New research venture created by Francesco Amodio (Econ ’10), Giorgio Chiovelli (Econ ’11) and Serafín Frache
A pair of Barcelona GSE Alumni and their frequent co-author and friend have recently launched a new research centre to provide a platform for their vision of ideal research collaboration and to bring those learnings to a wider audience. This venture is Mont^2, the Montréal x Montevideo Econ Lab.
This initiative was not without its challenges despite appearing to be an easy path for a group of friends and co-authors from the outside. Its genesis happened just before the COVID-19 pandemic struck both Canada and Uruguay, where the founders are based (not to mention the rest of the world) forcing them to adapt their plans for the launch of a physical working group to an online one.
Francesco Amodio ’10 and Giorgio Chiovelli ’11 are Economics Program alumni and became firm friends after meeting as TA and student in an econometrics class. They began collaborating during their respective PhD’s, Francesco at UPF and Giorgio at Bologna in Italy. After graduating and starting their careers in Montréal and Montevideo respectively, they included a third member into their collaborative efforts, Serafín Frache, and started laying the groundwork for what would ultimately become Mont^2. Serafín had local knowledge of Uruguayan administrative data and its potential to answer exciting economic questions. From these roots, the three researchers began thinking about their long-term career plans and how they can make an impact on their communities and give back to their respective local communities and the wider academic and policy-world.
It is with this foundation that Mont^2 was created. The professors applied to Social Sciences and Humanities Research Council (SSHRC) for seed funding to utilise the unique Uruguayan data and begin building the infrastructure of Mont^2.
They also aim for the lab to structure the mentorship of the professors’ current and future pre-doctoral research assistants. This would give them the tools to work with big data and be prepared for their future careers where this skill is in demand, whether in academia or the private sector. The trio also want to bring attention to the role academic research has to play with policy-making institutions regardless of where they might be located.
Mont^2 has just been launched, but already they are hard at work on a handful of projects with RAs already enlisted. It is a working environment meant to provide a formalised structure to the growing network of researchers and collaborators that began with Francesco, Giorgio and Serafín but now stretching far beyond. The hope is for Mont^2 to strengthen their ties with policy institutions and begin to promote best practices when dealing with confidential government big data.
Is ethnic diversity good or bad for economic development? When different languages, ethnicities or races coexist in the same society, there are challenges for the economy, but also opportunities. On one hand, if individuals within ethnic groups are homogeneous, and groups differ in preferences toward policies or public goods, then conflicting preferences can lead to inefficiencies in public good provision or to policy choices that may not benefit the entire society. Inter-group tensions can also result in civil conflicts or exacerbate mistrust and lack of cooperation. However, on the other hand, if ethnic groups differ in subsistence activities or skills, then complementary specializations can generate economic gains, stimulate innovation, and promote inter-group trade. Alesina and La Ferrara (2005) provide a review of this literature. While there is a general understanding that diversity brings opportunities and challenges, there is scarce evidence on which factors determine its positive or negative consequences. When is ethnic diversity good for economic development, and when is it bad?
I ask whether the effect of ethnic diversity on economic development depends on one characteristic of ethnic groups that has received little attention: the heterogeneity of individuals within ethnic groups. Underlying previous literature is the assumption that individuals within ethnic groups tend to be homogeneous. However, individuals may differ in many dimensions, including preferences, economic activities or skills, as well as cultural, genetic, and linguistic traits. I focus on having different economic specializations and skills within the same ethnic group, and I study whether ethnic groups with more heterogeneous individuals do better in multi-ethnic societies.
Consider two ethnic groups, A and B. The two groups differ in ethnicity. In turn, ethnic group A has individuals with diverse skills due to their different economic specializations, while ethnic group B is more homogeneous (individuals from ethnic group B have similar skills). The idea is that it may be easier for individuals of ethnicity A to live and to interact in a multi-ethnic society–they come from an ethnic group that is already highly heterogeneous. They will already be used to diverse environments. They will be more familiar with having to interact with heterogeneous individuals. If you come from an ethnic group that is highly heterogeneous, in terms of skills, you may be more willing to live and to interact with other ethnicities. In this case, positive interactions, mutually beneficial exchange, between ethnic groups will become more frequent.
The 16th Century resettlement of Peruvian ethnic groups
To study this, I collect new data on a natural experiment from Peru’s colonial history. I focus on highland Peru. There, Spanish colonizers resettled native populations in the 16th century. They forced together different ethnic groups in new villages, and this happened unintentionally. Importantly, in some ethnic groups, individuals had already been living in very different ecological zones of the Andes, at different altitudes, during the pre-colonial period, before the Spanish conquest. This creates within-group heterogeneity. In some cases, individuals from the same ethnic group were very different in terms of ecological specializations and skills – the types of lands and crops that they were used to cultivate. In other ethnic groups, everyone lived in the same climate zone, at the same altitude. I am asking: did the more heterogeneous ethnic groups do better once they were resettled in multi-ethnic villages?
Firstly, I use a map of the spatial distribution of ethnic groups at the time of the Spanish conquest. It allows me to compute the distance from each village to the closest ethnic frontier and use it as a source of quasi-random variation in ethnic diversity. During the pre-colonial period, individuals from the same ethnic group were distributed vertically, at different altitudes. This is the thesis of the anthropologist John Murra. He documents this vertical settlement pattern as a subsistence strategy in an environment in which differences in elevation create a variety of ecological zones and climates. At the time of the resettlement, the mountain environment of the Andes was new to Spanish colonizers – they were used to a flatter world. As a result, in villages that were created close to ethnic borders, they concentrated individuals from different ethnicities unintentionally (Pease 1978; Wachtel 1976). Secondly, I use spatial data on the distribution of ecological zones to compute a proxy for the heterogeneity of skills within each ethnic group prior to the conquest. It is important to note that ethnic groups with more heterogeneous skills may be different in other dimensions (e.g., group size, population density, etc). In the analysis, I use all the available data on the pre-colonial characteristics of ethnic groups to account for the main correlates of within-group heterogeneity.
The first result in the paper documents the direct effect of ethnic diversity, which I benchmark against previous results in the literature. I find that ethnic diversity is robustly associated with lower living standards in the long run. Specifically, I explore a variety of outcomes that capture contemporary living standards. As proxies for local economic activity, I use light intensity per capita (2000-2003) and a measure of non-subsistence agriculture from the agricultural census of 1994. For access to public infrastructure, I use data from the 1993 population census on access to public sanitation and the public network of water supply. This result is in line with the literature on the costs of ethnic diversity, though it also highlights the persistent consequences of forced diversity at the local level. When examining the effect of ethnic diversity and within-group heterogeneity, I find the following pattern:
The figure shows the average effect size of ethnic diversity as a function of within-group heterogeneity. I find a robust pattern: the more heterogeneous an ethnic group was prior to resettlement, the lower the cost of ethnic diversity. On average, where ethnic groups have more heterogeneous individuals in terms of skills, the negative effect of ethnic diversity is reduced, and ethnic diversity may even become an advantage for economic development. To understand the evolution of these long-term effects, I use data from the 1876 population census on occupations and literacy rates, showing that the documented pattern persists over time.
Why is this happening? When exploring potential channels, I find evidence consistent with cultural transmission. Individuals from more heterogeneous ethnic groups in terms of skills are more likely to interact with other ethnicities. Using data from colonial records, I find evidence suggesting cooperative behavior and more open attitudes when interacting with other ethnic groups. Overall, understanding whether individuals from more heterogeneous ethnic groups are better able to integrate in a multi-ethnic society is a relevant question, not only in an increasingly globalized world, but also in the context of forced displacements and migrations, like in the case of refugees.
References
Alesina, A., and La Ferrara, E. (2005). “Ethnic Diversity and Economic Performance.” Journal of Economic Literature, 43 (3), pp. 762-800.
Murra, J. V. (1975). Formaciones económicas y políticas del mundo andino. Instituto de Estudios Peruanos.
Pease, F. G. Y. (1978). Del Tawantinsuyu a la historia del Perú, Instituto de Estudios Peruanos.
Wachtel, N. (1976). Los vencidos: los indios del Perú frente a la conquista española (1530-1570). Alianza.
Vicky Fouka ’10 (Economics) is an editor of this new meeting point for HPE researchers
A map shows the original location of the Broad Street Pump
About the project
Broadstreet is a blog dedicated to the study of historical political economy (HPE). Its goal is to foster conversations across disciplines in the social sciences, namely economics and political science, but also history, sociology, quantitative methods, and public policy. Correspondingly, its editors (and guest contributors) are drawn from these respective disciplines.
Given the boundaries that typically exist across academic disciplines, scholars who work on similar subjects – like HPE – rarely talk to one another or read each other’s work. Our hope in starting Broadstreet is to break down some of these artificial boundaries, generate true cross-disciplinary dialogues, and produce better and more wide-ranging HPE research.
The blog’s name, Broadstreet, is a nod to the legendary John Snow and his study of the 1854 cholera outbreak in London. Snow found convincing evidence for a previously unproven water-born theory of cholera transmission, with a rigorous yet interdisciplinary approach — using detailed socio-economic data, ethnography, historical patterns of disease transmission, and early techniques of causal inference. The Broad Street water pump in London’s Soho district was not only a meeting place for the diverse residents of the neighborhood, but served as the focal point for Snow’s interdisciplinary breakthrough. While the Broad Street pump is no more, the legacy of this innovative research lives on. We hope that Broadstreet will be go-to location for all those with interests in HPE.
Vicky Fouka ’10 (Economics) is Assistant Professor of Political Science at Stanford University. She is an alum of the Barcelona GSE Master’s in Economics and earned her PhD in Economics at GPEFM (UPF and Barcelona GSE).
This paper studies the spillover of a macroprudential regulation in Spain to the Mexican financial system via Mexican subsidiaries of Spanish banks. The spillover caused a drop in the supply of household credit in Mexico. Municipalities with a higher exposure to Spanish subsidiaries experienced a larger contraction in household credit. These localized contractions caused a drop in macroeconomic activity in the local non-tradable sector. Estimates of the elasticity of loan demand by the non-tradable sector to changes in household credit supply range from 1.2–1.8. These results emphasize cross-border effects of regulations in the presence of global banks.
Key takeaways
Loan-loss provisions introduced in Spain in 2012 imposed a significant burden on the balanced sheet of Spanish banks. This regulation was unrelated to the Mexican financial system or the credit conditions of Mexican households. However, Mexican subsidiaries of two large Spanish banks, BBVA and Santander, reduced lending to Mexican households in response to the regulation (Fig. 1).
Fig. 1. Growth in credit lending by Spanish and non-Spanish banks in Mexico.
Mexican municipalities with a higher exposure to Spanish banks (Fig. 2) experienced a larger contraction in lending to households. This drop in lending to households (i.e. a drop in credit supply) was associated with a reduction in lending to the local non-tradable sector driven by a drop in local demand. This shows (1) cross-border effects of a macroprudential regulation on lending and economic activity, and (2) the macroeconomic effects of shocks in lending to households in an emerging economy.
Fig. 2. Share of Spanish banks in the household credit market across Mexican municipalities.
We investigate unemployment due to mismatch in the United States over the past three and a half decades. We propose an accounting framework that allows us to estimate the contribution of each of the frictions that generated labor market mismatch. Barriers to job mobility account for the largest part of mismatch unemployment, with a smaller role for barriers to worker mobility. We find little contribution of wage-setting frictions to mismatch.
VoxEU article by Adilzhan Ismailov ’15 (Economics) and Professor Antonio Ciccone
CEPR’s policy portal VoxEU has published the article “Democratic tipping points” by Economics alum Adilzhan Ismailov ’15 and Antonio Ciccone, professor at the Barcelona GSE and the UPF Economics department, where Adilzhan is currently doing his PhD.
VoxEU promotes “research-based policy analysis and commentary by leading economists.” The site receives about a half million page views per month.
Persistence of democratisation following transitory economic shocks plays an important role in the theory of political institutions. This column tests the theory of democratic tipping points using rainfall shocks in the world’s most agricultural countries since 1946. Negative rainfall shocks have a strong and transitory effect on agricultural output, but a persistent positive effect on the probability of democratisation even after ten years.
Key conclusions
The recent history of democratic (non-)transitions in the world’s most agricultural countries indicates that transitory events can have enduring effects on democratic institutions. When lower rainfall led to below-average agricultural output in these countries, countries ruled by authoritarian regimes were more likely to democratise and more likely to be democratic ten years later.
The shape of the effect of rainfall on the probability of democratisation indicates that the effect is through agricultural output. The agricultural economics literature finds an inverted-U-shaped effect of rainfall on agricultural output. In the theory of Acemoglu and Robinson (2001, 2006) we build on, transitorily lower output raises the probability of democratisation, and transitorily higher output lowers the probability of democratisation. Hence, the inverted-U-shaped effect of rainfall on agricultural output should translate into a U-shaped effect of rainfall on the probability of democratisation. We find this to be the case. Moreover, our results indicate that rainfall shocks tend to produce the largest change in the probability of democratisation when the estimated effect of rainfall on agricultural output is largest.
Figure. Effect of rainfall on real agricultural output and on the probability of democratisation
Note: The inverted-U-shaped solid black line is the effect of rainfall in year t on real agricultural output in year t and is measured on the left axis. The U-shaped coloured lines are the effect of rainfall on the probability of democratisation between years t-1 and t (one year later). The three classifications of democratic and autocratic regimes used in the figure are those of Acemoglu et al. (2019) (blue solid line); Przeworski et al. (2000) (red dotted line), as updated by Cheibub et al. (2010) and Bjornskov and Rode (2020); and Geddes et al. (2014) (green dashed line). The effect of rainfall on the probability of democratisation is calculated using the effect of rainfall in year t in column (1) of Tables 2 and 3 in the paper respectively for the Acemoglu et al. and the Przeworski et al. democratisation indicator. For the Geddes et al. democratisation indicator, the effect of rainfall on the probability of democratisation is calculated using the effect of rainfall in year t-1 in column (5) of Table 3. This is because of Geddes et al.’s unconventional start date for democratic regime transitions; see page 16 for details. Real agricultural output is an index with the base period 2004-2006. Rainfall is measured in dm.
Her research on the topic was also featured in The Washington Post last year!
Paper abstract
Do forced assimilation policies always succeed in integrating immigrant groups? This paper examines how a specific assimilation policy – language restrictions in elementary school – affects integration and identification with the host country later in life. After World War I, several US states barred the German language from their schools. Affected individuals were less likely to volunteer in WWII and more likely to marry within their ethnic group and to choose decidedly German names for their offspring. Rather than facilitating the assimilation of immigrant children, the policy instigated a backlash, heightening the sense of cultural identity among the minority.
Help Economics alum Steffi Huber ’10 by participating this survey!
I’d like to invite Barcelona GSE students and alumni to participate in a survey I’m conducting with Isabelle Salle (Bank of Canada, research fellow at the University of Amsterdam) to help understanding households’ consumption and investment responses to the prolonged “dance” phase of the COVID-19 crisis.
As yet, policymakers and academics do not have good estimates for how people might behave in this crucial period. You can help to fill this gap, and in the process help to build a collective understanding of the economic consequences of the pre-vaccine crisis.
We’ve received around 1,000 responses to the survey so far, and we are using it as a trial survey which will be adjusted for a large grant application to run a representative survey in all major European countries.
Please read below to know more about what is involved.
Purpose of the research
This research survey aims to shed light on household responses to the COVID-crisis in two ways. First, we want to investigate how the crisis has already changed investment and consumption demands. Second, we want to understand the expected consumption and investment behavior of households when lockdown restrictions are progressively lifted but prior to an effective treatment or vaccine being available.
What taking part involves
There will be a series of questions about your current and planned consumption and investments. The survey requires no special knowledge for you to complete it. Your participation is voluntary, you do not have to answer all the questions if you do not want to, and you may withdraw from the study at any point.
Your data
The information provided by you in the survey will be held anonymously, so it will be impossible to trace this information back to you individually. The anonymous data itself will be held indefinitely and may be used to produce reports, presentations, and academic publications. If you have any questions or concerns about this research please feel free to contact any of the researchers involved in the project, using the contact details below.
The survey can be answered in 16 different languages. So, don’t hesitate to forward this email to all your international friends!
See this website for more info on the objectives of this project.
Stefanie J. Huber ’10 is Assistant Professor at the University of Amsterdam. She is an alum of the Barcelona GSE Master’s in Economics and GPEFM PhD Program (UPF and Barcelona GSE).
Opinion piece by Francesco Amodio ’10 (Economics) on Canada’s response to COVID-19 crisis
In a piece published on March 31 in the Montreal Gazette, Francesco Amodio ’10 (Economics) looks at measures taken by the Canadian government in response to the coronavirus pandemic.
Here’s an excerpt:
The measures taken by the Canadian government are in line with those taken in other countries, where governments are adopting either one or the combination of the following two approaches. In the first one, the government lets firms lay off workers, then pays out employment insurance benefits or other kind of income support transfers. The second approach focuses instead on “saving jobs,” with the government subsidizing wages in order to avoid layoffs.
Each approach has its pros and cons. In the short run, the size of wage subsidies and number of potential layoffs will determine which one is costlier. Perhaps more importantly, the two approaches differ in their medium- to long-run impacts.
A displaced worker might rationally prefer to wait through a long spell of unemployment instead of seeking employment at a lower wage in a job he is not trained for. I evaluate this trade-off using micro data on displaced workers. To achieve identification, I exploit the fact that the more a worker has invested in occupation-specific human capital, the more costly it is for him to switch occupations and therefore the higher is his incentive to wait. I find that between 9% and 17% of total unemployment in the United States can be attributed to wait unemployment
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