Thursday, 3 February 2011

Indian Reservations

I never thought I would be able to mix boyhood entertainment with serious scholarship... cowboys and Indians AND serious economics? Get lost. But no, one of the job market candidates coming through CREI/UPF, Christian Dippel from U Toronto, has a very clean and cool paper on the incomes of native American-Indians. First, he shows that income differences between different reservations are HUGE -- much bigger than across US states. Most of these probably opened up in the last 20 years, or so he argues. This matters, because until ~1980, the reservations were largely run by the federal government. Under Reagan's "New Federalism", they got a degree of autonomy. Christian shows that reservations where previously politically independent groups were forced together do much worse than the rest -- the effect is around -20 to -30%. He uses a clever identification strategy that uses the effect of mining on reservation formation in the 19th century, which is reasonably plausible. This allows him to claim the effect is causal. Overall, I thought this was very nice work - clear, clean, important.

The only thing that remained a bit muddy is the mechanism. What political economy model would rationalize this gigantic effects? If you force previously independent clans together, why is that necessarily bad? It could be that there is more competition for leading the local council, instead of having deep political factions that lead to stalemate or power-grabbing. Ex ante, I wouldn't be sure what to expect, so the actual, big differences leave me a bit puzzled. But Christian has some plans to get census data to tell us more about exactly which type of activity suffers on the 'bad' reservations. With that in hand, my guess is that the paper could go far. Actually, in some ways, Christian reminds me a lot of another Toronto product, Nathan Nunn, who first got a job as an assistant professor at UBC-Vancouver before going here.

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