Colonial origins and the persistence of communal land ownership (Under Review)
Rural versus urban MPK in China (with Piyusha Mutreja and Wei Xiao)
The corruption of local elites (with Merima Ali, Odd-Helge Fjeldstad)
Trade in human capital (Under Review)
The Dual Policy in the Dual Economy -- The Political Economy of Urban Bias in Dictatorial Regimes
Journal of Development Economics, Volume 105, p. 77-85, November 2013 Download
In many developing countries, public resource allocation is often biased against the rural population. Since a vast majority of the poor live in rural areas, the bias is highlighted as one of the most important institutional factors contributing to poverty. This paper develops a political economy model of urban bias in a dictatorial regime. A novel result of the model is that urban bias can emerge in predominantly agrarian economies even if there is no bias in political power toward urban residents. The empirical evidence from a recently compiled country-level panel dataset on agricultural taxes/subsidies is consistent with the prediction of the model.
Does Agricultural Growth Cause Manufacturing Growth?
Economica, Volume 82, p. 1107-1125, December 2015. Download
The role of agricultural development for industrialization is central to several theories of economic development and policy. However, empirically assessing the impact of agricultural growth on manufacturing growth is challenging because of endogeneity concerns. To address the identification challenge, I use random weather variations to instrument agricultural growth. The instrumental variable estimations show that agricultural growth has a significant positive impact on manufacturing growth. I discuss the empirical implications for efficiency of the manufacturing sector and the role of agriculture in Africa's industrialization.
Should Developing Countries Constrain Resource-Income Spending? A Quantitative Analysis of Oil Income in Uganda
(with John Hassler, Per Krusell and Daniel Spiro)
The Energy Journal, Volume 38, p. 103-131, 2017. Download.
A large increase in government spending following resource discoveries often entails political risks, inefficient investments and increased volatility. Setting up a sovereign wealth fund with a clear spending constraint may decrease these risks. On the other hand, in a capital scarce developing economy with limited access to international borrowing, such a spending constraint may lower welfare by reducing domestic capital accumulation and hindering consumption increases for the currently poor. These two contradicting considerations pose a dilemma for policy makers in deciding whether to set up a sovereign wealth fund with a spending constraint. Using Uganda's recent oil discovery as a case study, this paper presents a quantitative macroeconomic analysis and examines the potential loss of constraining spending through a sovereign wealth fund with a simple spending rule. We find that the loss is relatively low and unlikely to dominate the political risks associated with increased oil spending. Thus, such a spending constraint appears well warranted.
Colonial Legacy, State-Building and the Salience of Ethnicity in Sub-Saharan Africa
(with Merima Ali, Odd-Helge Fjeldstad, Boqian Jiang)
The Economic Journal, Volume 129, Issue 619, April 2019, Pages 1048–1081. Download.
African colonial history suggests that British colonial rule may have undermined state centralisation due to legacies of colonial segregation across ethnic groups and stronger executive constraints. Using micro-data from sub-Saharan Africa, we find that anglophone (as opposed to francophone) citizens report a weaker sense of national identity (relative to their ethnic identity). The findings also hold among observations near anglophone--francophone borders, both across countries and within Cameroon. Evidence from taxation, security and the power of chiefs also suggests weaker state capacity in anglophone countries. These results highlight the legacy of colonial rule on state-building.
Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology
(with Merima Ali, Abebe Shimeles and Firew Woldeyes)
Revise and resubmit
Weak fiscal capacity for domestic resource mobilization is the hallmark of poor countries. Recently, many developing countries resorted to the application of information technology to consolidate tax mobilization; however, there is little systematic empirical evidence on the impact of such reforms. We attempt to narrow this gap by documenting evidence from Ethiopia where there has been a recent surge in the use of electronic sales register machines (ESRMs). Using a unique large-scale administrative data-set covering all business taxpayers, we find that the adoption of ESRMs was followed by significant increases in reported sales and tax payments. Moreover, we find a positive effect on employment and no effect on net entry, suggesting that increased tax payments by registered taxpayers occurred without erosion of the tax base.
Economic Growth and Trade in Human Capital
A salient empirical pattern in the East Asian “miracle” is a large increase in output and factor accumulation (both human and physical capital) despite only a modest increase in TFP. I present a model of growth and economic catch-up that provides a possible explanation. A novel element of the model is a global market for education that allows for human capital transfer from frontier to developing economies. This assumption is motivated by the fact that during the technological catch-up of countries like Korea and Taiwan, domestic universities usually relied on graduates of Western universities to provide advanced training in science and engineering. Calibration of the model using plausible parameter values from the literature and the data suggests that the human capital transfer channel can substantially amplify the impact of a TFP increase.
Urban bias and the political economy of rural land policy in China
(with Wei Xiao) Download.
Rural land reform remains a central issue in China's political economy. While peasants have the right to farm their plots, rights to transfer one's plots through land markets are significantly restricted. In this paper, we present a political economy model of rural land policy that takes into account some key characteristics of China's context. The model features an urban-biased political regime in the context of the standard dual economy model. We assume a leader facing conflicting motives with regard to rural land reform, i.e., removing restrictions on ownership of rural land. By lowering the opportunity cost of rural--urban migration, land reform leads to further industrialization of the economy and, as a result, could benefit the leader by increasing his rent base. On the other hand, the increase in the size of the urban population due to the rural--urban migration increases the cost of sustaining the economic privileges enjoyed by the politically powerful urban residents. The model shows that while a higher urbanization level provides a stronger incentive for adoption of land reform, an increase in productivity of the urban sector has a counteracting effect. Our analysis sheds important insight on the prospect for land reform as China's economy transforms toward more urbanization and higher productivity. For example, China has recently shown a greater willingness to strengthen rural land property rights, and the model's prediction offers the increase in the level of urbanization as a possible explanation for this policy change. On the other hand, due to the counteracting effects of urbanization and productivity on political incentives, the model also shows the conditions under which restrictions on rural land ownership could persist despite further modernization of the economy.