Inclusive Institutions and Long-Run Misallocation

Galor, Oded and Munshi, Kaivan and Wilson, Nicolas (2013): Inclusive Institutions and Long-Run Misallocation.

Abstract

This research advances the hypothesis that resource abundant economies characterized by a socially cohesive workforce and network externalities triggered the emergence of efficiency-enhancing inclusive institutions designed to restrict mobility and to enhance the attachment of community members to the local labor market. However, the persistence of these institutions, and the inter-generational transmission of their value, ultimately resulted in the misallocation of talents across occupations and a reduction in the long-run level of income per capita in the economy as a whole. Exploiting variation in resource intensity across the American Midwest during its initial development, the empirical analysis establishes that higher initial resource-intensity in 1860 is indeed associated with greater community participation over the subsequent 150 years, and reduced mobility and labor misallocation in the contemporary period.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inclusive institutions, Exclusive institutions, Growth, Networks, Labor misallocation, Persistence
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration

References

Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2001. The Colonial Origins of Comparative Development: An Empirical Investigation, American Economic Review 91: 1369-1401.

Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2002. Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution, Quarterly Journal of Economics 118: 1231-1294.

Acemoglu, Daron and James A. Robinson. 2012. Why Nations Fail: The Origins of Power, Prosperity, and Poverty, New York: Crown Publishers.

Alba, Richard D. 1990. Ethnic Identity: The Transformation of White America. New Haven and London: Yale University Press.

Alesina, Alberto, Reza Baqir, and William Easterly. 1999. Public Goods and Ethnic Division, Quarterly Journal of Economics 114(4): 1243-84.

Alesina, Alberto, Reza Baqir, and Caroline Hoxby. 2004. Political Jurisdictions in Heterogeneous Communities, Journal of Political Economy 112(2): 348-396.

Alexander, June Granatir. 1991. Moving into and out of Pittsburgh: Ongoing Chain Migration, in A Century of European Migrants, 1830-1930, eds. Rudolph J. Vecoli and Suzanne M. Sinke, Urbana: University of Illinois Press.

Altonji, Joseph, Todd Elder, and Christopher Taber. 2005. Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools. Journal of Political Economy 113(1): 151-184.

Bodnar, John. 1980. Immigration, Kinship, and the Rise of Working-Class Realism in Industrial America, Journal of Social History. 45-65.

Bodnar, John. 1985. The Transplanted: A History of Immigrants in Urban America. Bloomington: Indiana University Press. bod3 : Bodnar, John, Roger Simon, and Michael P. Weber. 1982. Lives of Their Own: Blacks, Italians, and Poles in Pittsburgh, 1900-1960. Urbana: University of Illinois Press.

Conzen, Kathleen Neils. 1976. Immigrant Milwaukee 1836-1860: Accomodation and Community in a Frontier City. Cambridge, Massachusetts: Harvard University Press.

Dell, Melissa. 2012. "The Persistent Effects of Peru's Mining Mita," Econometrica 78(6): 1863-1903.

Elder Jr., Glen H. and Rand D. Conger. 2000. Children of the Land: Adversity and Success in Rural America. Chicago and London: University of Chicago Press.

Engerman, Stanley L. and Kenneth L. Sokoloff. 1997. Factor Endowments, Institutions, and Differential Growth Paths Among New World Economies, in How Latin America Fell Behind, ed. Stephen Haber, Stanford, CA: Stanford University Press.

Evans, William N. and Robert M. Schwab. 1995. Finishing High School and Starting College: Do Catholic Schools Make a Difference? Quarterly Journal of Economics 110(3): 947-974.

Fishlow, Albert. 2000. Internal Transportation in the Nineteenth and Early Twentieth Centuries, in The Cambridge Economic History of the United States, eds. Stanley L. Engerman and Robert E. Gallman, Cambridge, England: Cambridge University Press.

Galor, Oded and Omer Moav. 2006. "Das Human Kapital: A Theory of the Demise of the Class Structure," Review of Economic Studies 73: 85-117.

Galor, Oded, Omer Moav, and Dietrich Vollrath. 2009. "Inequality in Land Ownership, the Emergence of Human Capital Promoting Institutions, and the Great Divergence," Review of Economic Studies 75: 143-179.

Gans, Herbert. 1962. The Urban Villagers: Group and Class in the Life of Italian-Americans. New York: The Free Press of Glencoe.

Gans, Herbert. 1979. Symbolic Ethnicity: The Future of Ethnic Groups and Cultures in America, Ethnic and Racial Studies 2(January): 1-20.

Gjerde, Jon. 1985. From Peasants to Farmers: The Migration from Balestrand, Norway to the Upper Middle West. Cambridge, England: Cambridge University Press.

Gjerde, Jon. 1991. Chain Migrations from the West Coast of Norway, in A Century of European Migrants, 1830-1930, eds. Rudolph J. Vecoli and Suzanne M. Sinke, Urbana: University of Illinois Press.

Gordon, David M., Richard Edwards, and Michael Reich. 1982. Segmented Work, Divided Workers: The Historical Transformation of Labor in the United States. Cambridge England: Cambridge University Press.

Hoerder, Dirk. 1991. International Labor Markets and Community Building by Migrant Workers in the Atlantic Economies, in A Century of European Migrants, 1830-1930,

Rudolph J. Vecoli and Suzanne M. Sinke, Urbana: University of Illinois Press.

Hutchinson, E. P. 1956. Immigrants and Their Children 1850-1950 New York: John Wiley and Sons, Inc.

Kamphoefner, Walter D. 1987. The Westfalians: From Germany to Missouri. Princeton: Princeton University Press.

Kornblum, William. 1974. Blue Collar Community Chicago and London: University of Chicago Press.

Landes, David. 1998. The Wealth and Poverty of Nations: Why Some are so Rich and Some so Poor New York: W.W. Norton.

Litina, Anastasia. 2013. Natural Land Productivity, Cooperation and Comparative Development. University of Luxembourg.

Maddison, Angus. 2008. "Shares of the Rich and the Rest in the World Economy: Income Divergence Across Nations, 1820-2030," Asian Economic Policy Review, June: 67-82.

Meyer, David R. 1989. Midwestern Industrialization and the American Manufacturing Belt in the Nineteenth Century, Journal of Economic History 49(4): 921-937.

Munshi, Kaivan and Mark Rosenzweig. 2006. "Traditional Institutions Meet the Modern World: Caste, Gender and Schooling Choice in a Globalizing Economy," American Economic Review 96(4):1225-1252.

Naidu, Suresh and Noam Yuchtman. 2013. "Coercive Contract Enforcement: Law and the Labor Market in 19th Century Industrial Britain," American Economic Review103(1):107-144.

North, Douglas C. 1981. Structure and Change in Economic History New York: W.W. Norton.

Sokoloff, Kenneth L. and Stanley L. Engerman. 2000. "History Lessons: Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives 14(3): 217-232.

Thistlethwaite, Frank. 1991. Migration from Europe Overseas in the Nineteenth and Twentieth Centuries, in A Century of European Migrants, 1830-1930, eds. Rudolph J. Vecoli and Suzanne M. Sinke, Urbana: University of Illinois Press.

Willis, Paul. 1977. Learning to Labor: How Working Class Kids Get Working Class Jobs New York: Columbia University