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". 

Readings

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.

Prometheus Shackled

my book with Peter Temin on banking and the Industrial Revolution will be out later this year. We are just finalizing the cover and waiting for the index. In the meantime, our friends who generously read (and criticized) the  manuscript have sent in their testimonials, and they have been very kind. Here is what their testimonials say:

“A major contribution to economic history, business history, social history, and economics, Prometheus Shackled resolves a great enigma about the Industrial Revolution by explaining why economic growth was so slow despite massive technical change."—Philip T. Hoffman, California Institute of Technology "Based on newly opened archival material, two economists have written a sparkling and provocative book on how banking worked in the past, that will force all scholars working in the area to re-examine their notions about the economics of the British Industrial Revolution, the importance of banking and finance in economic development, and the role that government regulation has played in the process of capital accumulation and industrialization."—Joel Mokyr, Northwestern University; author of The Enlightened Economy “Peter Temin and Joachim Voth have written a marvelous blend of business history and economic analysis.  Their careful study of Hoare’s Bank documents the origins of modern banking and relates the story to the state’s insatiable demand for credit to finance war.  Prometheus Shackled is a pleasure to read and calls into question many grand narratives that seek to explain the rise of the West.”--Bob Allen, University of Oxford; author of The British Industrial Revolution in Global Perspective “In a world still hobbled by the unchecked excesses of modern finance, this timely study of Industrial Revolution banking reminds us that bankers are as important for growth as engineers.  Indeed, the authors argue, too few bankers in eighteenth century Londonlimited economic growth much more than too many in the untrammeled City of today.” -- Greg Clark, University of California, Davis; author of A Farewell to Alms.

“This is an important work, and it is written in an engaging style. The authors integrate goldsmith banking operations with the history of the rise of the nation state’s finances and military aspirations, the broader economic trends that gave rise to industrialization, the rise of the middle class and the changing distribution of wealth, and evolving societal attitudes that accompanied industrialization. The central thesis of the book – that England’s constrained banking system served sovereign interests at the expense of private interests during the early industrial revolution (1760-1830) – is argued persuasively.” -- Charles Calomiris, Columbia University

“Prometheus Shackled solves a major puzzle:  Why during the first Industrial Revolution was Britain's economic growth anemic?  The authors show that financial and other policies diverted credit from the private economy to the government, making it easier for the British state to finance its numerous wars.  With implications for both history and our own financially and economically troubled times, this is an important book.” -- Richard Sylla, New YorkUniversity

a mostly stimulating and important black hole...

in the space + time continuum: I have just spent a few days writing tenure letters. It's hugely interesting... you get to read pretty interesting stuff that you wouldn't normally read, and you have to think about where the profession/subfield is headed. One can even live with the pleasant thought that one can influence (in a small way) where one's own field is going. Of course, the time cost is staggering. I hit "word count" on the last letter I wrote, and it weighs in at ~2,000 words. An average academic article is ~ 8,000 words, and much of the work that goes into it - except for the data analysis - isn't so different either ... the sifting of evidence and the ferreting out of research trends, plus the polishing of the text to make sure it conveys finer nuances. Good thing one only gets to do this with tenure under the belt!