Wednesday, 24 October 2012

Greeks vs Germans

Guiso, Herrera and Morelli have a new version of their working paper on "A CULTURE BASED THEORY OF FISCAL UNION DESIRABILITY". They first show just how big cultural differences are between Germans and Greeks; they then move on to build a model of when a fiscal union can work. Interestingly, and contrary to what I expected, they find that diversity is actually good for a  the sustainability of a fiscal union.

Economic history pays

at least in the UC system... Keefe and Wang have a new paper on faculty salaries in economics departments of the UC system, and find that there is a 13-17% premium for economic history, after accounting for campus, seniority, gender, and publications. My guess is that economic history is a tougher field to get hired in (more of a "luxury" item); the scholars that do get in are way better than the marginal candidate in more mainstream fields. Eventually, quality shows and a good university system rewards them accordingly.

Amongst other interesting findings is how much higher pay at UCLA is than at Berkeley... the authors also have a hugely misspecified regression where they claim that they can back out the value of extra publications in different journals... after controlling for rank. This is a classic "controlling for an intermediate outcome" mistake, where an important outcome influenced by what you are interested in - publications - goes on the right hand side, and gives you completely the wrong results. For an interesting example, see the discussion by Andrew Gelman of "Engineers have more sons". 

Tuesday, 16 October 2012


Felipe Valencia and I are organizing a reading group in long-term persistence this term. Today, we'll be discussing "Poor Institutions, Rich Mines: Resource Curse and the Origins of the Sicilian Mafia" by Buonanno, Durante, Prarolo, and Vanin. Here is the abstract:

This study explains the emergence of the Sicilian mafi a in the XIX century as the
product of the interaction between natural resource abundance and weak institutions. We
advance the hypothesis that the ma a emerged after the collapse of the Bourbon Kingdom
in a context characterized by a severe lack of state property-right enforcement in response
to the rising demand for the protection of sulfur - Sicily's most valuable export commodity
- whose demand in the international markets was soaring at the time. We test this
hypothesis combining data on the early presence of the ma a and on the distribution of
sulfur reserves across Sicilian municipalities and nd evidence of a positive and signi cant
e ect of sulphur availability on ma a's di usion. These results remain unchanged when
including department xed-e ects and various geographical and historical controls, when
controlling for spatial correlation, and when comparing pairs of neighboring municipalities
with and without sulfur.

Fewer Guns...

More Violence. The NRA will love this piece of research! MIT's Laura Ralston has a paper that looks at a disarmament campaign in Uganda, and finds that there is more violence afterwards. Remarkably, it's not cross-border raids from Kenya that increased, but Ugandan-on-Ugandan violence:
This paper studies the effect of Uganda’s 2006 disarmament policy in the Karamoja region in East Africa, a traditional tribal area that is one of the most violent places in the world. This policy greatly reduced the guns of tribes in the Ugandan districts of the region but not in the Kenyan districts. Theoretically, the impact of the disarmament is ambiguous, since guns can be used for deterrence as well as helping aggressors carry out crimes, such as livestock raiding. For example, disarmament could reduce the advantage of heavily armed tribes over weakly armed tribes and lower the number of tribes willing to carry out raids. At the same time, it will also lower the expected cost of confrontations for all tribes, which may lead to more tribes initiating raids, particularly if the weakly armed tribes begin to raid. Empirically, I find that the disarmament campaign had the unintended effect of increasing the frequency of raids in Uganda by about 40%, while, consistent with the idea that disarmament reduced the costs of raiding, I find no impact on the monthly death rate. Moreover, this increase in raids in Uganda was driven by an increase in Ugandan initiated raids on other Ugandans, not an increase in Kenyan initiated raids on Ugandans, suggesting that in this context the deterrent effect of guns outweighs their impact as a tool of aggression.

Waiting for Woody

It seems that there is a serious failure in marketing the case for Catalan independence. As I peruse the news sections of the gazettes, printed and online, I find many commentators who seem to say that the Catalans are simply a group of rich Spaniards who are tired of paying for the rest of the country. A currency strategist (!) at a London bank was quoted (via WSJ marketwatch) as saying
In view of the movements towards fiscal union within the euro zone it is perhaps ironic that Catalonia is calling for more autonomy from Spain. The region currently transfers EUR15 bln [about 19 billion] of its economic output to the rest of Spain each year, a situation that over a million protesters in Barcelona last week clearly view as undesirable. One question that inevitably arises from Catalonia’s protests is that if richer Spaniards are becoming more reluctant to support their less economically well off countrymen, who else do they expect will rise to the challenge?
This is, of course, breathtaking in its ignorance. The 11-S demonstrations were about much more than the injustice of current transfers. There was a very good case for Kosovo to separate from Serbia, and for Southern Sudan to break free. Nobody framed the issue of the dissolution of Czechoslovakia or Yugoslavia in terms of solidarity. And that's where the failure of the Catalan political elites lies. They have completely failed to market their case -- a country that is linguistically, culturally, economically distinct and largely ruled as a conquered province since 1714 by its bigger neighbor. If Catalonia was in another continent, everyone would agree that this is colonialism; within Europe, it is somehow ok. Everywhere else in Europe, smaller regions with a sense of independence are effectively paid to stay ... see Scotland, or Southern Tirol. Not so in Spain; the fiscal transfers from Catalonia to the rest of Spain are huge, and most "autonomy" until now has been a sham.

What's missing? In two words: George Clooney. The handsome actor lent his voice to the case for independence in Southern Sudan, and quite effectively. Before you can hope for the world to recognize you as a separate entity, you need someone to communicate what makes you distinct. Perhaps the Generalitat should ask Woody Allen to act as ambassador for the Catalan case.