A cross-country analysis of the roles of border openness, human capital and legal institutions in explaining economic development

The Journal of International Trade & Economic Development, July 2021.

Globalisation, human capital, and institutions have been widely recognised in the literature to be causally important for economic development. Most of the available studies, however, treat measures of these determinants either separately or as substitutes. In this paper, we study the income effects of border openness to migration, education, and the rule of law (our proxies for globalisation, human capital, and institutions, respectively). Using cross-country data covering all regions of the world, and employing instrumental variables for all three factors, we establish that they each have a robust, positive, and strong association with economic development. We then consider whether there are any useful interrelations between the three factors in explaining income. On the interaction effects, the results show that the impact on income of: (i) migration can be materially affected by cultivating good institutions but this effect is not dependent on the education level; (ii) education is important irrespective of the levels of migration and institutions; and (iii) institutions is significantly improved by raising the level of education but is not influenced by migration level. Our paper makes a significant contribution as the first investigation into the effects of migration, education, and institutions jointly and as complements.

Final version

Finance and inequality in a panel of US states

Empirical Economics, January 2021.

We examine the impact of sector-based reform on income inequality, concentrating on state banking deregulation in the USA, for which we employ annual balanced panel data from all 50 states and the District of Columbia, covering the period from 1970 to 2000, for our baseline analysis. The estimation strategy exploits the variation across states and years in the enactment of laws that remove restrictions on in-state bank branch geographical expansion and cross-state bank business operational expansion to compute the effects of developments in the financial sector on income inequality. We find evidence that inequality on average decreases with within-state branching reform, whereas it on average increases with between-state banking deregulation. Utilizing five different measures of inequality (top decile income share, Atkinson index, the Gini coefficient, relative mean deviation, and Theil entropy index), we determine that our  finding materially depends on which measure of income inequality is being considered. We argue that this has not been stressed in the previous literature.

Final version

Where do people live longer?

Research in Economics, November 2020.

Can historical exposures of non-European countries to European migrants explain part of their current health outcomes? We find that higher European share of the colonial population robustly raised life expectancy and reduced both fertility and infant mortality rates of present-day population in these former colonies. Specifically, after controlling for other plausible determinants, our baseline results imply that, on average, countries at the 95th percentile of the European share of the colonial population, compared to those at the 5th percentile, live 17 years longer, have 1 less child, and experience 54 fewer infant deaths per 1000 live births. A causal interpretation is given to these results by considering various identification strategies. Overall, our results indicate that health fortunes around the world, on average, improved because of European colonial settlers and that differences in the current levels of health performance can be traced back to differential levels of European colonial settlements, where countries that experienced higher influx of colonial Europeans have better health prosperity nowadays than countries with lower inflow of colonial Europeans. A puzzlement arises, however, as countries with no colonial European settlements have outperformed countries with low colonial European settlements. Thus, explaining this phenomenon and exploring how historical migration holds such an enduring influence on the health of nations today opens up an important avenue for future research.

Final version