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.

The Islamic commercial crisis: Institutional roots of economic underdevelopment in the Middle East

During the second millennium, the Middle East's commerce with Western Europe fell increasingly under European domination. Two factors played critical roles. First, the Islamic inheritance system, by raising the costs of dissolving a partnership following a partner's death, kept Middle Eastern commercial enterprises small and ephemeral. Second, certain European inheritance systems facilitated large and durable partnerships by reducing the likelihood of premature dissolution. The upshot is that European enterprises grew larger than those of the Islamic world. Moreover, while ever larger enterprises propelled further organizational transformations in Europe, persistently small enterprises inhibited economic modernization in the Middle East.

How common are common mental disorders? Evidence that lifetime prevalence rates are doubled by prospective versus retrospective ascertainment.

BACKGROUND: Most information about the lifetime prevalence of mental disorders comes from retrospective surveys, but how much these surveys have undercounted due to recall failure is unknown. We compared results from a prospective study with those from retrospective studies. METHOD: The representative 1972-1973 Dunedin New Zealand birth cohort (n=1037) was followed to age 32 years with 96% retention, and compared to the national New Zealand Mental Health Survey (NZMHS) and two US National Comorbidity Surveys (NCS and NCS-R). Measures were research diagnoses of anxiety, depression, alcohol dependence and cannabis dependence from ages 18 to 32 years. RESULTS: The prevalence of lifetime disorder to age 32 was approximately doubled in prospective as compared to retrospective data for all four disorder types. Moreover, across disorders, prospective measurement yielded a mean past-year-to-lifetime ratio of 38% whereas retrospective measurement yielded higher mean past-year-to-lifetime ratios of 57% (NZMHS, NCS-R) and 65% (NCS). CONCLUSIONS: Prospective longitudinal studies complement retrospective surveys by providing unique information about lifetime prevalence. The experience of at least one episode of DSM-defined disorder during a lifetime may be far more common in the population than previously thought. Research should ask what this means for etiological theory, construct validity of the DSM approach, public perception of stigma, estimates of the burden of disease and public health policy.

Does improved access to diagnostic imaging results reduce hospital length of stay? A retrospective study.

BACKGROUND: One year after the introduction of Information and Communication Technology (ICT) to support diagnostic imaging at our hospital, clinicians had faster and better access to radiology reports and images; direct access to Computed Tomography (CT) reports in the Electronic Medical Record (EMR) was particularly popular. The objective of this study was to determine whether improvements in radiology reporting and clinical access to diagnostic imaging information one year after the ICT introduction were associated with a reduction in the length of patients' hospital stays (LOS). METHODS: Data describing hospital stays and diagnostic imaging were collected retrospectively from the EMR during periods of equal duration before and one year after the introduction of ICT. The post-ICT period was chosen because of the documented improvement in clinical access to radiology results during that period. The data set was randomly split into an exploratory part used to establish the hypotheses, and a confirmatory part. The data was used to compare the pre-ICT and post-ICT status, but also to compare differences between groups. RESULTS: There was no general reduction in LOS one year after ICT introduction. However, there was a 25% reduction for one group - patients with CT scans. This group was heterogeneous, covering 445 different primary discharge diagnoses. Analyses of subgroups were performed to reduce the impact of this divergence. CONCLUSION: Our results did not indicate that improved access to radiology results reduced the patients' LOS. There was, however, a significant reduction in LOS for patients undergoing CT scans. Given the clinicians' interest in CT reports and the results of the subgroup analyses, it is likely that improved access to CT reports contributed to this reduction.

Dimensions, issues, and bills: Appropriations voting on the house floor

One of the fundamental findings in the congressional literature is that one or sometimes two dimensions can successfully describe roll-call voting. In this paper we investigate if we can reach the same conclusions about low dimensionality when we divide the roll-call agenda into subsets of relatively homogeneous subject matter. We are primarily interested in the degree to which the same ordering of representatives is yielded across these different groups of votes. To conduct our analysis we focus on all roll calls on the 13 annual appropriations bills across eight congresses. When we concentrate on these smaller issue areas, we find that voting is multidimensional and members do not vote in a consistent ideological fashion across all issue areas. Copyright © Southern Political Science Association 2010.

Impact of economic, regulatory, and patent policies on innovation in cancer chemoprevention.

Chemoprevention agents are an emerging new scientific area that holds out the promise of delaying or avoiding a number of common cancers. These new agents face significant scientific, regulatory, and economic barriers, however, which have limited investment in their research and development (R&D). These barriers include above-average clinical trial scales, lengthy time frames between discovery and Food and Drug Administration approval, liability risks (because they are given to healthy individuals), and a growing funding gap for early-stage candidates. The longer time frames and risks associated with chemoprevention also cause exclusivity time on core patents to be limited or subject to significant uncertainties. We conclude that chemoprevention uniquely challenges the structure of incentives embodied in the economic, regulatory, and patent policies for the biopharmaceutical industry. Many of these policy issues are illustrated by the recently Food and Drug Administration-approved preventive agents Gardasil and raloxifene. Our recommendations to increase R&D investment in chemoprevention agents include (a) increased data exclusivity times on new biological and chemical drugs to compensate for longer gestation periods and increasing R&D costs; chemoprevention is at the far end of the distribution in this regard; (b) policies such as early-stage research grants and clinical development tax credits targeted specifically to chemoprevention agents (these are policies that have been very successful in increasing R&D investment for orphan drugs); and (c) a no-fault liability insurance program like that currently in place for children's vaccines.

Socio-economic status and malaria-related outcomes in Mvomero District, Tanzania.

While policies often target malaria prevention and treatment - proximal causes of malaria and related health outcomes - too little attention has been given to the role of household- and individual-level socio-economic status (SES) as a fundamental cause of disease risk in developing countries. This paper presents a conceptual model outlining ways in which SES may influence malaria-related outcomes. Building on this conceptual model, we use household data from rural Mvomero, Tanzania, to examine empirical relationships among multiple measures of household and individual SES and demographics, on the one hand, and malaria prevention, illness, and diagnosis and treatment behaviours, on the other. We find that access to prevention and treatment is significantly associated with indicators of households' wealth; education-based disparities do not emerge in this context. Meanwhile, reported malaria illness shows a stronger association with demographic variables than with SES (controlling for prevention). Greater understanding of the mechanisms through which SES and malaria policies interact to influence disease risk can help to reduce health disparities and reduce the malaria burden in an equitable manner.

Physical and economic potential of geological CO2 storage in saline aquifers.

Carbon sequestration in sandstone saline reservoirs holds great potential for mitigating climate change, but its storage potential and cost per ton of avoided CO2 emissions are uncertain. We develop a general model to determine the maximum theoretical constraints on both storage potential and injection rate and use it to characterize the economic viability of geosequestration in sandstone saline aquifers. When applied to a representative set of aquifer characteristics, the model yields results that compare favorably with pilot projects currently underway. Over a range of reservoir properties, maximum effective storage peaks at an optimal depth of 1600 m, at which point 0.18-0.31 metric tons can be stored per cubic meter of bulk volume of reservoir. Maximum modeled injection rates predict minima for storage costs in a typical basin in the range of $2-7/ ton CO2 (2005 U.S.$) depending on depth and basin characteristics in our base-case scenario. Because the properties of natural reservoirs in the United States vary substantially, storage costs could in some cases be lower or higher by orders of magnitude. We conclude that available geosequestration capacity exhibits a wide range of technological and economic attractiveness. Like traditional projects in the extractive industries, geosequestration capacity should be exploited starting with the low-cost storage options first then moving gradually up the supply curve.

Economic return of clinical trials performed under the pediatric exclusivity program.

CONTEXT: In 1997, Congress authorized the US Food and Drug Administration (FDA) to grant 6-month extensions of marketing rights through the Pediatric Exclusivity Program if industry sponsors complete FDA-requested pediatric trials. The program has been praised for creating incentives for studies in children and has been criticized as a "windfall" to the innovator drug industry. This critique has been a substantial part of congressional debate on the program, which is due to expire in 2007. OBJECTIVE: To quantify the economic return to industry for completing pediatric exclusivity trials. DESIGN AND SETTING: A cohort study of programs conducted for pediatric exclusivity. Nine drugs that were granted pediatric exclusivity were selected. From the final study reports submitted to the FDA (2002-2004), key elements of the clinical trial design and study operations were obtained, and the cost of performing each study was estimated and converted into estimates of after-tax cash outflows. Three-year market sales were obtained and converted into estimates of after-tax cash inflows based on 6 months of additional market protection. Net economic return (cash inflows minus outflows) and net return-to-costs ratio (net economic return divided by cash outflows) for each product were then calculated. MAIN OUTCOME MEASURES: Net economic return and net return-to-cost ratio. RESULTS: The indications studied reflect a broad representation of the program: asthma, tumors, attention-deficit/hyperactivity disorder, hypertension, depression/generalized anxiety disorder, diabetes mellitus, gastroesophageal reflux, bacterial infection, and bone mineralization. The distribution of net economic return for 6 months of exclusivity varied substantially among products (net economic return ranged from -$8.9 million to $507.9 million and net return-to-cost ratio ranged from -0.68 to 73.63). CONCLUSIONS: The economic return for pediatric exclusivity is variable. As an incentive to complete much-needed clinical trials in children, pediatric exclusivity can generate lucrative returns or produce more modest returns on investment.

Characteristics of primary care office visits to nurse practitioners, physician assistants and physicians in United States Veterans Health Administration facilities, 2005 to 2010: a retrospective cross-sectional analysis.

UNLABELLED: BACKGROUND: Primary care, an essential determinant of health system equity, efficiency, and effectiveness, is threatened by inadequate supply and distribution of the provider workforce. The Veterans Health Administration (VHA) has been a frontrunner in the use of nurse practitioners (NPs) and physician assistants (PAs). Evaluation of the roles and impact of NPs and PAs in the VHA is critical to ensuring optimal care for veterans and may inform best practices for use of PAs and NPs in other settings around the world. The purpose of this study was to characterize the use of NPs and PAs in VHA primary care and to examine whether their patients and patient care activities were, on average, less medically complex than those of physicians. METHODS: This is a retrospective cross-sectional analysis of administrative data from VHA primary care encounters between 2005 and 2010. Patient and patient encounter characteristics were compared across provider types (PA, NP, and physician). RESULTS: NPs and PAs attend about 30% of all VHA primary care encounters. NPs, PAs, and physicians fill similar roles in VHA primary care, but patients of PAs and NPs are slightly less complex than those of physicians, and PAs attend a higher proportion of visits for the purpose of determining eligibility for benefits. CONCLUSIONS: This study demonstrates that a highly successful nationwide primary care system relies on NPs and PAs to provide over one quarter of primary care visits, and that these visits are similar to those of physicians with regard to patient and encounter characteristics. These findings can inform health workforce solutions to physician shortages in the USA and around the world. Future research should compare the quality and costs associated with various combinations of providers and allocations of patient care work, and should elucidate the approaches that maximize quality and efficiency.

Clinical effectiveness of posaconazole versus fluconazole as antifungal prophylaxis in hematology-oncology patients: a retrospective cohort study.

In preventing invasive fungal disease (IFD) in patients with acute myelogenous leukemia (AML) or myelodysplastic syndrome (MDS), clinical trials demonstrated efficacy of posaconazole over fluconazole and itraconazole. However, effectiveness of posaconazole has not been investigated in the United States in real-world setting outside the environment of controlled clinical trial. We performed a single-center, retrospective cohort study of 130 evaluable patients ≥18 years of age admitted to Duke University Hospital between 2004 and 2010 who received either posaconazole or fluconazole as prophylaxis during first induction or first reinduction chemotherapy for AML or MDS. The primary endpoint was possible, probable, or definite breakthrough IFD. Baseline characteristics were well balanced between groups, except that posaconazole recipients received reinduction chemotherapy and cytarabine more frequently. IFD occurred in 17/65 (27.0%) in the fluconazole group and in 6/65 (9.2%) in the posaconazole group (P = 0.012). Definite/probable IFDs occurred in 7 (10.8%) and 0 patients (0%), respectively (P = 0.0013). In multivariate analysis, fluconazole prophylaxis and duration of neutropenia were predictors of IFD. Mortality was similar between groups. This study demonstrates superior effectiveness of posaconazole over fluconazole as prophylaxis of IFD in AML and MDS patients. Such superiority did not translate to reductions in 100-day all-cause mortality.

Energy efficiency policies: A retrospective examination

We review literature on several types of energy efficiency policies: appliance standards, financial incentive programs, information and voluntary programs, and management of government energy use. For each, we provide a brief synopsis of the relevant programs, along with available existing estimates of energy savings, costs, and cost-effectiveness at a national level. The literature examining these estimates points to potential issues in determining the energy savings and costs, but recent evidence suggests that techniques for measuring both have improved. Taken together, the literature identifies up to four quads of energy savings annually from these programs - at least half of which is attributable to appliance standards and utility-based demand-side management, with possible additional energy savings from the U.S. Department of Energy's (DOE's) ENERGY STAR, Climate Challenge, and Section 1605b voluntary programs to reduce carbon dioxide (CO 2) emissions. Related reductions in CO 2 and criteria air pollutants may contribute an additional 10% to the value of energy savings above the price of energy itself. Copyright © 2006 by Annual Reviews. All rights reserved.