We build a multicountry dynamic general equilibrium model to study the economic effects of the 2004 enlargement of the European Union. In our model, trade is costly and households of different skills and nationalities face costly forward-looking migration decisions. We exploit the timing of migration policy changes to identify the changes in migration costs. We find that the changes in migration and trade policy resulted in aggregate welfare gains but with heterogeneous effects across skill groups. We study the interaction between trade and migration policies and highlight the importance of trade for quantifying the welfare and migration effects of labor market integration.
Alfred Marshall and Mary Paley Marshall are often described as the first academic economist couple. Both studied at the University of Cambridge, where Paley became one of the first women to take the Tripos exam and the first female lecturer in economics, with Marshall’s encouragement. But in later life, Marshall opposed granting Cambridge degrees to women and their participation in academic economics. This paper recounts Alfred Marshall’s use of gender norms, born out of a separate spheres ideology, to promote and ingrain women’s exclusion in academic economics and beyond. We demonstrate the persistence of this ideology and resultant norms, drawing parallels between gendered inequities in labor market outcomes for Cambridge graduates in the UK post-Industrial Revolution and those apparent in cross-country data today. We argue that the persistence of the norms produced by separate spheres ideologies is likely to reflect, at least in part, the rents associated with preferential access to better paid, high-skilled labor market opportunities. In doing so, we ask who benefits from gender norms, who enforces them, and suggest relevant policy work and areas for future research.
We use a two-stage experiment to study how a short-term subsidy for a new product affects uptake, usage, and future demand for the same product (a new solar lamp). We use an auction design to gauge willingness-to-pay, and randomly vary the strike price across villages to create random variation in purchase prices and uptake across villages. Our main results are that subsidies do not adversely affect subsequent product use, but stimulate uptake. If subsidies depress future willingness-to-pay, then this effect is outweighed by additional learning about the benefits of the new product. The net effect is that short-term subsidies increase future willingness-to-pay. However; prices play an important allocative role, and lowering prices via subsidies encourages uptake by households with low use intensity. We do not find any evidence supporting social learning and anchoring beyond the initial sample of beneficiaries.
We evaluate the effect of an educational program that aims to build social cohesion in ethnically mixed schools by developing perspective-taking ability in children. The program is implemented in Turkish elementary schools affected by a large influx of Syrian refugee children. We measure a comprehensive set of outcomes that characterize a cohesive school environment, including peer violence incidents, the prevalence of interethnic social ties, and prosocial behavior. Using randomized variation in program implementation, we find that the program significantly lowers peer violence and victimization on school grounds. The program also reduces the likelihood of social exclusion and increases interethnic social ties in the classroom. We find that the program significantly improves prosocial behavior, measured by incentivized tasks: treated students exhibit significantly higher trust, reciprocity, and altruism toward each other as well as toward anonymous out-school peers. We show that this enhanced prosociality is welfare improving from the ex post payoff perspective. We investigate multiple channels that could explain the results, including ethnic bias, impulsivity, empathetic concern, emotional intelligence, behavioral norms, and perspective taking. Children’s increased effort to take others’ perspectives emerges as the most robust mechanism to explain our results.
We exploit recent molecular genetics evidence on the genetic basis of arsenic excretion and unique information on family links among respondents living in different environments from a large panel survey to uncover the hidden costs of arsenic poisoning in Bangladesh. We provide for the first time estimates of the effects of the ingestion and retention of inorganic arsenic on direct measures of cognitive and physical capabilities as well as on the schooling attainment, occupational structure, entrepreneurship, and incomes of the rural Bangladesh population. We also provide new estimates of the effects of the consumption of foods grown and cooked in arsenic-contaminated water on individual arsenic concentrations. The estimates are based on arsenic biomarkers obtained from a sample of members of rural households in Bangladesh who are participants in a long-term panel survey following respondents and their coresident household members over a period of 26 years.
Do patents facilitate or frustrate innovation? Lawyers, economists, and politicians who have staked out strong positions in this debate often attempt to validate their claims by invoking the historical record—but they typically get the history wrong. The purpose of this book is to get the history right by showing that patent systems are the product of contending interests at different points in production chains battling over economic surplus. The larger the potential surplus, the more extreme are the efforts of contending parties, now and in the past, to search out, generate, and exploit any and all sources of friction. Patent systems, as human creations, are therefore necessarily ridden with imperfections; nirvana is not on the menu. The most interesting intellectual issue is not how patent systems are imperfect, but why historically US-style patent systems have come to dominate all other methods of encouraging inventive activity. The answer offered by the essays in this volume is that they create a temporary property right that can be traded in a market, thereby facilitating a productive division of labor and making it possible for firms to transfer technological knowledge to one another by overcoming the free-rider problem. Precisely because the value of a patent does not inhere in the award itself but rather in the market value of the resulting property right, patent systems foster a decentralized ecology of inventors and firms that ceaselessly extends the frontiers of what is economically possible.
To quantify trade frictions, we examine multiproduct exporters. We build a flexible general-equilibrium model and estimate market entry costs using Brazilian firm-product-destination data under rich demand and market access cost shocks. Our estimates show that additional products farther from a firm's core competency come at higher production costs, but there are substantive economies of scope in market access costs. Market access costs differ across destinations, falling more rapidly in scope at nearby regions and at destinations with fewer nontariff barriers. We evaluate a counterfactual scenario that harmonizes market access costs across destinations and find global welfare gains similar to eliminating all current tariffs.
I consider the aggregate impact of low intermediate input intensity in the agricultural sector of developing countries. In a dynamic general equilibrium model with idiosyncratic shocks, incomplete markets, and subsistence requirements, farmers in developing countries use fewer intermediate inputs because it limits their exposure to uninsurable shocks. The calibrated model implies that Indian agricultural productivity would increase by 16% if markets were complete, driven by quantitatively important increases in both the average real intermediate share and measured TFP through lower misallocation. I then extend the results to consider the importance of risk in other contexts. First, the introduction of insurance decreases cross-country differences in agricultural labour productivity by 14%. Second, scaling the introduction of improved seeds to decrease downside risk reduces inequality by reallocating resources from rich to poor farmers via equilibrium effects. This reallocation substantially increases aggregate productivity relative to what would be expected from extrapolating the partial equilibrium impact.
We propose a methodology for defining urban markets based on builtup landcover classified from daytime satellite imagery. Compared to markets defined using minimum thresholds for nighttime light intensity, daytime imagery identify an order of magnitude more markets, capture more of India’s urban population, are more realistically jagged in shape, and reveal more variation in the spatial distribution of economic activity. We conclude that daytime satellite data are a promising source for the study of urban forms.
Family and social networks are widely believed to influence important life decisions, but causal identification of those effects is notoriously challenging. Using data from Chile, Croatia, Sweden, and the United States, we study within-family spillovers in college and major choice across a variety of national contexts. Exploiting college-specific admissions thresholds that directly affect older but not younger siblings’ college options, we show that in all four countries a meaningful portion of younger siblings follow their older sibling to the same college or college-major combination. Older siblings are followed regardless of whether their target and counterfactual options have large, small, or even negative differences in quality. Spillover effects disappear, however, if the older sibling drops out of college, suggesting that older siblings’ college experiences matter. That siblings influence important human capital investment decisions across such varied contexts suggests that our findings are not an artifact of particular institutional detail but a more generalizable description of human behavior. Causal links between the postsecondary paths of close peers may partly explain persistent college enrollment inequalities between social groups, and this suggests that interventions to improve college access may have multiplier effects.
We review the literature that studies the dynamics of firms in foreign markets, at both the intensive and extensive margins, and their aggregate implications. We first summarize a set of micro facts on exporter entry, expansion, contraction, and exit and several macro facts about the response of aggregate trade flows to trade-policy and business-cycle shocks. We then present the canonical model developed to account for these facts and discuss its connection to the empirical evidence. We show how three model features—future uncertain profits, an investment in market access, and high depreciation of that access upon exit—generate transition dynamics and long-run aggregate outcomes from a cut in tariffs. The model and its extensions contribute to our understanding of trade integration and the evolution of future trade barriers. We discuss the key challenges faced by the canonical model, its possible extensions, and applications of the framework to recent global events.
For centuries, irrigation communities in south-eastern Spain were socially stable and economically efficient. In this article, we show how these self-governing institutions persisted by resolving conflicts over scarce resources with flexible punishment for water theft. We argue that variable penalties for violating irrigation rules provided social insurance to farmers during droughts. We develop a dynamic model in which judges trade off crime deterrence and social insurance, and test its predictions using a novel dataset on water theft in the self-governed irrigation community of Mula, Spain, from 1851 to 1948. For the same offence, we show that recidivists were punished more harshly than first-time offenders. When the defendant was wealthy, as indicated by the honorific title don, or the victim was poor, judgements were stricter.
Scholars have long recognized that the states’ authority to charter corporations bolstered their antitrust powers in ways that were not available to the federal government. Our paper contributes to this literature by focusing attention on the relevance for competition policy of lawsuits brought by minority shareholders against their own companies, especially lawsuits challenging voting trusts. Historically judges had been reluctant to intervene in corporations’ internal affairs and had been wary of the potential for opportunism in shareholders’ derivative suits. By the end of the nineteenth century, however, they had begun to revise their views and see shareholders as useful allies in the struggle against monopoly. Although the balance between judges’ suspicion of and support for shareholders’ activism shifted back and forth over time, in the end the lawsuits provoked state legislatures to strengthen antitrust policy by making devices like voting trusts unsuitable for purposes of economic concentration.
Modern trade agreements no longer emphasize basic trade liberalization but instead focus on international policy coordination in a much broader sense. In this review we introduce the emerging literature on the political economy of such deep integration agreements. We organize our discussion around three main points. First, the political conflict surrounding trade agreements is moving beyond the classic antagonism of exporter interests who gain from trade and import-competing interests who lose from trade. Second, there is a more intense popular backlash against deep integration agreements than there was against shallow integration agreements. Finally, the welfare economics of trade agreements has become more complex, in the sense that the goal of achieving freer trade is no longer sufficient as a guide to evaluating the efficiency of international agreements.