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Now showing items 1 - 16 of 21

  • 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 and American Economic Growth: New Data and Theory

    Dave Donaldson   Richard Hornbeck  

    This paper examines the impact of railroads on American economic growth. Drawing on general equilibrium trade theory, changes in counties' "market access" captures the aggregate impact of local changes in railroads. Using a new spatial network of freight transportation routes, we calculate county-to-county lowest transportation costs and counties' implied market access. As railroads expanded from 1870 to 1890, changes in market access are capitalized in land values with an estimated elasticity of 1 – 1.5. The computed decline in market access from removing all railroads in 1890 is estimated to reduce GNP by 6.3%, roughly double estimates by Fogel (1964). Without railroads, the total value of US agricultural land would have been lower by 73%. Fogel's proposed extention of the canal network would have only mitigated 8% of the loss from removing railroads.
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  • RAILROADS OF THE RAJ: ESTIMATING THE IMPACT OF TRANSPORTATION INFRASTRUCTURE

    Dave Donaldson  

    How large are the benefits of transportation infrastructure projects, and what explains these benefits To shed new light on these questions, this paper uses archival data from colonial India to investigate the impact of India's vast railroad network. Guided by four predictions from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real income levels; and (4), that a sufficient statistic for the effect of railroads on welfare in the model (an effect that is purely due to newly exploited gains from trade) accounts for virtually all of the observed reduced-form impact of railroads on real income in the data. I find no spurious effects from over 40,000 km of lines that were approved but for four different reasons were never built.
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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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  • 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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  • Weather and Death in India

    Robin Burgess   Olivier Deschênes   Dave Donaldson   Michael Greenstone  

    Weather fluctuations have shaped the economic activities of humans for centuries. And in poor, developing countries, where large swathes of the population continue to depend on basic agriculture, the weather continues to be a key determinant of production and employment. This raises the possibility that weather shocks may translate into increases in mortality. To investigate this possibility we examine the relationship between weather and death across Indian districts between 1957 and 2000. Our estimates imply that hot days (and deficient rainfall) cause large and statistically significant increases in mortality within a year of their occurrence. The effects are only observed for rural populations and not for urban populations, and it is only hot days that occur during the period when crops are growing in the fields that account for these effects. We also show that hot and dry weather depresses agricultural output and wages, and raises agricultural prices, in rural areas—but that similar effects are absent in urban areas. Using the coefficients from our analysis of Indian districts combined with two leading models of climate change we demonstrate that the mortality increasing impacts of global warming are likely to be far more strongly felt by rural Indians relative to their counterparts in urban India or the US. ∗Correspondence: ddonald@mit.edu. Affiliations: Burgess: LSE, BREAD and CEPR; Deschenes: UCSB and NBER; Donaldson: MIT, CIFAR and NBER; Greenstone: MIT and NBER. We are grateful to Oriana Bandiera, Tim Besley, Esther Duflo, Mushfiq Mobarak, Ben Olken, Torsten Persson, Imran Rasul, Nick Stern, Rob Townsend, and seminar participants at Asian Development Institute Patna, Boston University, Columbia, Harvard Kennedy School, IIES Stockholm, Indian Statistical Institute Delhi, LSE, MIT-Harvard, MOVE Conference 2010, NEUDC 2009, Pakistan Institute of Development Economics Silver Jubilee Conference, Pompeu Fabra, Stanford, UCSB, the World Bank, and Yale for helpful comments.
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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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  • Trafficking Networks and the Mexican Drug War∗ (Job Market Paper)

    Melissa Dell   Abhijit Banerjee   Dave Donaldson   Esther Duflo   Ray Fisman   Rachel Glennerster   Gordon Hanson  

    Drug trade-related violence has escalated dramatically in Mexico during the past five years; claiming over 40;000 lives. This study examines how drug traffickers’ economic objectives influence the direct and spillover effects of Mexican policy towards the drug trade. By exploiting variation from close mayoral elections and a network model of drug trafficking; the study develops three sets of results. First; regression discontinuity estimates show that drug trade-related violence in a municipality increases substantially after the close election of a mayor from the conservative National Action Party (PAN); which has spearheaded the war on drug trafficking. This violence consists primarily of individuals involved in the drug trade killing each other. The empirical evidence suggests that the violence reflects rival traffickers’ attempts to wrest control of territories after crackdowns initiated by PAN mayors have challenged the incumbent criminals. Second; the study predicts the diversion of drug traffic following close PAN victories by estimating a model of equilibrium routes for trafficking drugs across the Mexican road network to the U.S. When drug traffic is diverted to other municipalities; drug trade-related violence in these municipalities increases. Moreover; female labor force participation and informal sector wages fall; corroborating qualitative evidence that traffickers extort informal sector producers. Finally; the study uses the trafficking model and estimated spillover effects to examine the allocation of law enforcement resources. Overall; the results demonstrate how traffickers’ economic objectives and constraints imposed by the routes network affect the policy outcomes of the Mexican Drug War.
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