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Now showing items 1 - 16 of 17

  • Dave Donaldson: Winner of the 2017 Clark Medal

    Acemoglu, Daron  

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  • Dave Donaldson: Winner of the 2017 Clark Medal

    Acemoglu   Daron  

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  • Once a physicist: Dave Donaldson

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  • Once a physicist: Dave Donaldson

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  • Can International Trade Mitigate the Impacts of Climate Change?

    Dave Donaldson  

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  • RAILROADS AND AMERICAN ECONOMIC GROWTH: A "MARKET ACCESS" APPROACH

    Dave Donaldson   Richard Hornbeck  

    This paper examines the historical impact of railroads on the American economy. Expansion of the railroad network may have affected all counties directly or indirectly – an econometric challenge that arises in many empirical settings. However, the total impact on each county is captured by changes in that county's "market access," a reduced-form expression derived from general equilibrium trade theory. We measure counties' market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. As the railroad network expanded from 1870 to 1890, changes in market access were capitalized into county agricultural land values with an estimated elasticity of 1.1. County-level declines in market access associated with removing all railroads in 1890 are estimated to decrease the total value of US agricultural land by 64%. Feasible extensions to internal waterways or improvements in country roads would have mitigated 13% or 20% of the losses from removing railroads.
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  • RAILROADS AND AMERICAN ECONOMIC GROWTH: A "MARKET ACCESS" APPROACH

    Dave Donaldson   Richard Hornbeck  

    This paper examines the historical impact of railroads on the American economy. Expansion of the railroad network may have affected all counties directly or indirectly – an econometric challenge that arises in many empirical settings. However, the total impact on each county is captured by changes in that county's "market access," a reduced-form expression derived from general equilibrium trade theory. We measure counties' market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. As the railroad network expanded from 1870 to 1890, changes in market access were capitalized into county agricultural land values with an estimated elasticity of 1.1. County-level declines in market access associated with removing all railroads in 1890 are estimated to decrease the total value of US agricultural land by 64%. Feasible extensions to internal waterways or improvements in country roads would have mitigated 13% or 20% of the losses from removing railroads.
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  • Railroads of the Raj: Estimating the Impact of Transportation Infrastructure

    Dave Donaldson  

    How large are the benets of transportation infrastructure projects, and what explains these benets To shed new light on these questions, I collect archival data from colonial India and use it to estimate the impact of India s vast railroad network. Guided by six predictions from a general equilibrium trade model, I nd that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) eliminated the responsiveness of local prices to local productivity shocks (but increased the transmission of these shocks between regions); (4) increased the level of real income (but harmed neighboring regions without railroad access); (5) decreased the volatility of real income; and that (6), a sucient statistic for the eect of railroads on welfare in the model accounts for virtually all of the observed reduced-form impact of railroads on real income. I nd similar results from an instrumental variable specication, no spurious eects from over 40,000 km of lines that were approved but never built, and tight bounds on the estimated impact of railroads. These results suggest that transportation infrastructure projects can improve welfare signicantly, and do so because they can allow regions to exploit static gains from trade.
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  • CAN OPENNESS MITIGATE THE EFFECTS OF WEATHER SHOCKS? EVIDENCE FROM INDIA'S FAMINE ERA

    Robin Burgess   Dave Donaldson  

    A weakening dependence on rain-fed agriculture has been a hallmark of the economic transformation of countries throughout history. Rural citizens in developing countries to- day, however, remain highly exposed to fluctuations in the weather. This exposure affects the incomes these citizens earn and the prices of the foods they eat. Recent work has docu- mented the significant mortality and morbidity stress that rural households face in times of adverse weather (Burgess, Deschenes, Donaldson, and Greenstone 2009, Kudamatsu, Pers- son, and Stromberg 2009, Yang and Maccini 2009). Famines – times of acutely low nominal agricultural income and acutely high food prices – are an extreme manifestation of this mapping from weather to death. Knowles (1924) describes these events as "agricultural lockouts" where both food supplies and agricultural employment, on which the bulk of the rural population depends, plummet. The result is catastrophic with widespread hunger and loss of life. Though now confined to the world's poorest countries food shortages and famines were features of most pre-industrial societies. Over time there has been intense debate over what role openness to trade in food might play in mitigating or exacerbating the mortality impacts of weather shocks. One group of thinkers dating back to at least Smith (1776) argues that: "... drought [in "rice countries"] is, perhaps, scarce ever so universal as necessarily to occasion a famine, if the government would allow a free trade." (IV.5.45). This school of thought sees greater openness to trade as a key means of protecting human life by reducing volatility in real incomes. But others have argued along the lines of Gandhi (1938), that greater trade openness may "have... increased the frequency of famines, because, owing to facility of means of [movement], people sell out their grain, and it is sent to the dearest markets." (p. 36) Indeed many see trade as having played a key role in converting mild food scarcities into full-blown famines. Results from the theoretical and empirical international trade (eg, Newbery and Stiglitz (1981), and di Giovanni and Levchenko (2009)) and famine literatures (eg, Sen (1981)) are both ambiguous and inconclusive as regards this issue. The fundamental ambiguity here is that openness makes nominal incomes more responsive to production shocks (due to both increased specialization and dampened offsetting price movements), but consumer prices less volatile, such that the net effect on real incomes is unclear. The colonial era provides us with an opportunity to delve into this critical issue. Prior to colonization countries were poorly integrated both domestically and internationally. Invest- ments in new infrastructure such as railroads and roads radically changed the situation by slashing transport costs and enabling domestic and international trade. The gradual inte- gration of different parts of a country via connection to these transportation infrastructures thus provides us with a window into how trade changed the weather-death relationship. In this paper we employ a colonial era Indian district-level database for the period 1875 to 1919 to provide some preliminary insights into the weather-trade-death relationship. This time period contained one of the worst strings of famines in recorded history, with an es- timated death toll of between 15 and 30 million people (Visaria and Visaria 1983). It also covers the period when the bulk of the railroad network was built in British India. And just as railroads were, by 1919, reaching into every last corner of the country, India saw the end of peacetime famine (many decades before democracy came with independence in 1947). Our district panel regression results suggest that the arrival of railroads in Indian districts dramatically constrained the ability of rainfall shocks to cause famines in colonial India. On average, before the arrival of railroads, local rainfall shortages led to a significant rise in our index of famine intensity. But after a district gained railroad access the effect of local rainfall shortages on famine intensity was significantly muted. In what follows we begin in Section 1 by describing the colonial Indian environment between 1875 and 1919, and the data on rainfall, famine intensity and railroad penetration that we have constructed. Section 2 then presents our results on whether the arrival of railroads mitigated or exacerbated the ill effects of rainfall shortages on famine intensity. Finally, Section 3 offers conclusions and directions for future work.
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  • Nber Working Paper Series Railroads and American Economic Growth: a “market Access” Approach

    Dave Donaldson   Richard A. Hornbeck   Jeremy Atack   Georgios Angelis   Irene Chen   A. D. Sarma   Manning Ding   Jan Kozak   Meredith McPhail   Rui Wang   Sophie S. W. Wang   Kevin Wu  

    This paper examines the historical impact of railroads on the American economy. Expansion of the railroad network may have affected all counties directly or indirectly – an econometric challenge that arises in many empirical settings. However, the total impact on each county is captured by changes in that county's “market access,” a reduced-form expression derived from general equilibrium trade theory. We measure counties' market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. As the railroad network expanded from 1870 to 1890, changes in market access were capitalized into county agricultural land values with an estimated elasticity of 1.1. County-level declines in market access associated with removing all railroads in 1890 are estimated to decrease the total value of US agricultural land by 64%. Feasible extensions to internal waterways or improvements in country roads would have mitigated 13% or 20% of the losses from removing railroads. Dave Donaldson MIT Department of Economics 50 Memorial Drive, E52-243G Cambridge, MA 02142-1347 and NBER ddonald@mit.edu Richard Hornbeck Department of Economics Harvard University 232 Littauer Center Cambridge, MA 02138 and NBER hornbeck@fas.harvard.edu During the 19th century, railroads spread throughout a growing United States as the economy rose to global prominence. Railroads became the dominant form of freight transportation and areas around railroad lines prospered. The early historical literature often presumed that railroads were indispensable to the United States’ economy or, at least, very influential for economic growth. Our understanding of the development of the American economy is shaped by an understanding of the impact of railroads and, more generally, the impact of market integration. In Railroads and American Economic Growth, Fogel (1964) transformed the academic literature by using a “social saving” methodology to focus attention on counterfactuals: in the absence of railroads, freight transportation by rivers and canals would have been only moderately more expensive along most common routes. Fogel argued that small differences in freight rates caused some areas to thrive relative to others, but that the aggregate economic impact of railroads was small. This social saving methodology has been widely applied to transportation improvements and other technological innovations, though many scholars have discussed both practical and theoretical limitations of the approach (see, e.g., Lebergott, 1966; Nerlove, 1966; McClelland, 1968; David, 1969; White, 1976; Fogel, 1979; Leunig, 2010). There is an appeal to a methodology that estimates directly the impacts of railroads, using increasingly available county-level data and digitized railroad maps. Recent work has compared counties that received railroads to counties that did not (Haines and Margo, 2008; Atack and Margo, 2010; Atack et al., 2010; Atack, Haines and Margo, 2011), and similar methods have been used to estimate impacts of railroads in modern China (Banerjee, Duflo and Qian, 2012) or highways in the United States (Baum-Snow, 2007; Michaels, 2008). These studies estimate relative impacts of transportation improvements; for example, due to displacement and complementarities, areas without railroads and areas with previous railroads are also affected when railroads are extended to new areas. This paper develops a methodology for estimating aggregate impacts of railroads on the American economy, maintaining Fogel’s focus on the agricultural sector. We argue that it is natural to measure how expansion of the railroad network affects each county’s “market access,” a reduced-form expression derived from general equilibrium trade theory, and then to estimate how enhanced market access is capitalized into each county’s value of agricultural land. A county’s market access increases when it becomes cheaper to trade with another county, particularly when that other county has a larger population and higher trade costs with other counties. In a wide class of multiple-region models, changes in market access One alternative approach is to create a computational general equilibrium model, with the explicit inclusion of multiple regions separated by a transportation technology (e.g., Williamson, 1974; Herrendorf, Schmitz and Teixeira, 2009). Cervantes (2013) presents estimates from a calibrated trade model.
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  • Evolving Comparative Advantage and the Impact of Climate Change in Agricultural Markets: Evidence from 1.7 Million Fields around the World

    Arnaud Costinot   Dave Donaldson   Cory D Smith  

    A large agronomic literature models the implications of climate change for a variety of crops and locations around the world. The goal of the present paper is to quantify the macro-level consequences of these micro-level shocks. Using an extremely rich micro-level dataset that contains information about the productivity—both before and after climate change—of each of 10 crops for each of 1.7 million fields covering the surface of the Earth; we find that the impact of climate change on these agricultural markets would amount to a 0.26% reduction in global GDP when trade and production patterns are allowed to adjust. Authors’ email addresses: costinot@mit.edu; ddonald@mit.edu and corybsmith@gmail.com. For helpful suggestions and comments we are grateful to Sam Kortum; Rob Townsend; Ivan Werning and seminar audiences at the IIES Conference on “Climate and the Economy;” Princeton University; Bocconi; the University of Munich; UBC; and UC Berkeley. Moya Chin provided excellent research assistance. Costinot and Donaldson thank the National Science Foundation (under Grant SES-1227635) for research support.
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  • Railroads and the Raj: Estimating the Economic Impact of Transportation Infrastructure

    Dave Donaldson   Costas Arkolakis   David Atkin   Oriana Bandiera   Abhijit Banerjee   Erlend Berg   Daniel Bernhofen   Marianne Bertrand   Esther Duflo   Maitreesh Ghatak   James Harrigan   Elhanan Helpman   Thomas J. Holmes   Samuel Kortum   Tim Leunig   Rocco Macchiavello   Guy Michaels   Rohini Prabha Pande   Gerard Padro   T. Persson   Imran Rasul   James Robinson   Tirthankar Roy   Philipp Schmidt-Dengler   Daniel Sturm   Tony Venables  

    I estimate the economic impact of the construction of colonial India’s railroad network from 1861-1930. Using newly collected district-level data on output, prices, rainfall, and intraand international trade flows I estimate that the railroad network had the following effects: (1) Railroads caused transport costs along optimal routes (according to a network flow algorithm) to fall by 73 percent for an average shipment. (2) The lower transport costs caused by railroads significantly increased India’s interregional and international trade. (3) The responsiveness of a region’s agricultural prices to its own rainfall shocks fell sharply after it was connected to the railroad network, but its responsiveness to shocks in other regions on the railroad network rose. (4) Railroad lines raised the level of real agricultural income by 18 percent in the districts in which they were built. I find similar results using rainfall shortages in the 1877-78 agricultural year as an instrumental variable for railroad construction post-1880 (a response by the 1880 British parliament to the 1878 famine). And I find no effect in a variety of ‘placebo’ specifications that use over 11,000 km of railroad lines that were approved and surveyed, but were never actually constructed. Finally, I estimate the structural parameters of a Ricardian trade model using data on salt prices and trade flows only. The calibrated model explains 88 percent of the real income impact of railroads, suggesting that railroads raised welfare primarily because they enabled regions to exploit their comparative advantages by trading with one another. ∗Department of Economics, STICERD and India Observatory, London School of Economics. E-mail: d.j.donaldson@lse.ac.uk. Web: http://personal.lse.ac.uk/donald1s. This draft: 18 September 2008. I am extremely grateful to Timothy Besley, Robin Burgess and Stephen Redding for their encouragement and support throughout this project. Costas Arkolakis, David Atkin, Oriana Bandiera, Abhijit Banerjee, Erlend Berg, Daniel Bernhofen, Marianne Bertrand, Esther Duflo, Maitreesh Ghatak, James Harrigan, Elhanan Helpman, Thomas Holmes, Samuel Kortum, Tim Leunig, Rocco Macchiavello, Guy Michaels, Ted Miguel, Sharun Mukand, Ralph Ossa, Rohini Pande, Gerard Padro, Torsten Persson, Imran Rasul, James Robinson, Tirthankar Roy, Philipp Schmidt-Dengler, Daniel Sturm, Tony Venables and Jeffrey Williamson provided valuable advice and helpful comments. I am grateful to Erasmus Ermgassen, Rashmi Harimohan, Sritha Reddy and Structured Concepts for their help with the data; to the British Academy, the Nuffield Foundation, the Royal Economic Society, and STICERD for funding the data collection; and to the Royal Economic Society Junior Fellowship and the Bagri Fellowship for financial support.
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  • Railroads and American Economic Growth : A

    Dave Donaldson   Richard A. Hornbeck   Jan Kozak   Meredith McPhail   Rui Wang   Sophie S. W. Wang  

    This paper examines the historical impact of railroads on the American economy, with a focus on quantifying the aggregate impact in the agricultural sector in 1890. Expansion of the railroad network may have affected all counties directly or indirectly — an econometric challenge that arises in many empirical settings. However, the total impact on each county is captured by changes in that county’s “market access,” a reduced-form expression derived from general equilibrium trade theory. We measure counties’ market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. We estimate that county agricultural land values increased substantially with increases in county market access, as the railroad network expanded from 1870 to 1890. Removing all railroads in 1890 is estimated to decrease the total value of US agricultural land by 60%, with limited potential for mitigating these losses through feasible extensions to the canal network or improvements to country roads. Further, in the absence of the railroads, population levels and consumer welfare are predicted to decline substantially. ∗For helpful comments and suggestions, we thank many colleagues and seminar participants at Boston University, Brown, Chicago, Colorado, Dartmouth, EIEF, George Mason, George Washington, Harvard, LSE, NBER, Northwestern, Santa Clara, Simon Fraser, Stanford, Stanford GSB, Toronto, Toulouse, UBC, UCL, UC-Berkeley, UC-Davis, UC-Irvine, UC-Merced, UC-San Diego, Warwick, and the ASSA and EHA conferences (including our discussants, Gilles Duranton and Jeremy Atack). We are grateful to Jeremy Atack and coauthors for sharing their data and our conversations. Georgios Angelis, Irene Chen, Andrew Das Sarma, Manning Ding, Jan Kozak, Meredith McPhail, Rui Wang, Sophie Wang, and Kevin Wu provided excellent research assistance. This material is based upon work supported by the National Science Foundation under Grant No. 1156239. Railroads spread throughout a growing United States in the 19th century as the economy rose to global prominence. Railroads became the dominant form of freight transportation and areas around railroad lines prospered. The early historical literature often presumed that railroads were indispensable to the United States’ economy or, at least, very influential for economic growth. Our understanding of the development of the American economy is shaped by an understanding of the impact of railroads and, more generally, the impact of market integration. In Railroads and American Economic Growth, Fogel (1964) transformed the academic literature by using a “social saving” methodology to focus attention on counterfactuals: in the absence of railroads, agricultural freight transportation by rivers and canals would have been only moderately more expensive along most common routes. Fogel argued that small differences in freight rates caused some areas to thrive relative to others, but that railroads had only a small aggregate impact on the American agricultural sector. This social saving methodology has been widely applied to transportation improvements and other technological innovations, though many scholars have discussed both practical and theoretical limitations of the approach (see, e.g., Lebergott, 1966; Nerlove, 1966; McClelland, 1968; David, 1969; White, 1976; Fogel, 1979; Leunig, 2010). There is an appeal to a methodology that estimates directly the impacts of railroads, using increasingly available county-level data and digitized railroad maps. Recent work has compared counties that received railroads to counties that did not (Haines and Margo, 2008; Atack and Margo, 2011; Atack et al., 2010; Atack, Haines and Margo, 2011), and similar methods have been used to estimate impacts of railroads in modern China (Banerjee, Duflo and Qian, 2012) or highways in the United States (Baum-Snow, 2007; Michaels, 2008). These studies estimate relative impacts of transportation improvements; for example, due to displacement and complementarities, areas without railroads and areas with previous railroads are also affected when railroads are extended to new areas. This paper develops a methodology for estimating aggregate impacts of railroads. We argue that it is natural to measure how expansion of the railroad network affects each county’s “market access,” a reduced-form expression derived from general equilibrium trade theory, and then to estimate how enhanced market access is capitalized into each county’s value of agricultural land. A county’s market access increases when it becomes cheaper to trade with another county, particularly when that other county has a larger population and higher One alternative approach is to create a computational general equilibrium model, with the explicit inclusion of multiple regions separated by a transportation technology (e.g., Williamson, 1974; Herrendorf, Schmitz and Teixeira, 2009). Cervantes (2013) presents estimates from a calibrated trade model. Swisher (2014) calibrates a simpler economic model but models the strategic interaction between railroad and canal companies in building networks.
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  • NATURAL DISASTERS AND LABOUR MARKETS Martina

    LABOUR MARKETS   Martina KIRCHBERGERa   Alexei Abrahams   Orazio P. Attanasio   Silja Baller   Steve Bond   Matt Collin   Jonathan Colmer   Dave Donaldson   Eric V. Edmonds   Marcel Fafchamps   Doug Gollin   C. Gustav Helmers   Radha K. Iyengar   Måns Söderbom   Francis J. Teal   Gerhard Toews   Tony Venables  

    While it is clear that natural disasters have serious welfare consequences for affected populations; less is known with respect to how local labour markets in low income countries adjust to such large shocks; in particular the general equilibrium effects of the increase in the demand for construction as well as the inflow of resources in the aftermath of natural disasters. Combining data from the Indonesia Family Life Survey; the Desinventar database; the US Geological Survey and district level employment indicators; this paper explores how a large earthquake in Indonesia affected local labour markets; in particular the evolution of wages and employment across sectors. We find that wage growth in the agriculture sector is significantly higher in earthquake affected areas. We propose two mechanisms for this result: a higher growth rate of the price of rice in agricultural communities which switch from being net sellers to net buyers of rice and a downward shift in the supply of workers in the agricultural sector. We show evidence for both mechanisms.
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  • The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia∗

    Gharad Bryan   Melanie Morten   Paco Buera   Rebecca E Diamond   Dave Donaldson   Greg Fischer   Pete Klenow   David Lagakos   Ben Olken   Torsten Perrson   Steve Redding   Daniel Sturm  

    We estimate the aggregate productivity gains from reducing barriers to internal labor migration in Indonesia; accounting for worker selection and spatial differences in human capital. We distinguish between movement costs; which mean workers will only move if they expect higher wages; and amenity differences; which mean some locations must pay more to attract workers. We find modest but important aggregate impacts. We estimate a 22% increase in labor productivity from removing all barriers. Reducing migration costs to the US level; a high mobility benchmark; leads to an 8% productivity boost. These figures hides substantial heterogeneity. The origin population that benefits most sees an 104% increase in average earnings from a complete barrier removal; or a 37% increase from moving to the US benchmark.
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  • Race, Skin Color, and Economic Outcomes in Early Twentieth Century America

    Roy Mill   Luke C.D. Stein   Leah Platt Boustan   Louis Cain   Gregory Clark   Giacomo Giorgi   Dave Donaldson   Pascaline Dupas   Katherine Amelia Eriksson   Joseph P. Ferrie   Regina Grafe   Richard A. Hornbeck   Caroline Hoxby   David K Kennedy   Mark Koyama   Robert A . Margo   Joel Mokyr   Petra Moser   Richard J. Steckel  

    We study the effect of race on economic outcomes using unique data from the first half of the twentieth century; a period in which skin color was explicitly coded in population censuses as “White;” “Black;” or “Mulatto.” We construct a panel of siblings by digitizing and matching records across the 1910 and 1940 censuses and identifying all 12;000 African-American families in which enumerators classified some children as light-skinned (“Mulatto”) and others as dark-skinned (“Black”). Siblings coded “Mulatto” when they were children (in 1910) earned similar wages as adults (in 1940) relative to their Black siblings. This within-family earnings difference is substantially lower than the Black-Mulatto earnings difference in the general population; suggesting that skin color in itself played only a small role in the racial earnings gap. To explore the role of the more social aspect that might be associated with being Black; we then focus on individuals who “passed for White;” an important social phenomenon at the time. To do so; we identify individuals coded “Mulatto” as children but “White” as adults. Passing for White meant that individuals changed their racial affiliation by changing their social ties; while skin color remained unchanged. To partially disentangle the selection into passing; we compare Mulattoes who passed with their siblings who did not; thereby removing selection across families from the analysis. Passing was associated with substantially higher earnings; suggesting that race in its social form could have significant consequences for economic outcomes. We discuss how our findings shed light on the roles of discrimination and identity in driving economic outcomes.
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