Institutions, Human Capital, and Development

In this article, we revisit the relationship among institutions, human capital, and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified, both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about four to five times greater than that implied by micro (Mincerian) estimates, found in the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, whereas the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of former colonies.Comisión Nacional de Investigación Ciencia y Tecnología (Chile) (CONICYT/Programa de Investigación Asociativa (project SOC1102))United States. Army Research Office (ARO MURI W911NF-12-1-0509

The Transition from Relational to Legal Contract Enforcement

This paper studies the transition of contract enforcement institutions. The prevalence of relational contracts, low legal quality, strong cultural preference for personalistic relationships, low social mobility, and highly unequal endowment form a cluster of mutually reinforcing institutions that hinder economic development. The cultural element per se does not necessarily reduce social welfare though it may slow down the legal development, while the real problem lies in endowment inequality and low social mobility. Thus a more equal distribution of resources may be the ultimate key to unravel the above interlocking institutions. These results are generally consistent with the empirical evidence

Warfare, Fiscal Capacity, and Performance

We exploit differences in casualties sustained in pre-modern wars to estimate the impact of fiscal capacity on economic performance. In the past, states fought different amounts of external conflicts, of various lengths and magnitudes. To raise the revenues to wage wars, states made fiscal innovations, which persisted and helped to shape current fiscal institutions. Economic historians claim that greater fiscal capacity was the key long-run institutional change brought about by historical conflicts. Using casualties sustained in pre-modern wars to instrument for current fiscal institutions, we estimate substantial impacts of fiscal capacity on GDP per worker. The results are robust to a broad range of specifications, controls, and sub-samples

Functional Inequality in Latin America: News from the Twentieth Century

We report on a novel approach for the measurement of gas adsorption in microporous solids using X-ray computed tomography (CT) that we refer to as digital adsorption. Similar to conventional macroscopic methods, the proposed protocol combines observations with an inert and an adsorbing gas to produce equilibrium isotherms in terms of the truly measurable quantity in an adsorption experiment, namely the surface excess. Most significantly, X-ray CT allows probing the adsorption process in three dimensions, so as to build spatially-resolved adsorption isotherms with a resolution of approximately 10 mm3 within a fixed-bed column. Experiments have been carried out at 25 C and in the pressure range 1-30bar using CO2 on activated carbon, zeolite 13X and glass beads (as control material), and results are validated against literature data. A scaling approach was applied to analyze the whole population of measured adsorption isotherms (~7600), leading to single universal adsorption isotherm curves that are descriptive of all voxels for a given adsorbate-adsorbent system. By analyzing the adsorption heterogeneity at multiple length scales (1 mm3 to 1 cm3), packing heterogeneity was identified as the main contributor for the larger spatial variability in the adsorbed amount observed for the activated carbon rods as compared to zeolite pellets. We also show that this technique is readily applicable to a large spectrum of commercial porous solids, and that it can be further extended to weakly adsorbing materials with appropriate protocols that reduce measurement uncertainties. As such, the obtained results prove the feasibility of digital adsorption and highlight substantial opportunities for its wider use in the field of adsorptive characterization of porous solids

Crime, Institutions and Sector-Specific FDI in Latin America

In this article, we explore how crime and institutions affect the flow of capital in the form of foreign direct investment (FDI) to Latin American and Caribbean countries in the primary, secondary and tertiary sectors during the 1996-2010 period. We use three different variables related to violent crime: homicides, crime victimization, and an index of organized crime. We find that there is a correlation between the institutional and crime variables, where the significance of institutional variables tends to disappear when the crime variables are added to the model. We find that higher crime victimization and organized crime are associated with lower FDI in the tertiary sector. We do not find that crime affects FDI inflows to Latin America in the primary and secondary sector