ALUMNI PRESENT PANEL AT CONFERENCE OF
SOCIETY FOR INSTITUTIONAL AND ORGANIZATIONAL ECONOMICS
August 25, 2023
Goethe University Frankfurt, Germany

Workshop alumni Cesar Huaroto, Chicheng Ma, Marcos Salgado, and Ashutosh Thakur presented papers at a session on issues of long-run development at the 2023 SIOE conference. Mary Shirley was the organizer, Lee Benham was the chair, and Georgy Egorov was the commentator.

ABSTRACTS BY THE PANEL

Nation Building in the Andes: Evidence from the Chilean Invasion of Peru in the XIX Century
Cesar Huaroto
Universidad de Piura

Can war increase nation-building and social capital? This paper studies the effect of fighting a foreign invasion via self-organized resistance on nation-building in a developing country during the nineteenth century. I use the case of the Sierra Campaign, the last stage of the Pacific War (1879-1884, between Peru and Chile), where local indigenous communities fought a guerrilla war against a professional invader army. Using a novel dataset on the events of the Campaign, I find that people living today in municipalities more exposed to this Campaign reduced indigenous ethnic self-identification but increased political participation, democratic values, and civic capital. To address endogeneity concerns, I controlled for geographical, climatic, and pre-conflict socioeconomic characteristics, tested robustness to matching algorithms, and estimated the Oster test, all indicating that the evidence is causal.

Christian Missionaries and Foreign Trade, 1580-1936
Chicheng Ma
University of Hong Kong
Zhiwu Chen, University of Hong Kong
Xinhao Li,University of Hong Kong

We examine how Christian missions affected foreign trade expansion. As pioneers of Europeans’ global exploration since 1500, the missionaries provided useful information concerning the trade potential of remote areas to the Western audience. This mitigated the information asymmetry and entry cost of the early foreign trade. We test this hypothesis in the context of historical China, which had been preached by European missionaries from 1580 but was not opened to foreign trade until 1842. We find that prefectures which Christian missions had entered earlier were more likely to be introduced to the foreign market and thus to conduct foreign trade after 1842. The finding implies the importance of information flow in shaping the early global trade.

Building Loyalty through Personal Connections: Evidence from the Spanish Empire
Marcos Salgado
FGV Rio de Janeiro

How do rulers manage to govern when they cannot implement policy themselves and have limited means to monitor and even communicate with their agents? The personal loyalties of high-ranking officials can help overcome or exacerbate agency problems. The Spanish Empire promoted links between colonial officials and their superiors in Spain and discouraged social ties between them and local elites. I use superiors’ entries and exits as within-official shocks to connections to estimate their effect on promotions and performance. I find that connected ministers were more likely to be promoted and raised more revenue. On the other hand, ministers with more links to local elites collected less revenue. These patterns are explained by personal connections, defined as sustained in-person interactions during their early careers. I also validate the connections measure by showing that they predict endogenous friendships.

Evolution of Institutional Designs: Endogenizing the History of Allocation Procedures for the Indian Civil Services
Ashutosh Thakur
National University of Singapore

I endogenize the evolution of allocation procedures used to assign elite civil servants to states across India post-Independence. Using detailed knowledge of the history of matching mechanisms and the civil servants' rank-order preferences, I highlight the struggle over allocation procedures between Prime Minister and civil service. The Prime Minister wants an equitable distribution of bureaucratic quality across the country for balanced development. Whereas the civil service wants more weight to be given to their own preferences over where to work. The aspirations of the executive and bureaucracy remain at odds because bureaucrats' preferences are correlated: avoiding underdeveloped areas and conflict zones. I find that the institutional pendulum swings between allocation procedures the Prime Minister favors and those the bureaucracy favors, depending on the strength of the Prime Minister. Strong Prime Ministers (proxied by majority governments) can resist pressure from the bureaucracy. Thereby, they institute allocation procedures that achieve a more equitable distribution of bureaucratic quality, albeit by giving bureaucrats’ preferences less weight. On the other hand, weak Prime Ministers (proxied by coalition governments) are more prone to the bureaucracy’s pressure. In turn, they institute allocation procedures that give most bureaucrats more preferred assignments, though at the expense of disadvantaged regions systematically receiving lower-quality bureaucrats.