Free-Riding Yankees: Canada and the Panama Canal, with Sebastián Galiani and Luis F. Jaramillo (NBER WP 30402)
We study the impact of the Panama Canal on the development of Canada’s manufacturing sector in the years from 1900 to 1939. Using newly digitized county-level data from the Census of Manufactures and a market-access approach, we exploit the plausibly exogenous nature of this historical episode to study how changes in transportation costs influence the location of economic activity and productivity dynamics. Our reduced-form estimates show that lowered shipping costs led to greater market integration of marginally productive Canadian counties with key markets both inside and outside of Canada. This development permitted the reallocation of production activity to places whose production levels had been inefficiently low before the Canal opened. A shift from the 25th to the 75th percentile in terms of gains in market access brought about by the opening of the Canal led to a 9% increase in manufacturing revenues and input expenditures. Productivity rose by 13%. These effects persist when general equilibrium effects are considered: the closure of the Canal in 1939 would have resulted in economic losses equivalent to 1.86% of GDP, chiefly as a result of the restriction of the country’s access to international markets. Altogether, these results suggest that the Canal substantially altered the economic geography of the Western Hemisphere in the first half of the twentieth century.
Media coverage: Foco Económico
The Expansion of Public Education in Puerto Rico after 1900, with Matt Curtis (prepared for the book “Roots of Underdevelopment: A New Economic (and Political) History of Latin America and the Caribbean,” edited by Felipe Valencia-Caicedo)
During the first half of the 20th century, Puerto Rico sawrapid progress in expanding primary education. However, as elsewhere in Latin America, there were pronounced regional differences in the rates of increased schooling. Due to its varied crop suitability and detailed records from the US colonial government, Puerto Rico is an ideal setting to explore the role of agriculture in explaining regional variation in the growth of education. This chapter presents a newly constructed panel dataset of enrollment and attendance rates by counties between 1907 and 1943. It finds that differing agricultural production technologies, alongside policy decisions and rates of urbanization, help explain why the growth rate of education varied across regions.
Caffeinated Development: Export Sector, Human Capital, and Structural Transformation in Colombia (R&R Journal of the European Economic Association)
This paper studies the effect of the first wave of globalization on developing countries’ structural transformation, using data from Colombia’s expansion of coffee cultivation. Counties engaged in coffee cultivation in the 1920s developed a smaller manufacturing sector by 1973 than comparable counties, despite starting at a similar level in 1912. My empirical strategy exploits variation in potential coffee yields, and changes in the probability to grow coffee at different altitudes. This paper argues that coffee cultivation increased the opportunity cost of education, which reduced the supply of skilled workers, and slowed down structural transformation. Using exogenous exposure to coffee price shocks as an instrument, I show that reductions in cohorts’ educational attainment led to lower manufacturing activity in the long-run. The effect is driven by both a decrease in demand for education, and reductions in public goods. Finally, coffee cultivation during the early 20th Century had negative long-run effects on both individual incomes and poverty rates.
Media coverage: Forbes
Shaped by Violence: The Impact of Early Violence Exposure on Financial Risk Preferences (2018), with James Byder and Diego Agudelo (R&R Emerging Markets Review)
This paper examines whether growing up in areas with high homicide rates affects financial risk preferences. Our key conjecture is that individuals who have grown up in violent areas possess more risk averse financial preferences. We find support for this hypothesis using a dataset of mutual fund investors from one of Colombia’s largest stock brokers alongside Colombian official data on homicide rates. The likelihood of investing in risky assets is found to be negatively related to violence exposure during early childhood. We address potential identification issues by exploiting the timing of the violent confrontation between the Medellin cartel and the Colombian government between 1984 and 1993 to instrument for the level of violence. We compare investors from Colombia’s biggest cities to investors from Medellin born in a narrow bandwidth around 1984. When we focus exclusively on investors from Medellin, our empirical strategy resembles a fuzzy regression discontinuity design.
Explorations in Economic History, vol. 73
The redefinition of Catholic Church property rights was common in Europe and the Americas during late eighteenth- and nineteenth-centuries. In Latin America, the expropriation of the Church’s assets was part of the violent process of institutional change after independence. This paper focuses on Colombia after 1850. It measures the impact of the expropriation of Church wealth on political violence. The paper contests the traditional idea of the expropriation of the real estate of the Church as a source of political violence by highlighting the change in political competition when the alliance between Conservative factions and the Church was weakened. With yearly data on the number of battles per municipality, archival information on the reform, and difference-in-differences, the paper documents a reduction of political violence in places where the Church’s assets were expropriated. Furthermore, it shows the reduction was concentrated in municipalities with high political competition and where the Conservative Party was relatively weak. These results support a political explanation of why the reform reduced political violence.
Work in Progress
Trade and Migration: Evidence from the Panama Canal opening during the Great Migration, with Sebastián Galiani and Luis F. Jaramillo
Commodities’ Production Function and Human Capital: Evidence from Puerto Rico, with Matthew Curtis