Discussion Paper No. 374
January 27, 2023
Testing Marx
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We study the dynamics of capital accumulation, income inequality, capital concentration, and voting up to 1914. Based on new panel data for Prussian regions, we re-evaluate the famous Revisionism Debate between orthodox Marxists and their critics. We show that changes in capital accumulation led to a rise in the capital share and income inequality, as predicted by orthodox Marxists. But against their predictions, this did neither lead to further capital concentration nor to more votes for the socialists. Instead, trade unions and strike activity limited income inequality and fostered political support for socialism, as argued by the Revisionists.
Keywords:
income inequality; concentration; top incomes; capital share; capital accumulation;
JEL-Classification:
D31; D63; J31; N30;
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Discussion Paper No. 344
November 30, 2022
Income Misperception and Populism
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We propose that false beliefs about the own current economic status are an important factor for explaining populist attitudes. Along with the subjects' receptiveness to right-wing populism, we elicit their perceived relative income positions in a representative survey of German households. We find that people with pessimistic beliefs about their income position are more attuned to populist statements. Key to understanding the misperception-populism relationship are strong gender differences in the mechanism: Misperception triggers income dissatisfaction for both men and women, but the former are much more likely to channel their discontent into affection for populist ideas.
Keywords:
perception; income; populism;
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Discussion Paper No. 316
January 29, 2022
The Fiscal State in Africa: Evidence from a Century of Growth (-)
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What is the level of state capacity in developing countries today, and what have been its drivers over the past century? We construct a comprehensive new dataset of tax and revenue collection for 46 African polities from 1900 to 2015. Descriptive analysis shows that many polities in Africa have been characterized by strong growth in fiscal capacity. As a next step, we explain this growth using a fixed-effects long-run panel setting. The results show that canonical state-building factors such as democratic institutions and interstate warfare can increase revenue collection, while government turnover reduces it. Access to external credit and foreign aid are even more important, and both negatively affect fiscal capacity. In addition, access to external revenues, especially from commodity exports and debt, moderates the operation of canonical state-building factors such as democracy and conflict. These insights add important nuances to established theories of state building. Not only are states in Africa more capable than hitherto thought, but the international environment shapes their capacity, both directly and indirectly.
Keywords:
fiscal capacity; taxes; Africa; statehood; resources; external finance;
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Discussion Paper No. 315
Perks and Pitfalls of City Directories as a Micro-Geographic Data Source
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Historical city directories are rich sources of micro-geographic data. They provide information on the location of households and firms and their occupations and industries, respectively. We develop a generic algorithmic work flow that converts scans of them into geo- and status-referenced household-level data sets. Applying the work flow to our case study, the Berlin 1880 directory, adds idiosyncratic challenges that should make automation less attractive. Yet, employing an administrative benchmark data set on household counts, incomes, and income distributions across more than 200 census tracts, we show that semi-automatic referencing yields results very similar to those from labour-intensive manual referencing. Finally, we discuss potential applications in economic history and beyond.
Keywords:
city directories; data extraction; granular spatial data;
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Discussion Paper No. 217
November 10, 2021
On the Origins of National Identity
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What are the origins of national identity? We extend the model by Alesina et al. (2019) to analyze the incentives of elites to use specific types of identity policies in response to shocks, and the extent to which such policies should be effective. To elicit changes in identity we use data on first names given in German cities between 1800 and 1875. We show that parents in cities treated by nation building policies responded by choosing first names of German origin for their children. To control for familyspecific confounding factors, we exploit within family variation. We also show that the response can be conditional on cultural distance to the elite. Finally, Germanic first names had remarkable predictive power for behaviour. We find that individuals with Germanic first names made different marriage choices and were more likely to get actively involved and decorated during the German-French War in 1870/71 and the First World War.
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Discussion Paper No. 285
Trade Shocks, Labor Markets and Elections in the First Globalization
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This paper studies the economic and political effects of a large trade shock in agriculture – the grain invasion from the Americas – in Prussia during the first globalization (1871-1913). We show that this shock accelerated the structural change in the Prussian economy through migration of workers to booming cities. In contrast to studies using today’s data, we do not observe declining per capita income, health outcomes or political polarization in counties aected by foreign competition. Our results suggest that the negative and persistent eects of trade shocks we see today are not a universal feature of globalization, but depend on labor mobility. For our analysis, we digitize data from Prussian industrial and agricultural censuses on the county level and combine it with national trade data at the product level. We exploit the cross-regional variation in cultivated crops within Prussia and instrument with Italian trade data to isolate exogenous variation.
Keywords:
globalization; import competition; labor market; elections; agriculture; migration; trade shock;
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Discussion Paper No. 207
November 9, 2021
Rural Transformation, Inequality, and the Origins of Microfinance
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What determines the development of rural financial markets? Starting from a simple theoretical framework, we derive the factors shaping the market entry of rural microfinance institutions across time and space. We provide empirical evidence for these determinants using the expansion of credit cooperatives in the 236 eastern counties of Prussia between 1852 and 1913. This setting is attractive as it provides a free market benchmark scenario without public ownership, subsidization, or direct regulatory intervention. Furthermore, we exploit features of our historical set-up to identify causal effects. The results show that declining agricultural staple prices, as a feature of structural transformation, leads to the emergence of credit cooperatives. Similarly, declining bank lending rates contribute to their rise. Low asset sizes and land inequality inhibit the regional spread of cooperatives, while ethnic heterogeneity has ambiguous effects. We also offer empirical evidence suggesting that credit cooperatives accelerated rural transformation by diversifying farm outputs.
Keywords:
microfinance; credit cooperatives; rural transformation; land inequality; prussia;
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Discussion Paper No. 199
Weber Revisited: The Protestant Ethic and the Spirit of Nationalism
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We revisit Max Weber's hypothesis on the role of Protestantism for economic development. We show that nationalism is crucial to both, the interpretation of Weber's Protestant Ethic and empirical tests thereof. For late 19th century Prussia we reject Weber’s suggestion that Protestantism mattered due to an “ascetic compulsion to save”. Moreover, we find that income levels, savings, and literacy rates differed between Germans and Poles, not between Protestants and Catholics using pooled OLS and IV regressions as well as IV mediation analysis. We suggest that this result is due to anti-Polish discrimination.
Keywords:
Max Weber; protestantism; nationalism;
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Discussion Paper No. 172
November 8, 2021
The Rise of Fiscal Capacity
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Having sufficient fiscal capacity to tax is a key hallmark and defining feature of states, and there is a growing literature trying to explain its origins. Existing empirical evidence on fiscal capacity is scarce and focuses on large, ex-post successful territories. In this paper we study the introduction of the first centralized, permanent fiscal institutions in the multifarious territories of the Holy Roman Empire from 1400 to 1800. We link information on fiscal centralization and the size and survival of territories to an extensive dataset on state-formation and growth-related outcomes. We empirically confirm that territories are more likely to centralize when neighboring territories are centralized and when they are exposed to a higher threat of war. In line with the literature on the consequences of fiscal capacity, we show that centralized territories are more likely to survive than non-centralized territories and as a result grow more in size. They invest more in administrative and military structures, but investments in the military only occur in the core areas of centralized territories. This contradicts the central assumption of models on fiscal capacity which states that investments into the military are a non-excludable public good.
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Discussion Paper No. 143
Persistence and Activation of Right-Wing Political Ideology
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We argue that a long-run cultural persistence of right-wing ideology can explain the recent rise of right-wing populism. Shifts in the supply of party platforms can interact with this existing demand, and give rise to patterns of historical persistence. We study the context of Germany in the 2017 federal election, when the emergence of the AfD offered voters a populist right-wing option, with little social stigma attached. We show that municipalities that expressed strong support for the Nazi party in 1933 are more likely to vote for the AfD now, but not in 2013, when the AfD was a more moderate, fiscally conservative party. Using opinion surveys, we show that these dynamics are not generated by a concurrent demand shift: political attitudes do not shift sharply to the right in the municipalities with a history of Nazi support.
Keywords:
persistence; culture; right-wing ideology; germany;
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