Why does schooling attainment vary widely across countries? Why are differences in schooling attainment highly persistent? I show that cross-country differences in schooling are related to political institutions, such as democracy and local democracy (political decentralization), which are affected by colonial factors. By using the number of native cultures before colonization as an instrument for political decentralization, I show that after controlling for the causal effect of income on schooling, the degree of democratization positively affects the development of primary education, whereas political decentralization has a positive and significant impact on more advanced levels of schooling.

Levels of development vary widely within countries in the Americas. We argue that part of this variation has its roots in the colonial era, when colonizers engaged in different economic activities in different regions of a country. We present evidence consistent with the view that “bad” activities (those that depended heavily on labor exploitation) led to lower economic development today than “good” activities (those that did not rely on labor exploitation). Our results also suggest that differences in political representation (but not in income inequality or human capital) could be the intermediating factor between colonial activities and current development.

Local air pollution has led authorities in many cities around the world to impose limits on car use by means of driving restrictions or license-plate bans. By placing uniform restrictions on all cars, many of these programs have created incentives for drivers to buy additional, more polluting cars. We study vintage-specific restrictions, which place heavy limits on older, polluting vehicles and no limits on newer, cleaner ones. We use a novel model of the car market and results from Santiago’s 1992 program, the earliest program to use vintage-specific restrictions, to show that such restrictions should be designed to work exclusively through the extensive margin (type of car driven), never through the intensive margin (number of miles driven). If so, vintage restrictions can yield important welfare gains by moving the fleet composition toward cleaner cars, comparing well to alternative instruments such as scrappage subsidies and pollution-based registration fees.