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.

Dynamic Life Cycle Assessment Modeling Approaches for Transboundary Energy Feedstocks

The rise of the twenty-first century has seen the further increase in the industrialization of Earth’s resources, as society aims to meet the needs of a growing population while still protecting our environmental and natural resources. The advent of the industrial bioeconomy – which encompasses the production of renewable biological resources and their conversion into food, feed, and bio-based products – is seen as an important step in transition towards sustainable development and away from fossil fuels. One sector of the industrial bioeconomy which is rapidly being expanded is the use of biobased feedstocks in electricity production as an alternative to coal, especially in the European Union.

As bioeconomy policies and objectives increasingly appear on political agendas, there is a growing need to quantify the impacts of transitioning from fossil fuel-based feedstocks to renewable biological feedstocks. Specifically, there is a growing need to conduct a systems analysis and potential risks of increasing the industrial bioeconomy, given that the flows within it are inextricably linked. Furthermore, greater analysis is needed into the consequences of shifting from fossil fuels to renewable feedstocks, in part through the use of life cycle assessment modeling to analyze impacts along the entire value chain.

To assess the emerging nature of the industrial bioeconomy, three objectives are addressed: (1) quantify the global industrial bioeconomy, linking the use of primary resources with the ultimate end product; (2) quantify the impacts of the expaning wood pellet energy export market of the Southeastern United States; (3) conduct a comparative life cycle assessment, incorporating the use of dynamic life cycle assessment, of replacing coal-fired electricity generation in the United Kingdom with wood pellets that are produced in the Southeastern United States.

To quantify the emergent industrial bioeconomy, an empirical analysis was undertaken. Existing databases from multiple domestic and international agencies was aggregated and analyzed in Microsoft Excel to produce a harmonized dataset of the bioeconomy. First-person interviews, existing academic literature, and industry reports were then utilized to delineate the various intermediate and end use flows within the bioeconomy. The results indicate that within a decade, the industrial use of agriculture has risen ten percent, given increases in the production of bioenergy and bioproducts. The underlying resources supporting the emergent bioeconomy (i.e., land, water, and fertilizer use) were also quantified and included in the database.

Following the quantification of the existing bioeconomy, an in-depth analysis of the bioenergy sector was conducted. Specifically, the focus was on quantifying the impacts of the emergent wood pellet export sector that has rapidly developed in recent years in the Southeastern United States. A cradle-to-gate life cycle assessment was conducted in order to quantify supply chain impacts from two wood pellet production scenarios: roundwood and sawmill residues. For reach of the nine impact categories assessed, wood pellet production from sawmill residues resulted in higher values, ranging from 10-31% higher.

The analysis of the wood pellet sector was then expanded to include the full life cycle (i.e., cradle-to-grave). In doing to, the combustion of biogenic carbon and the subsequent timing of emissions were assessed by incorporating dynamic life cycle assessment modeling. Assuming immediate carbon neutrality of the biomass, the results indicated an 86% reduction in global warming potential when utilizing wood pellets as compared to coal for electricity production in the United Kingdom. When incorporating the timing of emissions, wood pellets equated to a 75% or 96% reduction in carbon dioxide emissions, depending upon whether the forestry feedstock was considered to be harvested or planted in year one, respectively.

Finally, a policy analysis of renewable energy in the United States was conducted. Existing coal-fired power plants in the Southeastern United States were assessed in terms of incorporating the co-firing of wood pellets. Co-firing wood pellets with coal in existing Southeastern United States power stations would result in a nine percent reduction in global warming potential.