We show that the “skill bias” of a country’s tariff structure is positively correlated with long-term per capita GDP growth. Testing for causal mechanisms, we find evidence consistent with the existence of real benefits from tariffs focused in skill-intensive industries. However, this only accounts for a quarter of the total correlation between skill-biased tariffs and growth. Turning to alternative explanations we extend the standard Grossman-Helpman “protection-for-sale" model and show how the skill bias of tariffs can reflect the extent of domestic rent-seeking activities in the economy. We provide evidence that the remaining variation is explained by this endogeneity
This article provides a survey of a growing body of empirical evidence that points toward the important long-term effects that historic events can have on economic development. The most recent studies, using microlevel data and more sophisticated identification techniques, have moved beyond testing whether history
matters and attempt to identify exactly why history matters. The most commonly examined channels include institutions, culture, knowledge and technology, and movements between multiple equilibria. The article concludes with a discussion of the questions that remain and the direction of current research in the literature.
Can part of Africa’s current underdevelopment be explained by its slave trades? To explore this question, I use data from shipping records and historical documents reporting slave ethnicities to construct estimates of the number of slaves exported from each country during Africa’s slave trades. I find a robust negative relationship between the number of slaves exported from a country and current economic performance. To better understand if the relationship is causal, I examine the historical evidence on selection into the slave trades and use instrumental variables. Together the evidence suggests that the slave trades had an adverse effect on economic development.
Recent studies have found evidence linking Africa’s current under-development to colonial rule and the slave trade. Given that these events ended long ago, why do they continue to matter today? I develop a model, exhibiting path dependence, which provides one explanation for why these past events may have lasting impacts. The model has multiple equilibria: one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production. I show that external extraction, when severe enough, causes a society initially in the high production equilibrium to move to a low production equilibrium. Because of the stability of low production equilibria, the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends. The model provides one explanation why Africa’s past events continue to matter today.
Is a country’s ability to enforce contracts an important determinant of comparative advantage? To answer this question, I construct a variable that measures, for each good, the proportion of its intermediate inputs that require relationship-specific investments. Combining this measure with data on trade flows and judicial quality, I find that countries with good contract enforcement specialize in the production of goods for which relationship-specific investments are most important. According to my estimates contract enforcement explains more of the pattern of trade than physical capital and skilled labor combined.
We examine the supply-side and demand-side determinants of global bilateral food aid shipments between 1971 and 2008. First, we find that domestic food production in developing countries is negatively correlated with subsequent food aid receipts, suggesting that food aid receipt is partly driven by local food shortages. Interestingly, food aid from some of the largest donors is the least responsive to production shocks in recipient countries. Second, we show that U.S. food aid is partly driven by domestic production surpluses, whereas former colonial ties are an important determinant for European countries. Third, amongst recipients, former colonial ties are especially important for African countries. Finally, aid flows to countries with former colonial ties are less responsive to recipient production, especially for African countries.
Domestic institutions can have profound effects on international trade. This chapter reviews the theoretical and empirical underpinnings of this insight. Particular attention is paid to contracting institutions and to comparative advantage, where the bulk of the research has been concentrated. We also consider the reverse causation running from comparative advantage to domestic institutions.
Using information on the locations of Catholic and Protestant missions during Africa’s Colonial period, I test whether Protestant and Catholic missionaries differentially promoted the education of males and females. I ﬁnd that while both Catholic and Protestant missions had a positive long-run impact on educational attainment, the impacts by gender were very different. Protestant missions had a large positive impact on the long-run education of females and a very small impact on the long-run education of males. In contrast, Catholic missions had no impact on the long-run education of females, but a large positive impact on the education of males. These ﬁndings are consistent with the greater importance placed on the education of women by Protestants relative to Catholics.
This chapter surveys a growing body of evidence showing the impacts that historical events can have on current economic development. Over the past two decades historical persistence has been documented in a wide variety of time periods and locations, and over remarkably long time horizons. Although progress continues to be made identifying and understanding underlying mechanisms, the existing evidence suggests that cultural traits and formal institutions are both key in understanding historical persistence.
This chapter uses statistical techniques to assess whether there is evidence that Africa’s slave trades had a detrimental impact on long-term economic development. This is done by first constructing estimates of the number of slaves taken from each region of Africa between 1400 and 1900. The estimates are constructed by combining data on the number of slaves shipped from African ports with data from historical records reporting the ethnic identities of slaves taken from Africa. Using the constructed data, it shown that the parts of the continent from which the largest number of slaves were taken in the past are the parts of the continent that are the poorest today. This relationship is found to be extremely robust. It remains even when other important determinants of economic development are taken into account.
This relationship can be interpreted a number of ways. One interpretation is that it shows that the slave trades had an adverse effect on Africa’s long-term economic development. An alternative interpretation, however, is that the parts of Africa from which the largest number of slaves were taken in the past were initially the least developed. And because these characteristics persist today, these parts of Africa continue to be the least developed. Therefore, we observe that the parts of Africa that exported many slaves in the past are also poor today, even though the slave trades did not cause these areas to become underdeveloped. This alternative explanation is tested in the data by examining whether it was in fact the initially least developed parts of Africa that exported the greatest number of slave. Consistent with the historical evidence, the data suggest that the parts of Africa that were initially the most developed, not the least developed, supplied the largest number of slaves. This evidence provide strong evidence against the second interpretation, and instead supports the first interpretation. It is also shown that additional statistical tests, using instrumental variables, also provides additional support for the slave trades having a causal adverse effect on economic development within Africa.
Recent research argues that among former New World colonies a nation’s past dependence on slave labor was important for its subsequent economic development (Engerman and Sokoloff, 1997, 2002). It is argued that specialization in plantation agriculture, with its use of slave labor, caused economic inequality, which concentrated power in the hands of a small elite, adversely affecting the development of domestic institutions needed for sustained economic growth. I test for these relationships looking across former New World economies and across states and counties within the U.S. The data shows that slave use is negatively correlated with subsequent economic development. However, there is no evidence that this relationship is driven by large scale plantation slavery, or that the relationship works through slavery’s effect on economic inequality.
Using data on U.S. intra-firm and arm’s-length imports for 5,423 products and 210 countries, we examine the determinants of the share of U.S. imports that are intra-firm. Three determinants of this share have been proposed: (1) Antràs (2003) focuses on the share of inputs provided by the headquarter firm. We provide added confirmation and further strengthen the empirical findings in Antràs (2003) and Yeaple (2006). (2) In a model featuring heterogeneous productivities, Antràs and Helpman (2004) focus on the interaction between the firm’s productivity level and the headquarter’s input share. We find very strong support for this determinant. (3) Antràs and Helpman (2006) add to this the possibility of partially incomplete contracting. We find that consistent with the novel prediction of their model, improved contracting of the supplier’s inputs can increase the share of U.S. imports that are intra-firm. In short, the data bear out the primary predictions of this class of models about the share of U.S. imports that is intra-firm trade.
This edited volume addresses the root causes of Africa's persistent poverty through an investigation of its longue durée history. It interrogates the African past through disease and demography, institutions and governance, African economies and the impact of the export slave trade, colonialism, Africa in the world economy, and culture's influence on accumulation and investment. Several of the chapters take a comparative perspective, placing Africa's developments aside other global patterns. The readership for this book spans from the informed lay reader with an interest in Africa, academics and undergraduate and graduate students, policy makers, and those in the development world.