Institutional Persistence in Eastern Europe: Economic and Political Legacies of Empires and Communism

This dissertation seeks to advance our understanding of the roles that institutions play in economic development. How do institutions evolve? What mechanisms are responsible for their persistence? What effects do they have on economic development?

I address these questions using historical and contemporary data from Eastern Europe and Russia. This area is relatively understudied by development economists. It also has a very interesting history. For one thing, for several centuries it was divided between different empires. For another, it experienced wars and socialism in the 20th century. I use some of these exogenous shocks as quasi-natural social experiments to study the institutional transformations and its effects on economic development both in the short and long run.

This first chapter explores whether economic, social, and political institutions vary in their resistance to policies designed to remove them. The empirical context for the analysis is Romania from 1690 to the 2000s. Romania represents an excellent laboratory for studying the persistence of different types of historical institutional legacies. In the 18th and 19th centuries, Romania was split between the Habsburg and Ottoman Empires, where political and economic institutions differed. The Habsburgs imposed less extractive institutions relative to the Ottomans: stronger rule of law, a more stable and predictable state, a more developed civil society, and less corruption. In the 20th century, the Romanian Communist regime tried deliberately to homogenize the country along all relevant dimensions. It was only partially successful. Using a regression discontinuity design, I document the persistence of economic outcomes, social capital, and political attitudes. First, I document remarkable convergence in urbanization, education, unemployment, and income between the two former empires. Second, regarding social capital, no significant differences in organizational membership, trust in bureaucracy, and corruption persist today. Finally, even though the Communists tried to change all political attitudes, significant discontinuities exist in current voting behavior at the former Habsburg-Ottoman border. Using data from the parliamentary elections of 1996-2008, I find that former Habsburg rule decreases by around 6 percentage points the vote share of the major post-Communist left party and increases by around 2 and 5 percentage points the vote shares of the main anti-Communist and liberal parties, respectively.

The second chapter investigates the effects of Stalin’s mass deportations on distrust in central authority. Four deported ethnic groups were not rehabilitated after Stalin’s death; they remained in permanent exile until the disintegration of the Soviet Union. This allows one to distinguish between the effects of the groups that returned to their homelands and those of the groups that were not allowed to return. Using regional data from the 1991 referendum on the future of the Soviet Union, I find that deportations have a negative interim effect on trust in central authority in both the regions of destination and those of origin. The effect is stronger for ethnic groups that remained in permanent exile in the destination regions. Using data from the Life in Transition Survey, the chapter also documents a long-term effect of deportations in the destination regions.

The third chapter studies the short-term effect of Russian colonization of Central Asia on economic development. I use data on the regions of origin of Russian settlers and push factors to construct an instrument for Russian migration to Central Asia. This instrument allows me to interpret the outcomes causally. The main finding is that the massive influx of Russians into the region during the 1897-1926 period had a significant positive effect on indigenous literacy. The effect is stronger for men and in rural areas. Evidently, interactions between natives and Russians through the paid labor market was an important mechanism of human capital transmission in the context of colonization.

The findings of these chapters provide additional evidence that history and institutions do matter for economic development. Moreover, the dissertation also illuminates the relative persistence of institutions. In particular, political and social capital legacies of institutions might outlast economic legacies. I find that most economic differences between the former empires in Romania have disappeared. By the same token, there are significant discontinuities in political outcomes. People in former Habsburg Romania provide greater support for liberalization, privatization, and market economy, whereas voters in Ottoman Romania vote more for redistribution and government control over the economy.

In the former Soviet Union, Stalin’s deportations during World War II have a long-term negative effect on social capital. Today’s residents of the destination regions of deportations show significantly lower levels of trust in central authority. This is despite the fact that the Communist regime tried to eliminate any source of opposition and used propaganda to homogenize people’s political and social attitudes towards the authorities. In Central Asia, the influx of Russian settlers had a positive short-term effect on human capital of indigenous population by the 1920s, which also might have persisted over time.

From a development perspective, these findings stress the importance of institutions for future paths of development. Even if past institutional differences are not apparent for a certain period of time, as was the case with the former Communist countries, they can polarize society later on, hampering economic development in the long run. Different institutions in the past, which do not exist anymore, can thus contribute to current political instability and animosity.

Trust and efficiency

Agency problems within the firm are a significant hindrance to efficiency. We propose trust between coworkers as a superior alternative to the standard tools used to mitigate agency problems: increased monitoring and incentive-based pay. We model trust as mutual, reciprocal altruism between pairs of coworkers and show how it induces employees to work harder, relative to those at firms that use the standard tools. In addition, we show that employees at trusting firms have higher job satisfaction, and that these firms enjoy lower labor cost and higher profits. We conclude by discussing how trust may also be easier to use within the firm than the standard agency-mitigation tools. © 2002 Elsevier Science B.V. All rights reserved.

Migration and fishing in Indonesian coastal villages.

The coastal ecosystems in Southeast Asia are under increased pressure from local and global change. This paper examines human migration and the use of marine resources in coastal villages in the Minahasa district of North Sulawesi, Indonesia. Primary data were collected through interviews with village leaders, focus groups, and a sample survey of 600 fishing households. Migration is responsible for at least one quarter of the total growth during the past decade. All groups of fishermen report falling productivity of the nearshore fisheries. Econometric analysis is used to examine the weekly fish catch of the artisanal fishing sector. Migration status and socioeconomic variables seem to have no systematic effect, while fishing effort (labor, boat, and gear), the degree of specialization, and the remoteness of villages are found to be positively related to weekly fish catches.

Regulating the Ocean: Piracy and Protection along the East African Coast

From 2008-2012, a dramatic upsurge in incidents of maritime piracy in the Western Indian Ocean led to renewed global attention to this region: including the deployment of multi national naval patrols, attempts to prosecute suspected pirates, and the development of financial interdiction systems to track and stop the flow of piracy ransoms. Largely seen as the maritime ripple effect of anarchy on land, piracy has been slotted into narratives of state failure and problems of governance and criminality in this region.

This view fails to account for a number of factors that were crucial in making possible the unprecedented rise of Somali piracy and its contemporary transformation. Instead of an emphasis on failed states and crises of governance, my dissertation approaches maritime piracy within a historical and regional configuration of actors and relationships that precede this round of piracy and will outlive it. The story I tell in this work begins before the contemporary upsurge of piracy and closes with a foretaste of the itineraries beyond piracy that are being crafted along the East African coast.

Beginning in the world of port cities in the long nineteenth century, my dissertation locates piracy and the relationship between trade, plunder, and state formation within worlds of exchange, including European incursions into this oceanic space. Scholars of long distance trade have emphasized the sociality engendered through commerce and the centrality of idioms of trust and kinship in structuring mercantile relationships across oceanic divides. To complement this scholarship, my work brings into view the idiom of protection: as a claim to surety, a form of tax, and a moral claim to authority in trans-regional commerce.

To build this theory of protection, my work combines archival sources with a sustained ethnographic engagement in coastal East Africa, including the pirate ports of Northern Somalia, and focuses on the interaction between land-based pastoral economies and maritime trade. This connection between land and sea calls attention to two distinct visions of the ocean: one built around trade and mobility and the other built on the ocean as a space of extraction and sovereignty. Moving between historical encounters over trade and piracy and the development of a national maritime economy during the height of the Somali state, I link the contemporary upsurge of maritime piracy to the confluence of these two conceptualizations of the ocean and the ideas of capture, exchange, and redistribution embedded within them.

The second section of my dissertation reframes piracy as an economy of protection and a form of labor implicated within other legal and illegal economies in the Indian Ocean. Based on extensive field research, including interviews with self-identified pirates, I emphasize the forms of labor, value, and risk that characterize piracy as an economy of protection. The final section of my dissertation focuses on the diverse international, regional, and local responses to maritime piracy. This section locates the response to piracy within a post-Cold War and post-9/11 global order and longer attempts to regulate and assuage the risks of maritime trade. Through an ethnographic focus on maritime insurance markets, navies, and private security contractors, I analyze the centrality of protection as a calculation of risk and profit in the contemporary economy of counter-piracy.

Through this focus on longer histories of trade, empire, and regulation my dissertation reframes maritime piracy as an economy of protection straddling boundaries of land and sea, legality and illegality, law and economy, and history and anthropology.

Contracting Freedom: Governance and East Indian Indenture in the British Atlantic, 1838-1917

This is a dissertation about identity and governance, and how they are mutually constituted. Between 1838 and 1917, the British brought approximately half a million East Indian laborers to the Atlantic to work on sugar plantations. The dissertation argues that contrary to previous historiographical assumptions, indentured East Indians were an amorphous mass of people drawn from various regions of British India. They were brought together not by their innate "Indian-ness" upon their arrival in the Caribbean, but by the common experience of indenture recruitment, transportation and plantation life. Ideas of innate "Indian-ness" were products of an imperial discourse that emerged from and shaped official approaches to governing East Indians in the Atlantic. Government officials and planters promoted visions of East Indians as "primitive" subjects who engaged in child marriage and wife murder. Officials mobilized ideas about gender to sustain racialized stereotypes of East Indian subjects. East Indian women were thought to be promiscuous, and East Indian men were violent and depraved (especially in response to East Indian women's promiscuity). By pointing to these stereotypes about East Indians, government officials and planters could highlight the promise of indenture as a civilizing mechanism. This dissertation links the study of governance and subject formation to complicate ideas of colonial rule as static. It uncovers how colonial processes evolved to handle the challenges posed by migrant populations.

The primary architects of indenture, Caribbean governments, the British Colonial Office, and planters hoped that East Indian indentured laborers would form a stable and easily-governed labor force. They anticipated that the presence of these laborers would undermine the demands of Afro-Creole workers for higher wages and shorter working hours. Indenture, however, was controversial among British liberals who saw it as potentially hindering the creation of a free labor market, and abolitionists who also feared that indenture was a new form of slavery. Using court records, newspapers, legislative documents, bureaucratic correspondence, memoirs, novels, and travel accounts from archives and libraries in Britain, Guyana, and Trinidad and Tobago, this dissertation explores how indenture was envisioned and constantly re-envisioned in response to its critics. It chronicles how the struggles between the planter class and the colonial state for authority over indentured laborers affected the way that indenture functioned in the British Atlantic. In addition to focusing on indenture's official origins, this dissertation examines the actions of East Indian indentured subjects as they are recorded in the imperial archive to explore how these people experienced indenture.

Indenture contracts were central to the justification of indenture and to the creation of a pliable labor force in the Atlantic. According to English common law, only free parties could enter into contracts. Indenture contracts limited the period of indenture and affirmed that laborers would be remunerated for their labor. While the architects of indenture pointed to contracts as evidence that indenture was not slavery, contracts in reality prevented laborers from participating in the free labor market and kept the wages of indentured laborers low. Further, in late nineteenth-century Britain, contracts were civil matters. In the British Atlantic, indentured laborers who violated the terms of their contracts faced criminal trials and their associated punishments such as imprisonment and hard labor. Officials used indenture contracts to exploit the labor and limit the mobility of indentured laborers in a manner that was reminiscent of slavery but that instead established indentured laborers as subjects with limited rights. The dissertation chronicles how indenture contracts spawned a complex inter-imperial bureaucracy in British India, Britain, and the Caribbean that was responsible for the transportation and governance of East Indian indentured laborers overseas.

Economic and Social Upgrading in Global Value Chains and Industrial Clusters: Why Governance Matters

© 2014, Springer Science+Business Media Dordrecht.The burgeoning literature on global value chains (GVCs) has recast our understanding of how industrial clusters are shaped by their ties to the international economy, but within this context, the role played by corporate social responsibility (CSR) continues to evolve. New research in the past decade allows us to better understand how CSR is linked to industrial clusters and GVCs. With geographic production and trade patterns in many industries becoming concentrated in the global South, lead firms in GVCs have been under growing pressure to link economic and social upgrading in more integrated forms of CSR. This is leading to a confluence of “private governance” (corporate codes of conduct and monitoring), “social governance” (civil society pressure on business from labor organizations and non-governmental organizations), and “public governance” (government policies to support gains by labor groups and environmental activists). This new form of “synergistic governance” is illustrated with evidence from recent studies of GVCs and industrial clusters, as well as advances in theorizing about new patterns of governance in GVCs and clusters.