• Corruption in the time of austerity


    On Thursday and Friday, TSE and Arqade organized the 11th European Development Network (EUDN) PhD Workshop on Development Economics. Good opportunity to meet students working on development issues from all over Europe and get a feel of what they are doing.

    Oana Borcan, from University of Gothenburg, presented a nice paper showing disturbing evidence of the impact of a large austerity plan in Romania (which translated into a 25% wage cut for public servants) on the prevalence of corruption during the national Baccalaureate exam.

    The Impact of an Unexpected Wage Cut on Corruption: Evidence from a “Xeroxed” Exam

    This paper aims to understand how corruption responds to financial incentives and, in particular, it is an attempt to identify the causal impact of a wage loss on the prevalence of corruption in the education sector. Specifically, we exploit the unexpected wage cut in May 2010 that affected all Romanian public sector employees, including the public education staff, and examine its effect on students’ scores on the high-stakes national exam which occurs at the end of high school—the Baccalaureate. To exploit the effect of an income shock on corruption, we use a difference-in-difference strategy and compare the change in the exam outcomes between the public schools—the treatment group—and the private schools—the control group, which were unaffected by the wage cut. Our findings suggest that the wage loss led the public schools to have better exam outcomes than the private schools in 2010 relative to 2009. We attribute this difference to the increased involvement in corrupt activities by public school staff, which was driven by financial incentives. These results match an unprecedentedly high number of allegations of fraud and bribery against school principals, which earned the 2010 Baccalaureate the title of the Xeroxed exam—akin to identical test answers found to have been distributed to numerous students.

    Now, think of the current wave of austerity measures being applied in several European countries, including Greece, Portugal, Spain, etc., some of which contemplate wage reductions of similar magnitude. Shouldn’t we think about the potential damages resulting from the shift in social norms and values that may accompany these policies? In particular, while it’s been often claimed that part of the budgetary problems facing countries like Greece also have to do with a culture of corruption and informality, it would be ironical if the proposed austerity cure actually made the corruption problem worse.

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  • Sewers and mortality in 19th century Paris


    Seen recently in the Economic History and Development Seminar at TSE, this paper by Jean-Laurent Rosenthal and Lionel Kesztenbaum shows how investments in sewers, which progressed at a higher speed in richer areas of the city, explain the first diverging then converging path of mortality across neighbourhoods (here is the link to the wider project on Rosenthal website).

    Around 1900, after centuries of disadvantage, urban life expectancy passed its rural counterparts. The process can be linked with two broad phenomena: rising incomes and improved sanitation. We focus on Paris during the key period of the health transition (1880-1914) and assemble a longitudinal data set on mortality and income for each of the city’s 80 neighborhoods. We show that life expectancy in Paris was not very different from the rest of the country –around 50 years at age 5– but the difference between best and worst neighborhoods exceeded 10 years. These huge mortality differentials are strongly related to a variety of income indicators. Over time, mortality across neighborhoods first diverged and then converged. This pattern cannot be explained by variation in income or fixed neighborhood characteristics. It is due to the gradual diffusion of sewers that were adopted faster in rich neighborhoods than in poor ones.

    Lessons for today’s policies in developing countries include the fact that divergences in access to excludable public goods, such as sanitation, may result from the implementation of a variety of fee-based investments schemes, including some of the widely advertized PPP types. In these cases, adverse distributional consequences can be wide-ranging, despite improvements in average coverage.

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  • On the Road to Heaven

    poll tax receipt

    An interesting paper written by my colleague Mohamed Saleh, relates the fact that today in Egypt non-Muslims are, on average, better off than the Muslim majority to the imposition of the poll tax on non-Muslims upon the Islamic Conquest of the then-Coptic Christian Egypt in 640. The main mechanism here is self-selection among the Copts, with the poorer converting to Islam to avoid paying the regressive tax.

    In the Middle East, non-Muslims are, on average, better off than the Muslim majority. I trace the origins of the phenomenon in Egypt to the imposition of the poll tax on non-Muslims upon the Islamic Conquest of the then-Coptic Christian Egypt in 640. The tax, which remained until 1855, led to the conversion of poor Copts to Islam to avoid paying the tax, and to the shrinking of Copts to a better off minority. Using new data sources that I digitized, including the 1848 and 1868 census manuscripts, I provide empirical evidence to support the hypothesis. I find that the spatial variation in poll tax enforcement and tax elasticity of conversion, measured by four historical factors, predicts the variation in the Coptic population share in the 19th century, which is, in turn, inversely related to the magnitude of the Coptic-Muslim gap, as predicted by the hypothesis. The four factors are: (i) the 8th and 9th centuries tax revolts, (ii) the Arab immigration waves to Egypt in the 7th to 9th centuries, (iii) the Coptic churches and monasteries in the 12th and 15th centuries, and (iv) the route of the Holy Family in Egypt. I draw on a wide range of qualitative evidence to support these findings.

    This paper is an example of a recent string of contributions, which trace today’s development outcomes to specific historical episodes, such as Melissa Dell’s paper on the Peruvian Mita, or Nathan Nunn and Leonard Wantchekon’s paper on the long term impact of the slave trade on trust in Africa.

    Of course, unearthing the channels at play in the long term transmission of the initial determinants, and illustrating them empirically is often the trickiest and more speculative part of these exercises. The development of historical databases, such as the project Mohamed is conducting on Egypt, is an important step in this direction.

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  • Can people be “poked” to act through social networks?


    Fascinating letter in Nature, discussed in this news and views article, analyzing the impact of a facebook message inciting people to vote in the 2010 US Congressional elections.

    Human behaviour is thought to spread through face-to-face social networks, but it is difficult to identify social influence effects in observational studies, and it is unknown whether online social networks operate in the same way. Here we report results from a randomized controlled trial of political mobilization messages delivered to 61 million Facebook users during the 2010 US congressional elections. The results show that the messages directly influenced political self-expression, information seeking and real-world voting behaviour of millions of people. Furthermore, the messages not only influenced the users who received them but also the users’ friends, and friends of friends. The effect of social transmission on real-world voting was greater than the direct effect of the messages themselves, and nearly all the transmission occurred between ‘close friends’ who were more likely to have a face-to-face relationship. These results suggest that strong ties are instrumental for spreading both online and real-world behaviour in human social networks.

    Two results stand out. First, messages displaying information about related close friends’ behaviour (the “social” message) is significantly more likely to push people to action. Second, the incitations are transmitted to the message recipients’ friends and to the friends of their friends. Clearly, this opens exciting research possibilities about the implementation of policies in developing countries contexts.

    The results show that users who received the social message were 2.08% more likely to report that they themselves voted, 0.26% more likely to seek information about a polling location, and 0.39% more likely to actually vote than users receiving the informational message (the authors estimated actual voting using data on 6.3 million users in their sample that could be matched to publicly available voting records). The authors also examined ‘contagion’ effects of the messages on users who themselves received neither the social nor the informational message, but who had a friend who received a message. Here, in the validated voting sample, individuals were 0.224% more likely to vote, for each close friend who received a message, than they would have been had their friend received no message.

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  • What do you get for 40 cents?


    What do you get for 40 cents?
    A video supporting (RED) FIGHTING FOR AN AIDS FREE GENERATION, featured on the World Bank development blogs. Wonder what other first necessities 40 cents could buy in Haiti, Uganda, or India.

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  • Compute your future H-index


    Scientists anxious about their future success can now costlessly get a glimpse of where they will stand in 10 years from now! As this Nature Comment explains (access restricted to subscribers), you can now use a simple formula to predict your future, (5- or 10-years into the future) H-index. Here is the online tool to apply it on yourself.

    If you are an economist, I suggest you replace the list of top journals (Nature, Science, Nature Neuroscience, Proceedings of the National Academy of Sciences and Neuron), by the 5 “core journals” (AER, Econometrica, REStud, JPE, QJE).

    If the results are great, let your colleagues know as soon as possible. If they are disappointing, just conclude this approach makes no sense. By the way, I got a 10-years prediction of 25…

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