Developing Greatness
How Cultural Diversity Drives Innovation: Surnames and Patents in U.S. History
Max Posch, Jonathan Schulz & Joseph Henrich
Journal of Political Economy, forthcoming
Abstract:
This paper examines the impact of cultural diversity on innovation. Focusing on the United States from 1850 to 1940, we develop a novel surname-based measure of cultural diversity and combine this with patent data. Leveraging quasi-random variation in counties’ surname compositions driven by historical immigration, we find that rising diversity increased both the quantity and quality of innovation within counties and for individual inventors. Examining mechanisms, we provide evidence suggesting that greater surname diversity accelerated innovation both by expanding the range of ideas, skills and perspectives available for recombination and by fostering the diverse social interactions that facilitate idea sharing.
Colonial rule and economic freedom
João Pedro Bastos
Public Choice, October 2025, Pages 79-104
Abstract:
This paper studies the legacy of European colonial rule for economic freedom in former colonies. I find that current levels of economic freedom in former colonies are directly related to the level of economic freedom of their colonizers. This association can be seen as early as the time of independence. I also find that additional European settlement from colonizers with high (low) economic freedom contributes to (detracts from) the overall economic freedom of their colonies. These results are robust to selection on unobservables and to controls for geography, climate, natural resource endowments, colonizer identity, settlement patterns, and precolonial characteristics. The difference in modern-day economic freedom associated with being colonized by the freest colonizer instead of the least free implies a predicted increase in modern-day per capita income of up to US$10,000.
American treasure and the decline of Spain
Carlos Charotti, Nuno Palma & João Pereira dos Santos
European Economic Review, November 2025
Abstract:
Spain was one of the world’s richest countries around 1500. Two centuries later it was a backwater. We rely on a synthetic control methodology to study the long-run impact of the influx of silver from the New World since 1500 for the economic development of Spain. Compared with a synthetic counterfactual, the price level increased by up to 200% by the mid-seventeenth century. Spain’s GDP per capita outperformed other European nations for around a century, but by 1750, GDP per capita was around 40% lower than it would have been if Spain had not been the first-stage receiver of the American treasure.
Once upon a loan: How folk tales shape access to credit
Jean-Baptiste Marigo & Laurent Weill
Journal of Economic Behavior & Organization, November 2025
Abstract:
We investigate the effect of folklore on firms’ access to credit. Using firm-level data on a large sample of 38,000 firms covering 124 countries and 274 cultural societies over the 2005–2022 period, we test the hypothesis that oral traditions linking risk-taking to success or failure influence access to credit. We find that folklore affects access to credit. Oral traditions associated with successful challenges increase access to credit, while those associated with unsuccessful challenges decrease access to credit. We further show that folklore influences access to credit through borrower discouragement and loan approval. We also find that foreign-owned firms are less sensitive to the influence of folklore, while more developed legal institutions reinforce its impact. We further observe that folklore explains aggregate credit supply at the country level. Using representations of trust in folklore, we find that more trusting societies are associated with more loan approval but lower loan applications, which results from the fact that higher trust encourages informal credit.
Why are Manufacturing Plants Smaller in Developing Countries? Theory and Evidence from India
Anil Jain & Siddharth Kothari
Federal Reserve Working Paper, August 2025
Abstract:
Poorer countries (and poorer states within India) have a larger share of manufacturing employment in small plants. This paper presents empirical evidence and a theoretical model to show that this relationship is driven by greater demand for lower quality goods in poorer regions, which can be produced efficiently in small plants. First, using data for India, we show that richer households buy higher price goods and larger plants produce higher price products. Second, we develop a model that matches these facts. Finally, we find that our model explains about forty percent of the cross-state variation in the size distribution of manufacturing plants in India.
Human Capital Accumulation Across Space
Klaus Desmet, Dávid Krisztián Nagy & Esteban Rossi-Hansberg
NBER Working Paper, October 2025
Abstract:
This paper studies how human capital shapes the economic geography of development. We develop a model in which the cost of acquiring human capital varies across space, and regions with higher human capital innovate more. Locations are spatially connected through migration and trade. There are localized agglomeration economies, and human-capital-augmenting technology diffuses across space. Using high-resolution data on income and schooling, we quantify and simulate the model at the 1° x 1° resolution for the entire globe. Over the span of two centuries, the model predicts strong persistence in the spatial distribution of development -- unlike spatial dynamic models without human capital, which predict convergence. Proportionally lowering the cost of education in sub-Saharan Africa or Central and South Asia raises local outcomes but reduces global welfare, whereas the same policy in Latin America improves global outcomes. An alternative policy equalizing educational costs across sub-Saharan Africa generates relatively worse outcomes, as population reallocates within the region toward less productive areas. Central to these results is the estimated negative correlation between the education costs and local fundamentals, as well as inefficiencies in the spatial allocation due to externalities.
Polygyny and Fertility: Continuity or Change in Sub-Saharan Africa
Sophia Chae & Victor Agadjanian
Demography, October 2025, Pages 1717-1740
Abstract:
This study revisits the polygyny‒fertility relationship in sub-Saharan Africa amid significant sociodemographic transformations, including declines in both fertility rates and the prevalence of polygyny. Using data from multiple rounds of the Demographic and Health Surveys across 23 African countries, we examine the contribution of polygyny to reductions in the total fertility rate (TFR), explore how the polygyny‒fertility relationship has evolved over time, and assess changes in the total number of children ever born, number of recent births, ideal fertility, and the desire for another child by polygyny status. Our findings show that the decline in polygyny has substantially contributed to reductions in TFR. While realized fertility — measured by children ever born and recent births — has declined for all married women, reductions have been greater among women in monogamous unions. Fertility preferences, including ideal fertility and the desire for another child, have decreased only among women in monogamous unions, while remaining stable for those in polygynous unions. Additionally, except for children ever born, we find minimal variation in fertility outcomes by wife's rank within polygynous unions. Taken together, these results underscore the complex influence of marriage systems on fertility and highlight the distinct fertility patterns of women in monogamous versus polygynous unions.
Explaining Persistent Duopolies of Violence: How the State Gets Drug Gangs to Govern for it
Benjamin Lessing
University of Chicago Working Paper, May 2025
Abstract:
Armed criminal governance over civilians is pervasive, resilient, and concentrated in urban zones within easy reach of the state. If states strive to establish Weberian monopolies, why do duopolies of violence persist? Perhaps the premise is wrong. "Market for protection" models offer limited traction: theoretically, they assume competing providers prefer monopoly; empirically, drug-retailing gangs often govern without charging taxes. Instead, I develop a public-goods model where state and criminal governance overlap and benefit both actors. I compare McGuire and Olson's (1996) model of (monopolistic) stationary banditry with a modified version that includes a second bandit -- the gang -- in terms of the state's utility, social welfare, and total governance. All three can be higher under criminal duopoly if gangs' costs of governance-provision are lower. If lower costs flow (in part) from gangs' recourse to illegal violence, states cannot simply hire or copy them (unless states suspend civil rights, as occurred in El Salvador). Adding a retail drug market in which gang governance (and taxation) affect drug profits by winning (or losing) residents' loyalty, the state may prefer duopoly even under equal costs of governance. Policing of drug retailing incentivizes gangs to cut taxes and channel illicit profits into governance, making duopoly preferable even though more drugs are trafficked. This requires the "pain" of drug trafficking to the state be neither too high (so that it monopolizes), nor too low (so that it decriminalizes and gangs lose the incentive to govern). If the state moves first, however, it might fight a drug war it cares nothing about merely to get gangs to govern for it.
Servants of Two Masters: The Economics of ‘Slave-Hiring’
Ennio Piano & Sean-Patrick Alvarez
European Economic Review, November 2025
Abstract:
We explore the economics of ‘slave-hiring’ in the antebellum U.S. South. We argue that the threat of excessive violence against enslaved employees increased the cost of transferring temporary property rights from masters to hirers, implying systematic differences in the prevalence of slave-hiring across industries. Slave-hirers will tend to be underrepresented in industries that rely more heavily on force as a motivational tool, compared to industries that instead employ positive incentives. Our analysis combines qualitative historical insights with quantitative evidence from the ‘Free’ and ‘Slave Schedules’ of the 1860 U.S. Census for Fauquier County, VA. We find that among slaveholders, farmers were approximately 30 percentage points less likely to hire enslaved workers than those in the crafts. This effect persists when we control for slaveholder characteristics and the month in which the information was collected. Our findings shed light on a key institution of the antebellum Southern economy and how slavery was able to adapt and thrive in urban settings. They also provide indirect evidence of James Scott’s hypothesis that agriculture is especially suited to exploitative labor practices.
Land, Power, and Property Rights: The Political Economy of Land Titling in Sub-Saharan Africa
Matthew Ribar
American Political Science Review, forthcoming
Abstract:
Only 15% of African households possess a formal title for their agricultural land, despite the widespread availability of titles and their documented benefits. Local politics combine with national land regimes to explain this empirical anomaly. I combine 170,216 household-level observations of titling across 22 African countries with a novel geospatial measure of land values and the returns to agricultural investment. Households in areas with high returns to potential agricultural investment title more. However, in countries with centralized land tenure regimes, strong customary institutions attenuate this relationship; in countries with decentralized land regimes, strong customary institutions reinforce it. I use a case study in Côte d’Ivoire, including an original survey of 801 households and 194 customary elites, to trace these mechanisms at work. This research documents granular variation in the uptake of land titles, illustrates how local politics explain this variation, and outlines conditions under which customary elites impede development.