The Rise of Inclusive Political Institutions and Stronger Property Rights: Time Inconsistency Vs. Opacity.

Giacomo Benati (University of Bologna)
Carmine Guerriero (University of Bologna)
Federico Zaina (University of Bologna)

Abstract : Despite the relevance of inclusive political institutions and strong property rights, we still lack an unified framework that identifies their origins and interaction. We study a model in which the elite can elicit the citizens' cooperation in investment by either granting a more inclusive political process, which allows them to select the tax rate and produce their preferred public good, and by punishing suspected shirking through the restriction of property rights. When the investment return is small, cooperation can only be attained under the more inclusive political process. When instead investment is sufficiently profitable, the elite does not need to empower the citizens and can substitute maximum taxation and \textit{de facto} property rights with partial redistribution and, possibly, no private rights. Yet, embracing the stick is optimal only when production is sufficiently transparent, and, thus, punishment effectively disciplines a shirking citizen. These predictions are consistent with the evolution of the geographic conditions shifting the expected return and opacity of the farming process, the inclusiveness of political institutions, the strength of property rights and the public good provision in a panel of the 44 major Mesopotamian polities spanning each half-century between 3050 and 1750 BCE. Crucially, our estimates are very similar when we control for proxies for trade potential, severity of external and internal conflicts and urbanization.

An Opium Curse? the Long-run Economic Consequences of Narcotics Cultivation in British India

Jonathan Lehne (Paris School of Economics)

Abstract : The long run consequences of colonial rule depended on the institutions introduced by the colonisers and the economic activities they promoted. This paper analyses the effects of opium production under British rule on current economic development in India. I employ a border discontinuity design which interacts fine-grained local variation in environmental suitability for poppy cultivation with administrative boundaries that demarcated opium-growing areas. I find that greater suitability for opium is associated with lower literacy and a lower rate of public good provision within opium-growing districts but has no effect in bordering areas where opium cultivation was prohibited. Placebo tests using suitability for other crops show no such discontinuity. Colonial administrative data allow me to test potential mechanisms for the persistent negative effect of opium production. Greater poppy cultivation is associated with less per capita public spending on health and education by the British administration, a lower number of schools, and a greater concentration of police officers. These results suggest that colonial officials in opium growing districts concentrated on administering and policing the extraction of monopsony rents, while investing less in the wider local economy.

Evolution and Long-run Consequences of Agricultural Inheritance Traditions

Fabian Wahl (University of Hohenheim)
Thilo R. Huning (University of York)

Abstract : What are the origins and consequences of different inheritance traditions of agricultural property? Our analysis is based on a municipal-level data set on agricultural inheritance practices in Baden-W├╝rttemberg in the early 1950s. We also theoretically model how equal partition, because it induced more part-time farming and created less migration pressure lead to industrialisation and structural change in rural areas. In a first step of our empirical analysis, we investigate the factors that determined the origin, persistence and change of different inheritance practices. We find that especially geographic factors like elevation or wine-growing but also deep historical factors like being in the Germanic settlement area or having access to Roman roads are important to understand the origins of inheritance practices. For the persistence of those, deep-rooted historical factors seem to be most important. We also find that inheritance traditions change due to economic incentives and cultural diffusion. Second, we employ a spatial RDD to empirically test whether this is true. Confirming our theory, we find equal partition areas to be better developed, and more industrialized in 1950 and still in the 2000s.