Knowledge that Transforms

This paper examines the relative benefits of general education and vocational training during Romania's transition to a market economy. We examine a 1973 educational reform that shifted a large proportion of students from vocational training to general education. Using census and household survey data, we analyze the effect of this policy with a regression discontinuity design. We find that men affected by the policy are significantly less likely to work in manual or craft-related occupations but have similar levels of labor market participation and earnings compared to their counterparts unaffected by the policy. We conclude that differences in labor market returns between graduates of vocational and general schools are largely driven by selection.

The Linder hypothesis has attracted substantial empirical research over decades. However, the evidence has failed to provide consistent support for it. This paper explains the failure. Building a theoretical framework in which, as in Linder's theory, product quality plays the central role, I show that the Linder hypothesis is formally derived but holds only when formulated as a sector-level prediction. This prediction is then estimated using a sample of 64 countries in 1995. The results support the sectoral Linder hypothesis: controlling for the effect of intersectoral determinants of trade, countries of similar income per capita trade more intensely with one another.

We analyze the impact of corruption on bilateral trade, highlighting its dual role in terms of extortion and evasion. Corruption taxes trade, when corrupt customs officials in the importing country extort bribes from exporters (extortion effect); however, with high tariffs, corruption may be trade enhancing when corrupt officials allow exporters to evade tariff barriers (evasion effect). We derive and estimate a corruption-augmented gravity model, where the effect of corruption on trade flows is ambiguous and contingent on tariffs. Empirically, corruption taxes trade in the majority of cases, but in high-tariff environments (covering 5% to 14% of the observations) their marginal effect is trade enhancing.

This study estimates the effect of economic conditions on redistributive conflict. We examine land invasions in Brazil using a panel data set with over 50,000 municipality-year observations. Adverse economic shocks, instrumented by rainfall, cause the rural poor to invade and occupy large landholdings. This effect exhibits substantial heterogeneity by land inequality and land tenure systems, but not by other observable variables. In highly unequal municipalities, negative income shocks cause twice as many land invasions as in municipalities with average land inequality. Cross-sectional estimates using fine within-region variation also suggest the importance of land inequality in explaining redistributive conflict.

Abstract This paper studies how rising male incarceration has affected women through its effect on the marriage market. Variation in marriage-market shocks arising from incarceration is isolated using two facts: the tendency of people to marry within marriage markets defined by the interaction of race, location, and age and the fact that increases in incarceration have been very different across these three characteristics. Using a variety of estimation strategies, including difference and fixed effects models and TSLS models in which we use policy parameters to instrument for within-marriage market changes in incarceration, we find evidence that is, on the whole, consistent with the implications of the standard marriage-market model. In particular, higher male imprisonment appears to have lowered the likelihood that women marry, modestly reduced the quality of their spouses when they do marry, and shifted the gains from marriage away from women and toward men. The evidence suggests that women in affected markets have increased their schooling and labor supply in response to these changes.

We ask how export demand shocks associated with the Asian financial crisis affected Chinese exporters. We construct firm-specific exchange rate shocks based on the precrisis destinations of firms' exports. Because the shocks were unanticipated and large, they are a plausible instrument for identifying the impact of exporting on firm productivity and other outcomes. We find that firms whose export destinations experience greater currency depreciation have slower export growth and that export growth leads to increases in firm productivity and other firm performance measures. Consistent with “learning-by-exporting,” the productivity impact of export growth is greater when firms export to more developed countries.

I examine how foreign presence affects the growth and survival of domestic firms. Separating a negative crowding out and positive technology spillovers, I analyze whether the crowding out effect is dynamic, that is, domestic firms cut production over time as foreign firms grow, or a static effect realized on foreign entry into the industry. Using 1994–2001 firm-level Czech data, I find evidence of both technology spillovers and crowding out. However, crowding out is only short term; after initial entry shakeout, growing foreign sales increase domestic firm growth and survival, indicating domestic demand creation effect. However, I find no such benefits from domestic competition.

This paper provides evidence on the patterns of multiproduct firm production in a large developing country, India, during a period that spans market reforms. In the cross-section, multiproduct firms in India look remarkably similar to their U.S. counterparts. The time-series patterns, however, exhibit important differences. In contrast to evidence from the United States, product churning, particularly product rationalization, is far less common in India. We find no link between product rationalization and output tariff declines following India's 1991 trade liberalization. The lack of “creative destruction” is consistent with the role of industrial regulation in preventing an efficient allocation of resources.

We employ a unique data set and new time-series techniques to reexamine the existence of trends in relative primary commodity prices. The data set comprises 25 commodities and provides a new historical perspective, spanning the seventeenth to the twenty-first centuries. New tests for the trend function, robust to the order of integration of the series, are applied to the data. Results show that eleven price series present a significant and downward trend over all or some fraction of the sample period. In the very long run, a secular, deteriorating trend is a relevant phenomenon for a significant proportion of primary commodities.

This paper compares economic outcomes across areas in India that were under direct British colonial rule with areas that were under indirect colonial rule. Controlling for selective annexation using a specific policy rule, I find that areas that experienced direct rule have significantly lower levels of access to schools, health centers, and roads in the postcolonial period. I find evidence that the quality of governance in the colonial period has a significant and persistent effect on postcolonial outcomes.