Political Economy of Railroad Land Grants: Legal Uncertainty & Development of Irrigation in Colorado and Montana

Abstract : While property rights scholarship recognizes that economic development can be stymied when rights are not well-defined, displaying this phenomenon empirically poses several challenges. Identifying appropriate comparative contexts where economic activity is sufficiently sensitive to comparable property rights structures, as compared to other forces determining economic outcomes, is no easy task. Similarly, measuring economic outcomes with a sufficient level of granularity poses data requirements that are often insurmountable. Our analysis follows in the lengthy tradition of considering property rights and economic development along frontiers. In the context of the US West, economic historians have long argued that the economic benefits of the railroads outweighed the costs of incentivizing development with federal land grants and loans. However, the way these land grants were awarded was not uniform in process or timing; we argue that uncertainty surrounding the development of the Northern Pacific in Montana created the right historical context within which to examine the effects of uncertainty to title on one costly economic activity along the frontier, irrigation development. Montana’s irrigation development generally lagged that of Colorado and we create a spatially granular data set of land patents and water rights for PLSS sections that yields a variety of evidence that uncertainty surrounding railroad land grants in Montana specifically contributed to delaying and stunting settlement and irrigation development in the state.

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Bargaining Matters: Taxation and Public Service Provision Under Natural Resource Revenue Sharing Arrangements

Abstract : Revenue sharing arrangements are increasingly common in natural resource abundant countries where the majority of government tax revenue comes from resource exports. The determinants of the distribution of tax revenue among constituents under these arrangements in resource rich settings remain relatively understudied in the literature. Additionally, the relationship between revenue allocation from these arrangements and local public service provision is an important empirical question. This paper seeks to answer these questions by modeling revenue sharing arrangements and public service provision as outcomes of bargaining between federal government and subnational agents. It then uses a novel dataset of revenue allocations, expenditures and local public service provision from military Nigeria, with available data over 1979 to 1999, to test the implications of the simple framework. Results show that subnational agents with higher measured bargaining power, or greater ability to mobilize to demand access to natural resource revenues, have higher revenue allocation and expenditure, though outcomes for public service provision are more ambiguous. The results are robust to extensive controls and an instrumental variables strategy. I explore the implications of these results for attitudes towards tax compliance.The results provide important insights into framing optimal fiscal policy aimed at promoting economic development.

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The Persistence of Historical Institutional Determinants of Financial System Development in Africa: Colonial Vs. Precolonial Effects

Abstract : This paper seeks to answer the following question: how persistent are the effects of colonial and precolonial historical institutional determinants of financial system development in African former European colonies from their independence to present day? The colonial factors analyzed are legal origins and disease endowment while the precolonial factors investigated are slave trade and political centralization. Based on empirical analysis of financial system development data from 1960 to 2015, I find that only slave trade, a precolonial historical institutional factor that is a determinant of mistrust and ethnic fractionalization in Africa, had a statistically significant effect and in the hypothesized direction in some decades out of the almost six decades studied. The other variables did not have robust effects over the 55 years under study. I discuss theoretical and policy implications of these findings.

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Why is Litigation So Costly to Growth?

Abstract : The present paper analyzes the causal link between litigation costs and economic growth. Costly litigation decreases the probability of economic transactions’ judicial enforcement, thus favoring post-contractual opportunistic behavior. As a consequence, this translates in less investments, credit shortage and higher interest rates. We exploit the variation in the prohibition of pactum quota litis, litigation fee concentration and the timing of WTO membership and GATT agreement, as plausibly exogenous sources of variation in litigation costs and use it to estimate the long-run growth and development in a cross-section of 140 countries for the period 2003-2015.

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