was never organized enough to universally enforce the one-drop rule. If you looked white enough to convince strangers, then it was possible for you to “pass” for white. We know that happened a lot. What we don’t know is how common it was. Consider Daniel Sharfstein: “According to just about anyone who has considered the question, the migration [from black to white] is impossible to reconstruct... At best, such evidence is scattered across local archives and county courthouses, in library stacks and microfilm reels. Beyond the isolated anecdotes, there seems to be only silence.”

Except that’s wrong! The U.S. census identified people by race; the census-taker did the identification. So we can, in theory, find out how many people moved from black to white and what happened to them.

And here come Emily Nix and Nancy Qian to do the work! And what do they find?

Using the full population of de-identified historical Censuses for ten Southern states during 1900-1940, we document that over one-fifth of black males “passed” for white at some point during their lifetime, a tenth of whom later reverse-passed to being black; passing was almost always accompanied by geographic relocation to communities with a higher percentage of whites; occurred at all ages; and was positively associated with political-economic opportunities for whites relative to blacks, such as schooling, earnings and voting rights.

The figures in their paper are even more surprising than that. The one-fifth number (21%, to be more exact) is a lower bound: it refers to the individuals that they were able to identify across censuses with perfect confidence. Their most likely estimates are much higher. Consider Table 5: of Southern black children aged 5-14 in 1900, 43% of them were identified as white in 1940. (The absolute lower bound for that number is 28%.)

They also find, less surprisingly, 95-97% of “passers” moved counties and 54% switched states. In addition, passing was associated with crappier conditions for black people in the county of origin. They are going to code up lynching in future work but I doubt that the results will surprise.

But there is still a lot we want to know! How did passers do relative to non-passers, adjusting for socioeconomic status? Did they marry whites or blacks and how did their children identify? What determined the counties that they moved to, besides having a higher percentage of whites? How many moved to the North, and where? What determined reverse-passing, e.g. going back to identification as black? 

The authors note that according to data from 23andme, the number of self-identified whites who would be black under the one-drop rule is about 20%. (The 23andme sample is far from random; I suspect the white people skew towards the descendents of Ellis Islanders.) If the Nix-Qian numbers are correct, however, then 20% is likely an underestimate unless one of three things is true: (1) The children of passers re-identified as black in significant numbers; (2) Passers showed significantly below-average fertility; or (3) Passers showed high levels of endogamy, that is, marrying other passers. 

Even in Jim Crow America, the color line is turning out to have been extremely fuzzy. 

A lesson for China from Australian history?

 If ever there was a country less likely to provide useful lessons for China, it is Australia. Australia has always been underpopulated. It is practically the platonic ideal of a settler colony, having wiped out the locals far more thoroughly than its American counterparts. The settlers brought British institutions with them and then improved them: in humanity’s slow move towards democracy and the rule-of-law, Oz has always been on the forefront.

But there is one thing that past Australia shared with future China: a huge imbalance of men over women!

There has been a lot of blather about China’s sex-imbalance, most recently in the Washington Post. In the words of our co-blogger, Doug Muir: 

I’ve been reading variants of that article since well back in the Clinton administration. Is anyone aware of any hard evidence linking skewed sex ratios to a more aggressive foreign policy? Because AFAIK there is none, which makes these articles Just So stories justifying another round of yellow peril pearl-clutching.

I note that China’s oldest sex-skewed cohorts are in their thirties now. So far, the major effects seem to be a rise in prostitution and a lot more time spent on the internet. Both negative social consequences to be sure, but a long way from the Tong Wars and “virile” foreign policy these two dopes are going on about.

So what did an unbalanced sex ratio do in Australia? Well, Pauline Grosjean and Rose Khattar of the University of New South Wales decided to take a look! Their findings:

We document the implications of missing women in the short and long run. We exploit a natural historical experiment, which sent large numbers of male convicts and far fewer female convicts to Australia in the 18th and 19th century. In areas with higher gender imbalance, women historically married more, worked less, and were less likely to occupy high-rank occupations. Today, people living in those areas have more conservative attitudes towards women working and women are still less likely to have high-ranking occupations. We document the role of vertical cultural transmission and of homogamy in the marriage market in sustaining cultural persistence. Conservative gender norms may have been beneficial historically, but are no longer necessarily so. Historical gender imbalance is associated with an aggregate income loss estimated at $800 per year, per person. Our results are robust to a wide array of geographic, historical and present-day controls, including migration and state fixed effects, and to instrumenting the overall sex ratio by the sex ratio among convicts.

In other words, the historical evidence does not point to a future of gang warfare and foreign adventurism. Rather, China will be more traditional, more married, and slightly poorer than it would have been otherwise. And if the lessons from the West and Latin America hold, the result of that will also counterintuitively be a much lower birthrate than in more gender-equal countries.

China in 2050? A big giant Queensland! But with robots. 

This is not as sexy as a Venezuelan-style crime wave combined with an invasion of Siberia, or whatever. But it has the advantage of being grounded in this thing we historians call evidence. 

Brazil was not a country before 1914, economically-speaking

 In comments, Jonathan asks the significance of the finding that Argentina is not alone in experiencing relative decline after 1914. Rather, it spans most of the Conosur. The fact that Uruguay also experienced decline is well known, so I will not comment more. And I will punt on Chile, since I know not sufficient economic history to say anything sensible ... there is evidence that Chile was in fact quite poor at the time but the headline figures for GDP per capita show a similar relative decline. But I will discuss southern Brazil. 

(Short version: southern Brazil was much richer than most think before WW1. It then experienced relative decline much like Argentina. Any explanation for Argentine decline that cannot also explain southern Brazil, or vice versa, is therefore likely to be wrong.)

Longer version: The popular version of Brazilian economic history is that Brazil in the 19th century was an underdeveloped country, like Peru. It then underwent a period of explosive catch-up growth in the 1950s and 1960s, but growth collapsed in the 1970s, only to pick up again recently.

That picture, however, does not jibe with what we now know of the non-economic history of Brazil or what we know of regional economic development in that country. Molly Ball (Rochester) has done some excellent work tracking down wage data in São Paulo. She collected data from textile firms, gas & electric companies, and the tramways. Ball’s textile wage data do not go back before WW1, but her series for the latter two industries go back to 1891.

It is possible to compare Paulista nominal hourly wages with U.S. wages for the same two industries, taken from Historical Statistics of the United States. (I calculated American hourly wages under the assumption that electric and tramway workers had a 48-hour week, which is consistent with data from the U.S. Postal Service; manufacturing workweeks fell from 55 to 50 hours in 1891-1913.)  I could not easily find data on comparable Italian wages, but is also possible to compare them with the estimates of hourly wages for skilled construction workers generated by Stefano Fenoaltea (University of Rome Tor Vergata). The United States was, of course, the second-richest destination country in the New World; Italy was a major country of emigration in the early 19th-century to both America and Brazil. 

Bearing in mind that these are nominal wages, the results look like this:

The basic image is that Brazilian wages were lower than in the United States, but much higher than in Italy. (They were within striking distance of much of northern Europe and beat Sweden.) It would be hard to call São Paulo underdeveloped the way we think of it today. 

(The Brazilian volatility is almost certainly an artifact of the fact that the estimates come from industries dominated by monopolies in one city in  whereas the American results are a national population-weighted average.)

Now, nominal wages are not real wages. It is possible that high prices in São Paulo meant that living standards were closer to Italy than to America. Brazil was highly protectionist at the time and had lousy internal transportation, so there are reasons to believe that many manufactured goods would have been pricier.

Fortunately, Luis Bértola and Carolina Román (Universidad de la República) have done much of the hard work. They find, rather astoundingly, that the cost of living in Brazil was one-third that of the U.K. before WW1, although it should be noted that their data is from Rio de Janeiro rather than São Paulo. Now, I strongly suspect that their estimates are off by a significant amount and the benchmark was Britain, not America ... but I would also bet that correctly accounting for the net effect of differences in the cost of living would still raise Paulista real wages with respect to the United States.

(I would also submit that for many migrants, who intended only to work and save in the new country for a while before returning home, nominal wages would be the relevant draw.) 

In short, southern Brazil was rich before 1914. Not as rich as Argentina, not as rich as the United States, maybe not as rich as the richest parts of Europe, but rich. 

The reason why Brazil as a whole ranked so poor in 1913 was that the United States of Brazil resembled the French Empire much more than it did an integrated nation-state like the Argentine Republic or the United States of America. Its huge northern hinterland, like France’s African territories, were populated by near-subsistence peasants isolated from the national economy and providing little save some tropical products. They were effectively prohibited from migrating south (or, in the case of France, north) by a combination of extreme poverty, poor transport links, and racial prejudice. 

The problem is that a mass southward migration of northerners masks the relative economic failure of the south after 1913. We know much less about the timing of that decline than we should. We also know much less about the reasons for the decline than we should; unlike Argentines, Brazilians not only do not obsess about their fallen position in the world, they’ve forgotten that they ever had a better one. 

The fact that the relative declines spans Argentina, Brazil and Uruguay means that Argentina-specific explanations are almost certainly wrong. Rafael di Tella may be correct that Argentina was “hit with 700,000 bullets,” but it can be asserted that the ones which did not also go to hit the neighbors did not kill the target. 

Kind of long, but I wanted to make the point about Brazilian relative decline. Did I answer the question?

Observatorio argentino 26: How long has Argentina been in decline?

Randy McDonald brought this article to my attention. The title captures the argument quite well: “Argentina: The Myth of a Century of Decline.” The author is contesting an Economist article that dated the country’s decline to 1914.

Here is the key argument:

Below I will try to show that instead of a “century decline,” what characterizes Argentina’s economic evolution as compared to other countries is that it suffered a deep economic collapse from the mid 1970s to the end of the 1980s (in what follows, data is from the Maddison Project. http://www.ggdc.net/maddison/maddison-project/data.htm).

This structural break in the evolution of the GDP per capita (GDPpc) in Argentina can indeed be attributed to internal conditions in that country. But other than that, there is not much difference in the evolution of Argentina, when compared to, for instance, Australia, or Uruguay, two countries mentioned by The Economist as either not having suffered the “hundred year decline” and/or to have followed better economic and institutional policies than Argentina. It is true that other countries such as Korea or Spain, which had far lower GDPpc than Argentina during great part of the 20th Century overtook Argentina by a large margin since the 1970s. But it is also true that if Argentina had avoided the sharp drop in the 1970s and maintained the share of the US GDPpc that prevailed before that structural break, the country would have had now an income per capita above all countries in LAC and many European countries such as Portugal, the Czech Republic, Hungary, and Poland. And if it had maintained the lineal trend growth from the 1960s to the mid 1970s it would be now at about the level of New Zealand or Spain, according to the data of the Maddison Project. In other words, if Argentina had avoided the real tragedy that started in the mid 1970s, the country would be now a developed country.

I’m not sure I fully understand the argument. It hinges on a rhetorical definition of “decline” and a debate over the correct counterfactual. Contemporary Argentine opinion leaders thought their country was one of the richest in the world in 1914. Now, the author is correct that compared to Australia it was already running significantly behind (66% of per capita income) ... but Argentina had achieved a rather respectable 82% of Canada’s per capita income. 

Still, 82% is less than 100%, even accounting for the difficulty in measuring these things. And there are other indicators that Argentina was in fact already behind in 1914 despite its elevated income figures. Filipe Campante and Ed Glaeser have a good comparison of Buenos Aires and Chicago around 1914. The differences?

1. Much higher education levels in Chicago. This was not in fact a result of Chicago’s public schools, although those schools were better and more prevalent than in Buenos Aires. Rather, it was a product of Chicago getting rural Americans and German immigrants, who were better educated than the Spaniards and Italians pouring into B.A.

2. Chicago was more industrialized, despite competition from the old industrial centers in the American northeast. In fact, businesses in general were more mechanized: Chicago had 2.4 times as much capital per worker as B.A.

3. Finally, Argentina didn’t have universal male suffrage until 1912 ... which led to riots and revolts that could and did topple national governments. Chicago had riots and political machines, but the government remained stable.

Thing is, the Economist piece makes a big deal of the Campante and Glaeser article. Why is Díaz-Bonilla different?

Díaz-Bonilla points out Argentina did not start to lose further ground against Europe until WW2 ... and he notes that fate also befell Australia. The problem is that much of Australian economic history is dedicated to explaining the country’s relative failure after WW2. Comparisons with Argentina were rife at the time as both countries slid down the league tables. I am not sure what the Australian experience proves for Argentina.

Finally, he shows that the wheels come of the slowing Argentine bus with the spectacularly incompetent military governments of the 1970s.

I understand what the author is trying to argue, but it’s not as effective as it might sound. “Argentina was poorer than people think in 1914, fell further behind (along with Australia and Uruguay) after 1940, and then collapsed in the 1970s” is less catchy than “one hundred years of decline,” but it doesn’t sound categorically different.

I think the author is trying to push the argument too far. 

That said, the author makes two good points. First, the Argentine juntas really were that bad. Second, the relative decline after 1914 cut across the entire southern cone, including southern Brazil. The whole region was relatively richer in 1900 than it is today. Brazilians in particular seem to forget this point, but it is an important one to remember, especially when diagnosing Argentina’s modern economic problems.

Did drought abet the start of the Syrian civil war?

I have no idea. But there was a bad drought in Syria in 2006-11. (Hat tip: Wonkblog.) It is not unreasonable to think that there might be a connection.

Have we historical evidence?

Maybe. Many historians believe that the Mexican drought of 1906-10 played an important role in setting off the Mexican Revolution. Melissa Dell set out to test that hypothesis, combining one dataset of pre-1910 precipitation and another one of Revolutionary violence. She found that drought-affected counties were more likely to experience violent mobilization during the revolution.

I think she is right ... but I am not sure that her data is good enough to show it. The data on revolutionary mobilization were not the best. They came from the Encyclopedia of Mexican Counties, taking on a value of zero or one depending on whether the authors of the Encyclopedia noted spontaneous violent mobilizations. The data are summarized in this map:

The counties singled out on the map are  few of the ones where the coding is unclear. Tlahualilo, for example, produced few local leaders or organized revolt, but there were not a few complaints of banditry in 1911 and when Pancho Villa did roll in, the locals supported him. In Camargo, the Loyal Camargo Brigades formed an important part of the Villista army. (Inasmuch as they were no violent mobilizations in Camargo, it appears to be because the Revolution took over the state quickly enough to let Villa use it as a place for serious R&R as early as 1913.) If you go through all the possible switchers (and note that there might be something special about Yucatán) the results are weaker. Contagion models could weaken it further.

This does not mean that the argument is wrong! Just that more data is necessary.

Which brings us back to Syria. The report from the Center for American Progress (see page 25) is damnably vague. But data on precipitation, internal displacement, and the pace of revolutionary mobilization in the country should exist. (Doug? Carlos?) If they do, then it should be possible to see if climactic stress is linked to unrest or violence, at least in the modern Levant.

A too-brief history of zoning

As most of you know, I am not a big fan of zoning. In fact, my wife and I recently made the mistake of attending a Cambridge zoning hearing. It does bad things to my blood pressure to hear people state with apparent sincerity that limiting buildings to three stories will keep rents lower.

Seriously, this building should be at least as tall as the 1970s-era one right next to it.

Here is a nice short economic history of zoning. The argument is that the streetcar first enabled the creation of informal residential districts. (Before that, you just could not cleanly separate residential and commercial functions, since city size was limited and commutes painful. Workplaces and residences had to be close.) Then the truck and bus came along and busted up the informal zoning that had emerged. Ergo, formal zoning.

I am only partially convinced. After all, it should not have been surprising to anyone that apartment buildings would follow townhomes along the streetcar lines. Why wait until cars and trucks came along? In addition, the explanations for the 1970s spread and tightening of zoning laws are ad hoc. I would like to know more.

The economic history blog

  Some interesting stuff, some boring stuff, according to taste, but all good stuff.  Found here.

Barbados, Jamaica, institutions, and a great reason for a research trip

  There is a debate inside the economics profession about the importance of institutions, broadly defined.  One side of the battle holds that institutions are everything.  Countries can institute all sorts of bad policies and still prosper over the long run if they have “good” institutions — France is a common example.  A subset of this group likes to argue that a particular set of legal institutions is very important.  You can sum their argument up as “Common law good, civil law bad.” 

The “institutions as epiphenomena” side of the debate has mostly given up, with the valiant exception of Greg Clark.  That said, strong opposition still exists in the form of two arguments: “institutions aren't everything” and its subset, “legal origin theory is total b@ll$#/t.”

One obvious experimental laboratory is the British West Indies.  Not a whole lot of good came out of the collapse of the West Indian Federation, but one bit of lemonade coming out of that lemon was that it left us with a collection of independent and quasi-independent states with a similar institutional background.  Now come two authors with a comparative paper on Barbados and Jamaica, arguing that it is macroeconomic policy, not the legacy of history, that explains the different paths of the two nations since independence. 

Are their arguments convincing?  More below the fold.