Author Archives: Chris Colvin

About Chris Colvin

Chris Colvin is a Lecturer (Assistant Professor) in Economics at Queen’s University Belfast, where he is also a Research Associate at Queen’s University Centre for Economic History.

The Godfactor

Religion and Innovation

By Roland Bénabou (rbenabou@princeton.edu), Davide Ticchi (davide.ticchi@imtlucca.it) and Andrea Vindigni (andrea.vindigni@imtlucca.it)

URL: http://econpapers.repec.org/paper/nbrnberwo/21052.htm

Abstract

In earlier work (Bénabou, Ticchi and Vindigni 2013) we uncovered a robust negative association between religiosity and patents per capita, holding across countries as well as US states, with and without controls. In this paper we turn to the individual level, examining the relationship between religiosity and a broad set of pro- or anti-innovation attitudes in all five waves of the World Values Survey (1980 to 2005). We thus relate eleven indicators of individual openness to innovation, broadly defined (e.g., attitudes toward science and technology, new versus old ideas, change, risk taking, personal agency, imagination and independence in children) to five different measures of religiosity, including beliefs and attendance. We control for all standard socio-demographics as well as country, year and denomination fixed effects. Across the fifty-two estimated specifications, greater religiosity is almost uniformly and very significantly associated to less favorable views of innovation.

Review by Stuart Henderson (Queen’s University Belfast)

What is the effect of religion on innovation? A recent working paper by Bénabou, Ticchi and Vingini (2015) (henceforth BTV), and distributed by NEP-HIS on 2015-04-02, suggests that religious differences contribute to significant variation in attitudes towards innovation. In particular, BTV find a consistent and robust negative relationship between various measures of religiosity and attitudes which are considered more favourable to innovation and change.

BTV use individual-level data from all waves of the World Values Survey from 1980 to 2005. This provides a variety of innovation measures which are categorised under the following three headings: “attitudes toward science and technology”, “attitudes toward new ideas, change, and risk taking” and “child qualities”. On the right-hand-side of the regression specification, religiosity is measured using the following alternatives: “identifying as a religious person, belief in God, importance of religion and importance of God in your life, and finally church attendance”. In addition, further socio-demographic controls are included.

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BTV builds especially on Bénabou, Ticchi and Vingini (2013), who similarly find a negative relationship between religiosity and patents per capita across countries and US states. However, their more recent work benefits from a wider spectrum of innovation indicators, as well as the use individual-level data which helps to ameliorate concerns such as the ecological fallacy problem. More generally, their work also adds to a growing economics of religion literature, which has increasingly developed a more nuanced understanding of the causal mechanism associating religion with economic outcomes.

As BVT posit, their work fills a neglected niche which should provide greater clarity on how religiousness (and potentially secularisation) can drive innovation, and thereby long-run growth. Related literature such as Guiso et al. (2003) has emphasised that religious beliefs have a positive association with economic attitudes and growth respectively. However, Barro and McCleary (2003) find that this is tempered by the extent of religious participation, in what can be seen as a believing-belonging trade-off. Similarly, recent work by Campante and Yanagizawa-Drott (2015), and focusing on Ramadan, demonstrates how religious participation enhances the well-being of participants, but negatively affects economic outcomes. As such, while BVT advocate a strong relationship between religion and innovation, there is potentially room for a more refined consideration of religiosity differences especially between those of beliefs and participation. (This seems to be evidenced in that the church attendance religiosity measure is generally weakest across the specifications used by BVT.)

GodTrust

There are a number of further considerations and extensions which may be beneficial for BVT in future work. Take for example when BVT focus on “attitudes toward science and technology”. Here the statistical significance and magnitude of the coefficients fall as we go down the list of statements analysed:

  • “We depend too much on science and not enough on faith”
  • “Science and technology make our way of life change too fast”
  • “The world is better off because of science and technology”

Intuitively, this makes sense. The first and second statements are made in a negative manner, as opposed to the latter which is positive. Furthermore, the first more clearly juxtaposes religion and innovation. Hence, it is possible that the framing of the statements is driving the perceived negative association. Similarly, for the “child qualities” variables, respondents select five they consider “especially important”. The ranking nature of this question, means that if religious faith (which appears as one of the options) is selected, then the values perceived as innovative will on average move down the list, even if people perceive them as important (since only five can be selected). It also seems unusual that religious faith would feature as an alternative choice given the position of religiosity on the other side of the regression specification.

One solution to this potential bias is to examine differences between and within denominations (as BVT already allude to). Indeed, previous work such as Arruñada (2010) has demonstrated how denominational groupings (Catholics vs. Protestant) differ in their economic attitudes. Moreover, by excluding those who are not religious, and then focusing on the gradation in religious practice, BVT could more precisely understand how the intensity of religious practice influences innovation attitudes. In addition, by focusing not only on denominational differences, but also on religious intensity, BVT could potentially deal with the issue of nominal religious identity/cultural labelling, something which has received little attention in previous work.

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The issue of causality is also important, with recent literature employing a variety of novel approaches to deal with such problems. In particular, instrumental variables have become especially popular, and have helped to alleviate concerns such as reverse causality and endogeneity. More broadly, for BVT there exists an opportunity to address how their attitudinal indicators of innovation are reflected in innovation outcomes. While difficult, this would potentially have much greater policy implications, especially if one believes in the functional nature of religion. (There also exists opportunity to examine how socio-demographic factors such as gender interact with religion and thereby affect innovation.)

In sum, BVT have effectively added a much-needed innovation perspective to the economics of religion literature. These initial results suggest that various forms of religiosity have a negative association with attitudinal measures of innovation at the individual-level, complementing previous work by Bénabou, Ticchi and Vingini (2013) across countries and US states. Moreover, their rich data set provides much opportunity to more precisely focus on what facets of religion influence innovation, and thereby not only understand how religion affects society across a recent period of economic history, but also better understand the very nature of religion itself.

References

  • Arruñada, Benito, “Protestants and Catholics: Similar Work Ethic, Different Social Ethic,” Economic Journal, 120 (2010), 890–918.
  • Barro, Robert J., and Rachel M. McCleary, “Religion and Economic Growth Across Countries,” American Sociological Review, 68 (2003), 760–781.
  • Bénabou, Roland, Davide Ticchi and Andrea Vindigni, “Forbidden Fruits: The Political Economy of Science, Religion and Growth,” Princeton University, Research Paper No. 065‑2014, Dietrich Economic Theory Center, (2013).
  • Bénabou, Roland, Davide Ticchi and Andrea Vindigni, “Religion and Innovation,” NBER Working Paper No. 21052, (2015).
  • Campante, Filipe, and David Yanagizawa-Drott, “Does Religion Affect Economic Growth and Happiness? Evidence from Ramadan,” Quarterly Journal of Economics, 130 (2015), forthcoming.
  • Guiso, Luigo, Paola Sapienza, and Luigi Zingales, “People’s Opium? Religion and Economic Attitudes,” Journal of Monetary Economics, 50 (2003), 225–282.

Singing for Hitler – Choirs, Clubs and the Third Reich

Bowling for Fascism: Social Capital and the rise of the Nazi Party in Weimar Germany, 1919-33

Shanker Satyanath (NYU), Nico Voigtlander (UCLA) and Hans-Joachim Voth (Zurich)

URL: econpapers.repec.org/paper/zureconwp/147.htm

Abstract:

Social capital typically leads to positive political and economic outcomes. A growing literature also emphasizes the potentially “dark side” of social capital. This paper examines the role of social capital in the downfall of democracy in interwar Germany. We analyse Nazi Party entry in a cross-section of cities. Dense networks of civic associations such as bowling clubs, choirs, and animal breeders facilitated the Nazi Party’s rise. Towns with one standard deviation higher association density saw at least one-third faster entry. All types of associations – veteran associations and non-military clubs, “bridging” and “bonding” associations – positively predict NS Party entry. These results suggest that social capital aided the rise of the Nazi movement that ultimately destroyed Germany’s first democracy. We also show that the effects of social capital depended on the institutional context – in Prussia, where democratic institutions were stronger, the link between party entry and association density was markedly weaker.

Reviewed by Ronan McGarry (final-year BSc Economics student, Queen’s University Belfast)

This NBER working paper was distributed by NEP-HIS-2013-07-15. The authors seek to clarify and quantify the role that social capital played in the rise of the Nazi Party and the ensuing downfall of the democratic Weimar Republic. In order to do so, econometric analysis of the link between local clubs/societies and Nazi party membership is conducted. The authors also seek to add to the current literature on the ‘dark side’ of social capital (Putnam 1995).

The literature on positive and negative outcomes as a result of high levels of social capital is conflicting. In his 1995 essay ‘Bowling Alone’, Robert Putnam wrote that communities with high levels of social capital ‘promote participatory democracy’. However, Riley (2005) would refute this and point to society-rich Northern Italy – which turned fascist in the 1930s. Furthermore, Chambers & Kopstein (2001) point out that after the collapse of the USSR, Serbs began ethnically cleansing their Balkan neighbours, even though Serbia had fairly intense levels of social capital. This paper turns its attention to Weimar Germany in an effort to shed more light on the topic.

It must be noted that the authors were not the first to tackle Weimar Germany’s fall in terms of social capital. However, they are the first to have done so econometrically. Berman (1997) showed that ‘a robust civil society helped scuttle the twentieth century’s most critical democratic experiment, Weimar Germany’ explaining that the ‘high levels of association served to fragment rather than unite German society.’ This paper builds on Berman’s conclusion by comparing numerically the rates of civic association intensity in German towns and cities against the rate of Nazi Party membership uptake; whilst controlling for various other political and socio-economic variables.

The authors collected data on 111 German towns and cities in modern-day Germany. One problem here is that Weimar Germany’s eastern border was much further to the east than modern-day Germany’s. This means that missing from this dataset are cities like Breslau (now Wroclaw, Poland) and Konigsberg (now Kaliningrad, Russia). Both of these cities were very Nazi-friendly – the Nazis received 44% of Breslau’s vote in 1932 (Davies & Moorhouse, 2011) and 54% of Konigsberg’s in 1933 (Jasinski, 1994) and so their exclusion from the dataset is disappointing in terms of accuracy.

Missing from the authors' dataset are cities like Breslau, Koningberg and Danzig.

Missing from the authors’ dataset are cities like Breslau, Koningberg and Danzig.

Following this, the authors begin the presentation of their findings with an interesting comparison of two similar towns – Kleve and Coburg. Both were similar in size, but with large differences in the presence of associations. Coburg was far denser in terms of civic society – with a rate of 2.99 associations per 1000 inhabitants, compared to Kleve’s 0.89 per 1000. Then, as their hypothesis predicts, Coburg saw an ‘80% greater uptake’ (p. 15) in Nazi Party membership than Kleve between 1919 and 1933.

However, whilst this serves to broadly illustrate the authors’ point, I find this comparison disingenuous in that in picking Coburg, they happen to select one of the most Nazi-friendly cities in Germany to make their point. Indeed, Coburg’s city hall was the first in Germany to fly the Nazi flag. My point is that by picking a town in Bavaria (the home province of the Nazis) and comparing it to a town in the far north, they are ignoring potential geographical concerns. Indeed, if the authors had of compared Kleve with Hamburg (another Northern city with a similar Association Density to Coburg’s), then they would have found their results running the wrong way, as Hamburg has a higher Association Density but a lower Nazi Party entry rate!

Nazi Party Entry Rate against Association Density of towns, with Hamburg, Kleve and Coburg highlighted.

Nazi Party Entry Rate against Association Density of towns, with Hamburg, Kleve and Coburg highlighted.

The authors then present their numerical findings. They announce that ‘association density strongly and significantly predicts higher entry rates into the NSDAP’, with ‘the per capita entry rate increasing by 0.4 standard deviations for every standard deviation increase in association density’ (p.16), results which support Chambers & Kopstein (2001) and Riley’s (2005).

Following this, the authors make an effort to quantify the differences between Putnam’s (1995) ‘bonding’ (exclusive groups such as Gentleman’s Clubs) and ‘bridging’ (inclusive groups such as choirs or bowling clubs) social capital in terms of their effects on Nazi membership uptake. Putnam believed bonding social capital to have adverse effects, with bridging social capital fulfilling the opposite role. However, the authors find bridging capital to have ‘positive, significant and quantitatively meaningful coefficients, which are similar in magnitude to those for bonding capital’ (p.21) – suggesting that both types of associations were ‘important pathways’ in terms of Nazi party membership.

German youth choir, and example of bridging capital. The sign translates to 'We sing for Adolf Hitler'.

German youth choir, and example of bridging capital. The sign translates to ‘We sing for Adolf Hitler’.

One final important contribution this paper makes is in terms of investigating the evidence that social capital can develop a ‘dark side’ (Putnam, 1995) and actually undermine a functioning democracy – which the authors claim is ‘missing’ from current literature. To do so, they examine the state of Prussia, which was more ‘pro-democracy’ and was ‘governed more competently’ (p.22). What they find is that before the gradual weakening of Prussian democracy in 1930, the relationship between party entry and association entry in Prussia was ‘systematically weaker’ (p.23) than the rest of Germany. What this shows is that a ‘functional, strong, democratic government’ (p.24) can help prevent social capital showing its ‘dark side.’

To conclude, this paper offers an interesting insight into an area of social capital literature which had not been studied econometrically before. Whilst it is indeed disappointing that the authors could not include important eastern European cities that are no longer a part of Germany, they do make a fair point that massive war damage in these cities led to the loss of many public records and as such, makes it impossible to gather data. On a positive note, the presentation of Prussia as a case in which social capital can suddenly change from a democracy-supporting vehicle to one which undermines democracy completely is welcomed, and suggests that the manner in which social capital operates is heavily dependent on the ‘wider institutional context’. In terms of future study into the ‘dark side’ of social capital, it might be interesting to apply these econometric methods to the rise of other fascist parties, such as the Golden Dawn in Greece, or further study on fascist – building on Riley’s 2005 work.

Bibliography

Berman, S. (1997). Civil society and the collapse of the Weimar Republic.World politics49, 401-429.

Chambers, S., & Kopstein, J. (2001). Bad civil society. Political Theory, 837-865.

Davies, N., & Moorhouse, R. (2011). Microcosm: a portrait of a central European city. Random House.

Jasiński, J. (1994). A history of Konigsberg: sketches of the thirteenth to twentieth centuries. (Historia Królewca: szkice z XIII-XX stulecia) Książnica, Poland.

Putnam, R. D. (1995). Bowling alone: America’s declining social capital. Journal of democracy6(1), 65-78.

Riley, D. (2005). Civic associations and authoritarian regimes in interwar Europe: Italy and Spain in comparative perspective. American Sociological Review70(2), 288-310.

Satyanath, S., Voigtländer, N., & Voth, H. J. (2013). Bowling for fascism: Social capital and the rise of the Nazi Party in Weimar Germany, 1919-33 (No. w19201). National Bureau of Economic Research.

 

What Chance Change? Driving Development through Transport Infrastructure

Locomotives of Local Growth: Short- and Long-Term Impact of Railroads in Sweden

By Thor Berger (Lund University) and Kerstin Enflo (Lund University)

Abstract: This paper uses city-level data to examine the impact of a first wave of railroad construction in Sweden, between 1855 and 1870, from the 19th century until today. We estimate that railroads accounted for 50% of urban growth, 1855-1870. In cities with access to the railroad network, property values were higher, manufacturing employment increased, establishments were larger, and more information was distributed through local post offices. Today, cities with early access to the network are 62% larger and to be found 11 steps higher in the urban hierarchy, compared to initially similar cities. We hypothesize that railroads set in motion a path dependent process that shapes the economic geography of Sweden today.

URL: http://ideas.repec.org/p/hes/wpaper/0042.html

Review by Alexander Horkan (final-year PPE student, Queen’s University Belfast)

What impact did the introduction of railroads to Sweden have on town-level growth? This is the question being explored by Thor Berger and Kerstin Enflo, both of Lund University, in their EHES working paper circulated as part of NEP-HIS-2013-08-05. The paper focusses on the early development of the Swedish railroad network, between 1855 and 1870, and examines whether towns with early access to the network[1] experienced higher levels of expansion of economic activity, using population growth as a proxy measure for this. They expand the possibility of their have been effects beyond merely the initial shock and scrutinise whether there was a long-run impact on economic development over the 20th Century.

Berger and Enflo contribute to the discourse on the value of transport infrastructure to lowering trade costs, which frequently hypothesises that large infrastructure projects foster economic development ‘ahead of demand’. Although an intuitive suggestion serving as a core belief of policymakers regarding the localisation of growth and planning possibilities, it is historically troublesome to provide evidentiary credence that such growth is independent from endogenous, observable and unobservable preconditions. Modern transport infrastructure is rarely assigned randomly to locations, instead being focussed around connecting ‘hubs’ that inevitably possess advantageous biases towards growth. This builds on various works detailing how such biases plague neutral analysis of development, as infrastructure projects are seemingly inextricably linked with political interference at either end of the spectrum, whether promoting growth in areas of economic sterility, or those already growing through endogenous factors.

Berger and Enflo show how railroads affect the location, not the level, of growth

Does railroad access increase the overall level of growth, or just the location of growth?

This paper seems to be of extreme relevance to current debates surrounding the future of a high-speed rail network connecting Birmingham to London in the UK. Contemporary debates have been hazy, lacking clear focus on precise and demonstrable economic incentives, leading to many questioning the value brought to northern cities. This research can increase the scope of such debates, providing clear evidential support that early adoption of technological advancements in transport infrastructure ignites and fosters long-term economic growth, yet simultaneously causes large negative ‘spillover’ effects on nearby, unconnected towns. Such research seems valuable and relevant to both sides of the question and must only serve to enrich any subsequent discussion.[2]

Proof of their hypothesis is offered through the calculation of comparative populations of cities both connected and unconnected to the railroad network between 1855 and 1870. Through using a difference-in-difference framework, they show that those who gained early exposure to the rail network grew larger, with additional population growth of 26% on average. Such increases imply that levels of urbanisation in 1870, and the aggregate rate of growth by the same point, would have ‘decrease[d] by 15% and 50% respectively’ (p. 3) independent from rail infrastructure. These calculations prove correlation between the exposure to railways and subsequent growth, echoing work by Fishlow (1965).

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Where Bergen and Enflo really contribute to expanding existing literature, however, is by providing robust justification to draw direct causal relationships between railroad placement and subsequent ‘ignition’ of economic development. This is achieved through a tripartite construct, initially matching observationally similar towns and their growth patterns before the railway introduction. These measures ensure that observable differences are not key to explaining growth of specific towns, i.e. they were not already growing faster than surrounding cities.

Secondly, they calculate a strong instrumental variable; this relies on proposed routes drawn up by Adolf van Rosen in 1845 and subsequently by Nils Ericson in 1856. As such routes were constructed in relative isolation of political and economic pressures; favouring conditions of topographical simplicity and military strategic importance (avoiding coastal areas traditionally predisposed to growth) such an instrument is robust in corroborating the evidence of the first measure. By estimating the pre-rail differences in population growth for towns included in these original plans, and calculating their relative differences as close to zero, further corroboration is given to assertions that there were no pre-existing conditions conducive to growth in these towns.

The final measure is the imagined construction of these proposed lines, and further ‘low cost routes’. By creating this strong counterfactual, the authors presuppose that these lines that were not built, due to political obstinacy and lassitude, and those proposed later, to link profitable hubs of commerce would show large increases in populations if the driving factor behind growth was some unobservable, predetermining factor. Conversely however, if growth failed to materialise, it would be clear that the most significant force at work was early exposure to railways.

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What can policymakers today learn from the Swedish case?

In his 1964 paper Robert Fogel identified the aggregate contribution of railroads to the US economy through social savings, deeming it of very little significance to social savings against a comparable counterfactual canal system. The measures used by Berger and Enflo are inversely interested in the relative impact of the railroad on cities. The negative ‘spillovers’ to nearby, unconnected towns examined in this paper further confirm Fogel’s argument that, whilst railroads had little impact on aggregate economic activity, they had large effects on relative growth patterns.

The final key significance Berger and Enflo draw out is the persistency of the impact of early exposure to rail networks. There are a myriad of reasons for this: high value sunk investments provide large barriers to both entry to and exit from the market, prompting concentration of economic activity in specific places. Additionally emerging towns become identifiable with growth and development, thus almost gaining critical mass and organically attracting further growth by this virtue. This emergent path dependency mirrors that cited by Bleakley and Lin (2012) regarding US cities being focussed around portage sights, despite the increasing irrelevance of such a factor. The implications of this paper however shadow those of Redding, Sturm and Wolf (2011) and Jebwad and Moadi (2011), examining man-made advantages over natural ones, contributing more greatly to discourse on policy implications and growth strategy.

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Throughout the paper, however, despite great lengths to isolate geographical preconditions for local growth, there was an absence of discussion regarding elasticity of demand for rail services across the country. It seems remiss to address reduction of trade costs, whilst ignoring the possibility for elasticity of demand for such services, for example during winter months where winter roads open new avenues of trade, significantly reducing goods transportation costs via substitutions. Such questions could raise insightful analysis of unexplored geographical factors in northerly cities not experiencing the same degree of negative ‘spillovers’ suffered by more central ones.

The scope of this rigorous analysis could be expanded beyond current high-speed rail debates explored above to varying fields. Pertinent could be investigation of whether such findings have significance surpassing large-scale travel infrastructure and technological advancements, to the increasingly relevant information and communication sector for example; examining whether early adoption of communications advancements and infrastructure lead growth in specific locations.

Notes

[1] Less than a third of towns were connected by the end of this period, and only around a tenth of the peak network size had been realised.

[2] For a wider discussion of the minutia of this debate please refer to:

http://www.ft.com/cms/s/0/63ff3bfe-8dbd-11e3-bbe7-00144feab7de.html#axzz2xvZqcMe0

and

http://www.economist.com/news/leaders/21588862-britains-plans-high-speed-railway-are-deeply-flawed-spend-money-boring-stuff

 

References

Bleakley, H. and Lin, J. (2012). Portage and Path Dependence. The Quarterly Journal of Economics 127, 2, 587{644.

Fishlow, A. (1965). American Railroads and the Transformation of the Ante-bellum Economy. Vol. 127. Cambridge: Harvard University Press.

Fogel, R. (1964). Railroads and American Economic Growth. Baltimore: John Hopkins Press.

Jedwab, R. and Moradi, A. (2011). Transportation Infrastructure and Development in Ghana. Mimeo.

Redding, S. J., Sturm, D. M., and Wolf, N. (2011). History and Industry Location: Evidence from German Airports. Review of Economics and Statistics 93, 3, 814{831.

 

Converting for tax reasons

On the road to heaven: Self-selection, religion and socioeconomic status

By Mohamed Saleh (Toulouse School of Economics)

Abstract: The correlation between religion and socioeconomic status is observed throughout the world. In the Middle East, local non-Muslims are, on average, better off than the Muslim majority. I trace the origins of the phenomenon in Egypt to a historical process of self-selection across religions, which was induced by an economic incentive: the imposition of the poll tax on non-Muslims upon the Islamic Conquest of the then-Coptic Christian Egypt in 640. The tax, which remained until 1856, led to the conversion of poor Copts to Islam to avoid paying the tax, and to the shrinking of Copts to a better off minority. Using a sample of men of rural origin from the 1848- 68 census manuscripts, I find that districts with historically stricter poll tax enforcement (measured by Arab immigration to Egypt in 640-900), and/or lower attachment to Coptic Christianity before 640 (measured by the legendary route of the Holy Family), have fewer, yet better off, Copts in 1848-68. Combining historical narratives with a dataset on occupations and religion in 640-1517 from the Arabic Papyrology Database, and a dataset on Coptic churches and monasteries in 1200 and 1500 from medieval sources, I demonstrate that the cross-district findings reflect the persistence of the Copts’ initial occupational shift, towards white-collar jobs, and spatial shift, towards the Nile Valley. Both shifts occurred in 640-900, where most conversions to Islam took place, and where the poll tax burden peaked. Occupational barriers to entry and the religiously segregated schools both led occupations to persist in 900-1848.

URL: http://EconPapers.repec.org/RePEc:tse:wpaper:27573

Review by Chris Colvin

This paper, which was distributed by NEP-HIS on 2013-10-18, forms an important contribution to the growing literature on the economics of religion. In it, Mohamed Saleh attempts to explain why Egypt’s Coptic Christians are historically better off than its Muslim majority, and why their elite status has persisted in the long run. Using a variety of different archival sources, some of which required extensive and expensive data collection and digitisation, Saleh advances the hypothesis that poor Copts converted to Islam to escape taxes levied on non-Muslims in the period 640-900.

In contrast with Maristella Botticini and Zvi Eckstein’s explanation of the distinctive occupational selections of Jews, which requires conversion for religious reasons (failure to read the Torah), Saleh’s explanation for Coptic socioeconomic superiority is that they were responding to an economic incentive (exemption from the Poll Tax). Those who were sufficiently well off to bear the tax imposed on them by their new Islamic overlords remained Christian; those who were better off if they joined the growing ranks of the new Arabic religion decided instead to register at their local Islamic authorities. On average, both groups were better off by the move. The institutional design of the Islamic faith incentivised voluntary conversion out of pursuit of worldly rather than heavenly riches. Taxes led to the virtual eradication of Coptic Christianity, or at least its switch from being the faith of Egypt’s majority to the faith of a very small minority, by rewarding new members financially.

Poor Copts voluntarily abandoned Christianity for tax reasons

Salah argues that poor Copts voluntarily abandoned Christianity for tax reasons

Saleh discounts religious reasons for conversion using a carefully constructed historical narrative backed by time series evidence. Coptic Christianity and the Islam practiced in the Nile Valley were quite similar in the period when most conversion took place in terms of their mystical ritualization and worship; Islam was neither more nor less costly to practice than the incumbent religion. Copts were not required to read to be good Christians and so unlike Jews in this period had no religious incentive to invest in human capital; the Botticini-Eckstein hypothesis does not work here. Districts where the poll tax was more strictly enforced witnessed wider conversion among poor Copts to Islam, further solidifying the status of the Coptic elite. Their socioeconomic position was subsequently maintained for over a millennium through segregated schooling and the fact that reverse-conversion was punishable by death, among other things.

Saleh is poised to expand his research to other parts of what is now the Muslim world. In his paper, he sets out how other yet-to-be digitised tax registers can used to find out why Christianity survived to varying degrees in the Levant and North Africa, or, conversely, can help explain the historical process of Islamization. I look forward to reading the results of such work.

It’s the Timing, Stupid

Cross-Sections Are History

Richard Easterlin (University of Southern California)

Abstract

Although cross section relationships are often taken to indicate causation, and especially the important impact of economic growth on many social phenomena, they may, in fact, merely reflect historical experience, that is, similar leader-follower country patterns for variables that are causally unrelated. Consider a number of major advances (“revolutions”) in the human condition over the past four centuries – material living levels, life expectancy, universal schooling, political democracy, empowerment of women, and the like. Suppose that each has its own unique set of causes, and, as a result, a unique starting date and a unique rate of diffusion throughout the world. Suppose too that initially all countries are fairly closely bunched together on each variable in fairly similar circumstances. Suppose, finally, that the geographic pattern of diffusion is the same for each aspect of improvement in the human condition, that is, the same group of countries have a head start, and the follower countries in the various parts of the world fall in line in a similar geographic order. The result will be statistically significant international cross section relationships among the various phenomena, despite their being causally independent. The oft-reported significant cross-country relationships of many variables to economic growth may merely demonstrate that one set of countries got an early start in virtually every “revolution”, and another set, a late start.

URL: http://econpapers.repec.org/paper/izaizadps/dp7341.htm

Review by Chris Colvin

The “correlation equals causation” fallacy says that one thing preceding another does not imply causation. Be that as it may, inferring causality from time series data is significantly more plausible, under certain conditions, than from cross sections. A cross-sectional regression only shows the co-occurrence of different factors; to prove causality we also need to know about history. This is the argument made in an IZA Discussion Paper by USC’s Richard Easterlin distributed as part of NEP-HIS 2013-04-27 (since published in the journal Population and Development Review).

Easterlin’s particular beef is with purveyors of cross-country growth regressions. He notes that studies of actual historical experience of individual countries frequently disprove expectations about causation based on cross-sectional relationships. The fact that a certain group of countries enjoys high levels of per-capita GDP and high life expectancies does not mean the former causes the latter. Indeed, the fact even that these countries were the first to enjoy both high GDP and high life expectancies still does not prove causality.

Richard Easterlin argues that history matters

Richard Easterlin argues that history matters

Easterlin, famous for his Easterlin Hypothesis, instead argues that there could be unrelated factors causing GDP and life expectancy that cannot be picked up in a cross-sectional regression. The reason: cross sections register the results of history, not insights into likely experience. Co-occurrence at any one point in time does not imply causation. Per-capita GDP and life expectancy may be independent of one another and governed by advances in separate underlying technologies. The Industrial Revolution and the Mortality Revolution may be totally unrelated; each phenomenon must be analysed in its own right.

This is a short paper which I think offers an important contribution. It is especially useful as a teaching aid. Easterlin presents his argument in a clear and concise fashion that undergraduate students should easily grasp. His paper reiterates the importance of economic history in the teaching of economics, something which is noted to be lacking in many university syllabi by many of the authors of a great volume on the future of economics teaching edited by Diane Coyle. And when read in conjunction with e.g. Morten Jerven’s recent book on the unreliable nature of the statistics pertaining to growth and income in the Global South, the lessons of this paper can be used by students to themselves explore the problems of much of the empirical development literature of recent history.

Do banks facilitate economic growth? If so, what type?

Banks, free banks, and U.S. economic growth

Matthew Jaremski (Colgate University)
Peter Rousseau (Vanderbilt University)

Abstract

The “Federalist financial revolution” may have jump-started the U.S. economy into modern growth, but the Free Banking System (1837-1862) did not play a direct role in sustaining it. Despite lowering entry barriers and extending banking into developing regions, we find in county-level data that free banks had little or no effect on growth. The result is not just a symptom of the era, as state-chartered banks seem to have strong and positive effects on manufacturing and urbanization.

URL: http://econpapers.repec.org/paper/vanwpaper/vuecon-12-00012.htm
Review by Chris Colvin

Do banks facilitate economic growth, and if so, what type of banks do so best? Matthew Jaremski and Peter Rousseau attempt to answer this question by looking at the economic impact of the entry of “free banks” to the US market for banking services in the mid-nineteenth century.

Free banks, so called because they required no charter, were an early form of financial liberalisation which in the long-run proved to be unsuccessful; by 1863, one third of all the free banks ever created had closed.

The advent of free banking laws lowered entry barriers because any group of individuals could establish a bank, as long as they fulfilled certain requirements set down by the state in which they operated. The incumbent charter banks, by contrast, required significant political lobbying before they were permitted to open.

Jaremski and Rousseau look at a period of US history in which both types of bank operated side-by-side. Using county-level social, financial and economic data, they are able to track the impact, if any, of a bank opening on its locality.

Jaremski and Roussasu find that free banking had little effect on growth

Jaremski and Roussasu find that free banking had little effect on growth

Overall, they find that banks of any kind had a strong effect on local growth, especially in manufacturing. But when differentiating the impact by bank type (charter versus free), charter banks had a positive effect while free banks had little or no effect on growth.

So in conclusion, banks appear to facilitate economic growth, but free banks not so much. Why? The authors reckon it has something to do with: (1) what they were investing in (agriculture rather than manufacture); (2) what backed their note issues (some states required very little stable collateral); and (3) new banking legislation in the 1860s (which saw the advent of national banking).

The Open Access Debate and Economic History

This paper, which was distributed by NEP-HIS 2013-02-03, is an example of an alternative use of working paper series: the distribution of soon-to-be-published journal articles that have already gone through peer review. Jaremski and Rousseau are about to have this article published in Economic Inquiry; it is already available there on Early View.

Why do authors use working paper series for this purpose? Well, probably to improve the access to their work.

Improving access to academic work is a very live political issue here in the UK. There is much talk about ways to make academic research available to the general public. The UK government seems to be in favour of something called Gold Access, where researchers pay to have their work published in journals (see here). This strikes me as a way to prop up the status quo, to support publishers’ existing business models, which in my opinion have come under incredible pressure from digital paper archiving and distribution services like RePEc.

An alternative mooted by others has been dubbed Green Access, and is very much the spirit of what Jaremski and Rousseau do here: in addition to publishing work in the standard way, through an established journal with peer review, academics make a version of their article available free-of-charge through their own website or their institution’s online archive, perhaps after some time delay. Many publishers seem dead against this route, perhaps because it threatens their business model more than Gold Access would. But I think putting pressure on their business is a good idea; I reckon that the likes of Elsevier need this pressure in order to curb their market power.

The Economic History Society has recently sent at letter to the UK government committee tasked with looking into the issue of Open Access (see here). It is written from the perspective of not-for-profit academic publisher, and has a different assessment of the situation than me. I urge economic historians to read it and debate its implications, also those located outside of the UK.

To patent or not to patent, that is the question

Inventors, Patents and Inventive Activities in the English Brewing Industry, 1634-1850

Alessandro Nuvolari (alessandro.nuvolari@sssup.it) and James Sumner (james.sumner@manchester.ac.uk)

URL: http://ideas.repec.org/p/ssa/lemwps/2012-18.html

Abstract

This paper examines the relationship between patents, appropriability strategies and market for technologies in the English brewing industry before 1850. Previous research has pointed to the apparent oddity that large-scale brewing in this period was characterized both by a self-aware culture of rapid technological innovation, and by a remarkably low propensity to patent. Our study records how brewery innovators pursued a wide variety of highly distinct appropriability strategies, including secrecy, selective revealing, patenting, and open innovation and knowledge-sharing for reputational reasons. All these strategies could co-exist, although some brewery insiders maintained a suspicion of the promoters of patent technologies which faded only in the nineteenth century. Furthermore, we find evidence that sophisticated strategies of selective revealing could support trade in inventions even without the use of the patent system.

Review by Chris Colvin

Much about the recent legal dispute between Apple and Samsung suggests that our patent system is broken. The conventional economic argument for patent protection is that it is socially beneficial because it: (1) incentivises invention in areas where there would otherwise be few rewards for inventors; and (2) aids in the dissemination of ideas and combats secrecy (for a good explanation of the conventional view, see Suzanne Scotchmer’s excellent textbook). But in their 2008 polemic, and again in a recent working paper, Michele Boldrin and David K Levine argue that patents create only ‘an “intellectual monopoly” that hinders rather than helps the competitive free market regime that has delivered wealth and innovation to our doorsteps’. The authors argue instead that: (1) patents neither increase invention, nor adequately reward inventors; and (2) patents simply create a market in patents and in associated legal services.

Nuvolari and Sumner try to understand the remarkably low propensity to patent in brewing before 1850.

It is against this on-going debate on the value and efficacy of patent protection that Alessandro Nuvolari and James Sumner’s new working paper should be read. Distributed on NEP-HIS-2012-11-03, the paper offers an excellent industry case study from history with which to understand the role of patents within a single sector. Nuvolari (Scuola Superiore Sant’Anna, Pisa) and Sumner (University of Manchester) track their use in the brewing industry before, during and after the Industrial Revolution. Not only do they compile a new dataset of patents and patentees in brewing across the period, but they also catalogue alternative appropriability strategies used by innovators at the time: trade secrecy, complete openness, and everything between. Of particular interest to economists and historians studying innovation and incentives are the authors’ findings that the strategies of “insiders” and “outsiders” to the brewing industry differed substantially, and that there was a large trade in inventions, even for those that were not protected by patents.

Today, and with few exceptions, we have a one-size-fits-all patent system that offers the same levels of protection to inventors in all sectors of the economy. One mooted solution to our current patent mess is that these government-granted monopoly rights should be redesigned to be sector-specific; they are perhaps more appropriate to some industries than others and should have different protection lengths, breadths and costs to reflect this. For example, patents that relate to tablet computers should be weakened, whilst those relating to pharmaceuticals strengthened. Nuvolari and Sumner give us a warning shot from history for policymakers considering such an approach: a great deal of different appropriability strategies can be present even within the same industrial sector, let alone between sectors. Redesigning today’s patent system to be sector-specific would fail to reflect the different ways in which inventors compete; it may force rivals to use the same strategies, and may hamper rather than help progress.