Knowledge that Transforms

This research explores the origins of observed differences in time preference across countries and regions. Exploiting a natural experiment associated with the expansion of suitable crops for cultivation in the course of the Columbian Exchange, the research establishes that pre-industrial agro-climatic characteristics that were conducive to higher return to agricultural investment, triggered selection, adaptation and learning processes that generated a persistent positive effect on the prevalence of long-term orientation in the contemporary era. Furthermore, the research establishes that these agro-climatic characteristics have had a culturally embodied impact on economic behavior such as technological adoption, education, saving, and smoking.

We use a randomized experiment in India to show that improved technology enhances agricultural productivity by crowding in modern inputs and cultivation practices. Specifically, we show that a new rice variety that reduces downside risk by providing flood tolerance has positive effects on adoption of a more labor-intensive planting method, area cultivated, fertilizer usage, and credit utilization. We find that a large share of the expected gains from the technology comes from crowding in of other investments. Therefore, improved technologies that reduce risk by protecting production in bad years have the potential to increase agricultural productivity in normal years. (JEL O13, O33, Q14, Q15, Q16)

We estimate that unemployment insurance (UI) extensions reduce reemployment wages using sharp age discontinuities in UI eligibility in Germany. We show this effect combines two key policy parameters: the effect of UI on reservation wages and the effect of nonemployment durations on wage offers. Our framework implies if UI extensions do not affect wages conditional on duration, then reservation wages do not bind. We derive resulting instrumental variable estimates for the effect of nonemployment durations on wage offers and bounds for reservation wage effects. The effect of UI on wages we find arises mainly from substantial negative nonemployment duration effects. (JEL J31, J64, J65)

China has defied the declining trend in domestic content in exports in many countries. This paper studies China's rising domestic content in exports using firm- and customs transaction-level data. The approach embraces firm heterogeneity and hence reduces aggregation bias. The study finds that the substitution of domestic for imported materials by individual processing exporters caused China's domestic content in exports to increase from 65 to 70 percent in the period 2000–2007. Such substitution was induced by the country's trade and investment liberalization, which deepened its engagement in global value chains and led to a greater variety of domestic materials becoming available at lower prices. (JEL F13, F14, L14, O19, O24, P31, P33)

Capital flow and commodity cycles have long been connected with economic crises. Sparse historical data, however, has made it difficult to connect their timing. We date turning points in global capital flows and commodity prices across two centuries and provide estimates from alternative data sources. We then document a strong overlap between the ebb and flow of financial capital, the commodity price super-cycle, and sovereign defaults since 1815. The results have implications for today, as many emerging markets are facing a double bust in capital inflows and commodity prices, making them vulnerable to crises.

Too-big-to-fail" is consistent with policies followed by private bank clearing houses during financial crises in the U.S. National Banking Era prior to the existence of the Federal Reserve System. Private bank clearing houses provided emergency lending to

We study the role of communication within a cartel. Our analysis is carried out in Stigler’s (1964) model of repeated oligopoly with secret price cuts. Firms observe neither the prices nor the sales of their rivals. For a fixed discount factor, we identify conditions under which there are equilibria with “cheap talk” that result in near-perfect collusion, whereas all equilibria without such communication are bounded away from this outcome. In our model, communication improves monitoring and leads to higher prices and profits. (JEL C73, D43, D83, L12, L13, L25)