Excessive Public Employment and Rent-Seeking Traps

We propose an occupational choice model in which the quality of the state bureaucracy influences aggregate output and the level of entrepreneurial activity through its participation in the labour market. Skilled agents differ in terms of their public service motivation: if agents with low public mission become bureaucrats, they will use their position to rent seek, by employing an excessive number of unskilled workers. This generates an upwards pressure on wages, which lowers profits and deters entrepreneurship. A better equilibrium results when public service motivated agents self-select into the state bureaucracy, since they exert high effort and employ a limited number of workers. The model also shows that the working class might optimally choose to vote for an inefficient public sector. We provide evidence supporting the mechanism in our model by confronting some of its main predictions to a variety of data sources.Occupational Choice, Public Service Motivation, Political Economy

Where mining takes place, food production takes a hit in Ghana

The device you are using to read this blog contains at least a dozen different types of minerals, many of which most likely come from modern large-scale mines in developing countries. As these mining operations tend to be located in poor rural locations, the question of how neighbouring populations are affected by their expansion becomes an interesting one. The answers can be varied and very policy-relevant

Mining, Pollution and Agricultural Productivity: Evidence from Ghana

Most modern mines in the developing world are located in rural areas, where agriculture is the main source of livelihood. This creates the potential of negative spillovers to farmers through competition for key inputs (such as land) and environmental pollution. To explore this issue, we examine the case of gold mining in Ghana. Through the estimation of an agricultural production function using household level data, we find that mining has reduced agricultural productivity by almost 40%. This result is driven by polluting mines, not by input availability. Because of its crowding out effects on agriculture, we find that the mining activity is associated with an increase in poverty, child malnutrition and respiratory diseases. A simple cost-benefit analysis shows that the fiscal contribution of mining would not have been enough to compensate affected populations

Essays on development economics.

This thesis presents three papers that contribute to the measurement and understanding of the process of economic development. In particular, I deal with issues of significant importance in the current literature in development economics: the provision and regulatory institutions of infrastructure, firms and industries' behaviour and performance, and the process of human capital accumulation and its link to gender issues. In Chapter 2 I investigate the effect of electricity provision on industrialization using a panel of Indian states from 1965-1984. To address the endogeneity of investment in electrification, I use the introduction of a new agricultural technology intensive in irrigation (the Green Revolution) as a natural experiment. As electric pumpsets are used to provide farmers with cheap irrigation water, I use the uneven availability of groundwater to predict divergence in the expansion of the electricity network and, ultimately, to quantify the effect of electrification on industrial outcomes. I present a series of tests to rule out alternative explanations that could link groundwater availability to industrialization directly or through other means than electrification. Overall, the uneven expansion of the electricity network explains between 10 and 15 percentage points of the difference in manufacturing output across states in India. In Chapter 3 I explore how firms in India cope with the erratic and expensive provision of electricity. In a model that combines upstream regulation with downstream heterogeneous firms in a monopolistic competition firework, I investigate the role of the electricity regulator's preferences and the economic environment (i.e. regulation and openness) in determining the decision to adopt a captive generator of electricity and industries' aggregate productivity. I show that a firm's productivity, the electricity regulator's disregard for the well-being of industrial producers consuming electricity and greater industry protection from competition are associated with greater adoption of captive power. The mechanisms I propose are present for a representative repeated cross-section sample of Indian firms in the 1990s, with heterogeneous effects along dimensions such as location. In Chapter 4 I investigate the effect of the Green Revolution on rural literacy and rural women's employment and literacy levels, using a panel of 254 districts for census years, before and after the introduction of the high yield variety (HYV) seeds. Even though the new technology has been shown to increase returns to education, aggregate effects on literacy are ambiguous a priori, if claims are correct that the process excluded most poor farmers and that mechanization replaced women labour and their effects are strong. I find robust evidence that the increase in adoption of the new seeds is associated with increases of around 2 percentage points in literacy levels. The effects are only present for treated cohorts. Additionally, I find no evidence of a Green Revolution related increase in the gender gap: even though results indicate that the percentages of working and literate women in rural India fall over time, a greater intensity in HYV is shown to mitigate this trend

Job displacement costs of phasing out coal

The reduction of carbon emissions will require a rapid phasing out of coal and the displacement of millions of coal miners. How much could this energy transition cost mining workers? We use the dramatic collapse of the UK coal industry to estimate the long-term impact on displaced miners. We find evidence of substantial losses: hourly wages fell by 40% and earnings fell by 80% to 90% one year after job loss. These losses are persistent and remain significantly depressed fifteen years later, amounting to present discounted value earnings losses of between four and six times the miners pre-displacement earnings