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

Structural Change and the Fall of Income Inequality in Latin America : Agricultural Development, Inter-sectoral Duality, and the Kuznets Curve

In this study we approach the recent decline in income inequality in Latin America from the perspective of structural change with a focus on the relative performance of the agricultural sector. Our focus is on the underlying forces implied by Kuznets (1965). We zoom in on the relative performance of agriculture in the development process and the rural-urban duality and pay particular attention to the last couple of decades in relation to the entire post-1950 period. We attempt to estimate empirically possible theoretical relations with regard to these patterns by posing the following basic questions: how does the resurgence of agriculture relate to the reduction of income inequality and to what extent is this an expression of Latin America moving downward on the Kuznets curve? The literature on agriculture’s relation to the recent changes of income distribution in Latin America is quite limited. For instance, in a recent ECLAC report titled “Structural change for equality” (2012), the role of agriculture is not even mentioned. By agriculture we mean both farming and agro-business that processes and transports that output. To our knowledge, this paper is the first attempt to investigate this relationship for the recent decades in the perspective of structural change in Latin America. There are strong theoretical reasons to connect agricultural development to income distribution. The closing of the rural-urban income gap reflects what Reynolds (1975) called a “dynamic” transformation of agriculture and relates to the contribution agriculture provides for overall growth of the economy. In addition, the elasticity of poverty reduction with respect to growth is estimated to be stronger when growth emanates in the agricultural sector (Ravallion and Chen 2007, de Janvry and Sadoulet 2009). Productivity growth in the lagging sector should also contribute to sectoral labor productivity to convergence and thus helps to reduce inequality (Timmer 1988). For these reasons, the resurgence of agriculture driven partly by improving commodity prices should be given due attention when assessing the decline in income inequality in Latin America. According to the logic of the Kuznets curve, the hypothesized “turning point” of the inverted U-curve is generated by a reduction of income inequality in one or both of the sectors and/or a reduction of the rural-urban income gap as the weight of the agricultural sector diminishes, and the income per capita gap between them declines. We find that the recent decline in income inequality is related to the recent resurgence of Latin American agriculture, and, by inference, its lack of decline across most of the 20th century must be related to a lack of productivity change in agriculture. We provide estimates showing that during the recent decades inter-sectoral duality has been reduced by agricultural productivity growth. The duality expressed as an inter-sectoral Gini shows the shape of an inverted U-curve and as such the closing of the rural-urban income gap corroborates with the theoretical expectations postulated by Kuznets. The wider implication of the study is, however, that with slower growth in agricultural labor productivity, continuing improvement in the income distribution becomes more difficult. In the absence of strong manufacturing growth, agriculture might be able to reduce income inequality further if agro-industries remain unskilled labor intensive, thus raising the opportunity cost of unskilled workers. On the other hand, the traditional service sector has perhaps become the “new agricultural sector” in terms of productivity and labor surplus. In other words, the source of the remaining dualism does not come only from rural areas, but also from urban areas

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