Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade - Job Market Paper

Industrial policy is always a contentious argument in development economics between free-marketers and state intervention. Réka Juhász's Job Market Paper "TemporaryProtection and Technology Adoption: Evidence from the Napoleonic Blockade" brings historical evidence to that debate through an interesting natural experiment from the early 19th century.

Abstract

"This paper uses a natural experiment to assess whether temporary protection from trade with industrial leaders can foster development of infant industries in follower countries. Using a new dataset compiled from primary sources, I find that in the short-run regions (départements) in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803-15) increased capacity in a new technology, mechanised cotton spinning, to a larger extent than regions which remained more exposed to trade. Temporary protection had long term effects. In particular, by exploiting the fact that the post-war location of the cotton industry was determined to a large extent by the historical accident of the wars, I first show that the location of cotton spinning within France was persistent, and firms located in regions with higher post-war spinning capacity were more productive 30 years later. Second, I find that after the restoration of peace, exports of cotton goods from France increased substantially, consistent with evolving comparative advantage in cottons. Third, I show that as late as 1850, France and Belgium - both part of the French Empire prior to 1815 - had larger cotton spinning industries than other Continental European countries which were not protected from British trade during the wars; this suggests that adoption of the new technology was far from inevitable."

Interestingly, the paper studies the effects of an event and policy that was not designed for industrial purposes: the Napoleonic Wars and the Continental Blockade. While the Continental Blockade had the foreign policy purpose of undermining Britain's trade advantage/power and not necessarily a protectionist measure for French industry (in this case cotton). Probably the most interesting case may be that of Belgium and not that of France. During the Napoleonic Wars, Belgium was under French control (1794-1815) until it became part of the Netherlands. However, cotton industry grew more in Belgium than in the Netherlands in the post-Napoleonic period.. pointing out to the second issue: Technology Adoption

The results show there may be some role to be played for protectionist policies for infant industries not only to establish productive capacity but also the be able to adopt/adapt new technologies more successfully. On the other hand, the temporary protection was not sector-specific but across the board, leading to the interpretation that industrial policy may be more effective by focusing on the general environment rather than specific industries, allowing for an efficient internal reallocation of resources.

To note that the study focuses on a successful case and does not look at the industries that may have been wiped out after the lifting of the blockade, so we should be careful in making general economic welfare interpretations at country level.

Interesting Links

Interesting articles and links:

- Running surveys in warzones

- Does money buy Hearts and Minds? Mostly research in the Philippines but also elsewhere.

- Understanding the Civil Law, an interesting primer for people without legal background (and some interest in history)

Transtional Justice and Political Settlements - Working Paper

Transitions are as hard, or maybe even harder, that the negotiated processes that originated them (peace and/or political agreements) Christine Bell's "Transitional Justice and Political Settlements" look into the role that transitional justice places both in the negotiating table and its aftermath.

Abstract:     

"This draft article examines the role of transitional justice in societies emerging from conflict. Fundamentally, it addresses the ways in which the context of conflict resolution shapes the transitional justice mechanisms which emerge and constrains their implementation. The paper argues that transitional justice measures need to be understood as having a critical political settlement dimension, and as closely intertwined with the bargaining processes of political elites. These processes are important to non-repetition of human rights violations. The paper sets out the factors which influence design of transitional justice mechanisms, and in conclusion it suggests strategies for improving international intervention in the area."

The article follows a long discussion between the peace imperative (ending the conflict) and the rights-based approach imperative (respect of human rights and justice) that has been going on for a while. These two imperatives are at odds mostly because they come about from different perspectives, one is a bargaining process among the stakeholders while the latter is a normative/principled process (with very little room for negotiation). While this discussion is not new, what Bell brings into the table is that transitional justice mechanisms are, in their design and implementation, also bargaining processes and a continuation of conflict objectives. The fact that the external appearance of the mechanism may similar across countries (Truth Commissions, Special Tribunals, etc..) should not blind us to the fact they represent a political dynamic and are shaped by the narrative of both the conflict and the aimed future.

Overall is a call to more contextual knowledge in both design and intervention, a point that everybody agrees with and yet we keep falling short time and again.

Pornography

My ISP in Yemen has decided that VOX is pornography.

I wonder which criteria they have used to catalog a public policy website as pornography. They may be using the famous 'I know it when I see it' yardstick from US Supreme Court's Judge Stewart. What kind of 'pornography' does this website peddle? What can be so dangerous for Yemen citizens that merits the drastic measure of banning access? Public transportation articles? Health care policy? Political partisanship? Poverty reduction measures?  All of them highly relevant to Yemen, so yes, open discussion of these topics can surely poison the peaceful policy discourse ongoing in Yemen.

On the other hand, one can easily access Dabiq,the magazine by the entity also known as Islamic State, or AQAP's Inspire, although for this one it may be an issue of pride... having been produced in Yemen, it is probably the most trending magazine the country has recently produced.

By the way, web proxies are also being blocked (under their own category).

Interesting links

Links of the week:

- Salaries and NGOs (no, money ain't all). Study on incentives for NGO workers in Uganda

- 10 thing political scientist know that you don't (in the USA) 

- Kony 2012 aftermath, Why did Invisible Children dissolve?

- Lobster fishing or lobster farming? 80% of Maine lobster diet is bait?

The Effect of HIV Infection Risk Beliefs on Risky Sexual Behaviors: Scared Straight or Scared to Death? - Job Market Paper

Much of the development work is about behavior change, the assumption that with extra resources and knowledge people (also known as beneficiaries) will do things better in the future. Nowadays there is an increasing shift towards the 'at-risk' label (although 'vulnerable' is still going strong) to justify targeting: youth at-risk, women at-risk, children at-risk. However, Kerwin's job market paper "The Effect of HIV Infection Risk Beliefs on Risky Sexual Behaviors: ScaredStraight or Scared to Death?" suggests that we may be wrongly identifying both target groups and responses.

Abstract

"Economists typically assume that risk compensation is uniformly self-protective - that people become more careful as the health risks of their actions increase. However, risk-seeking, or fatalistic, responses can also be rational: increased risks can lead people to take fewer precautions. I extend the typical model of risk compensation to show that fatalism is a rational response to sufficiently high risks if people do not have perfect control over all possible exposures, and if the condition in question is irreversible. This result holds even for people who do not understand how to add up probabilities. I test this model's implications by randomizing the provision of information on HIV transmission risks to people in Malawi, a country with a severe HIV epidemic where there is qualitative evidence of fatalistic responses to the virus.

Average risk responses are self-protective and statistically significant, but small in magnitude: the mean risk elasticity of sexual behavior is roughly -0.6. To test the model of rational fatalism,I develop a method of decomposing 2SLS estimates of the risk elasticity of sexual behavior by baseline risk beliefs. Consistent with the predictions of my theoretical framework, I find that this elasticity varies sharply by baseline risk beliefs: the risk elasticity varies from -2.3 for the lowest initial beliefs to 2.9 for the highest initial beliefs. 13.8% of the population has a positive elasticity, suggesting they are fatalistic."

While the study focuses on HIV, how we handle 'at risk' groups is conceptually similar across the sectors. In most cases, targets are identified according to socioeconomic status, employment, location, age and other indicators of potential risk. The advantage of this method is that is relatively easy to identify people with this criteria. The study adds yet another criteria: fatalism, an indicator extremely relevant and yet very difficult to measure (somehow some behaviors can be used as proxy). A fatalist view will not attempt to mitigate the risks but rather embrace them and assume the worst already, making traditional risk education infective (as it tends to highlight negatives as a preventive methodology).

We see a similar issue regarding suicide bombers, gang membership and other high risk behaviors, where the at-risk profile is wide enough to include thousands (if not millions) and yet the actual number of joining are well below. Maybe what we need is better psychological profiling in order to be more precise in both identifying beneficiaries and tailoring the message.

HT to Development Impact

Give Everybody a Voice! The Power of Voting in a Public Goods Experiment with Externalities - Working Paper

While, in general, I am not keen on social science results coming out of controlled lab experiments, Engel and Rockenbach's "Give Everybody a Voice! The Power of Voting in a Public Goods Experiment with Externalities" offer an interesting though with potential large implications (if proven by field testing) for development practitioners.

 
Abstract:  

"We study the effect of voting when insiders’ public goods provision may affect passive outsiders. Without voting insiders’ contributions do not differ, regardless of whether outsiders are positively or negatively affected or even unaffected. Voting on the recommended contribution level enhances contributions if outsiders are unaffected and internalizes the negative externality by lowering contributions when outsiders are negatively affected. Remarkably, voting does not increase contributions when it would be most desirable, i.e. with a positive externality. Here, participants vote for high contributions, yet compliance is poor. Unfavorable payoff comparisons to the outsiders that gain a windfall profit drive contributions down."

In many development interventions, specially with the popularity of Community Driven Development (CDD), communities are asked to chose priorities and, in some cases, also contribute to them. Those priorities usually reflect public goods (or rather public services that can have a public good component, like schools, medical posts, markets, community centers) that do have externalities on other communities (or even within the community). Unfortunately, in development we tend to treat externalities either as a risk (other communities/actors reacting negatively, spoilers) or as a multiplier-effect (bonus points because there is a positive spill-over beyond the community) but rarely as something integral to the design of the decision-making process and the community contribution (both at initial stage and on running costs).

The study shows that enforcement of decisions is key (nothing new there) but also that voting and the nature of the externality have an effect on contributions: If negative it lowers (acknowledgement of impact on others?), if positive it also lowers!! (why should we pay for those free riders?) and if neutral increases (it is all ours?).

In my view policy implications are multiple: 

1) we need to field test this hypothesis, 

2) we may need to tailor decision-making processes and corresponding contributions according to externalities (assuming we want to maximize community contribution). Of course this is easier said that done, specially in CDD settings where the prioritization outcome is not necessarily known beforehand (although the guessing can be quite narrow),

3) extend voting to all contributors. While this point is not looked into by the study, the fact that there might be contributor not participating in the decision-making (indirectly so, through the non-binding phase), we can assume that shifting them from semi-bystanders to decision-makers/contributors would increase the compliance (a point made in many studies in political science on broadening the voting franchise AND the tax base),

4) in stable systems, both and positive negative externalities are dealt by shifting the decision-making process to a higher level (district, region, nation) that can provide for a compensatory system (insurance, investments, balancing out positive and negative externalities). However, in many development settings a 'bump-up the ladder' is not an efficient option (and a whole different 'governance' debate). Clustering (identifying and including affected parties) for decision-making and contributions (in the case of positive externalities) would make the public good neutral (and raise contributions). For negative externalities it is much harder unless the potential damage has been pre-identified and a compensatory mechanism already established (i.e. another development project in the affected community, mitigation measures).