We only begin to understand how economic activity is shaped by geography, as standard growth models cannot explain why some nations fall behind, and some prosper. Why do cities emerge? How did all these 'good' institutions come along? How did the Monstrum Germanicum become the core of the European Union? What role does trade play? What are the implications for today's economic policy?
"The Fetters of Inheritance? Equal Partition and Regional Economic Development", joint with Fabian Wahl
European Economic Review, forthcoming
Did European regions industrialize first because their institutions fostered urbanization? We argue that culture, precisely an agricultural inheritance tradition that would immobilize the rural population, was no obstacle to economic growth (as commonly thought). Instead, equal partition tied excess labor to the land and fostered the establishment of a low-wage low-skill industry there. Using data for the German state of Baden-Württemberg, as well as for the whole of West Germany, we document that these equal partition areas are richer than primogeniture areas today. With a focus on identification, we conduct fuzzy spatial RDD regressions for 1895, the 1950s, and today. We find that inheritance rules caused
—in line with our theoretical predictions—higher incomes, population densities, and industrialization levels in equal partition areas. We document that equal partition reduced emigration. Results suggest that more than a third of the overall inter-regional difference in average per capita income in present-day Baden Württemberg—or 598 Euro—can be attributed to equal partition. The reasons for Europe's uniqueness do not lie in the supremacy of primogeniture, and have to be searched elsewhere.
Journal of Comparative Economics, forthcoming
We investigate the origins of agricultural inheritance traditions, equal partition and primogeniture. Our case study is the German state of Baden-Württemberg. Our empirical findings suggest that rural inheritance traditions were primarily determined by geography. First, fertile soils allowed splitting of the land among siblings for longer and with fewer conflicts, and hence we find more equal partition in areas with higher soil quality, especially at elevation levels conducive to intensive agriculture. Second, geography determined the settlement pattern. Areas that were settled before the Middle Ages, when land was abundant and free, are more likely to apply equal partition today. In areas that were largely uninhabited until the Middle Ages, primogeniture is the norm. We argue that these areas were deforested with the obligation of primogeniture, imposed by feudal lords.
Oxford Research Encyclopedia in Economics and Finance
The study of the Holy Roman Empire, a medieval state on the territory of modern-day Germany and Central Europe, has attracted generations of qualitative economic historians and quantitative scholars from various fields. Its bordering position between Roman and Germanic legacies, its Carolingian inheritance, and the numerous small states emerging from 1150 onward, on the one hand, are suspected to have hindered market integration, and on the other, allowed states to compete. This has inspired many research questions around differences and communalities in culture, the origin of the state, the integration of good and financial markets, and technology inventions, such the printing press. While little is still known about the economy of the rural population, cities and their economic conditions have been extensively studied from the angles of economic geography, institutionalism, and for their influence on early human capital accumulation. The literature has stressed that Germany at this time cannot be seen as a closed economy, but only in the context of Europe and the wider world. Global events, such as the Black Death, and European particularities, such as the Catholic Church, never stopped at countries’ borders. As such, the literature provides an understanding for the prelude to radical changes, such as the Lutheran Reformation, religious wars, and the coming of the modern age with its economic innovations.
"Britain has had enough of experts? Social networks and the Brexit referendum", joint with Giacomo de Luca and Paulo Santos Monteiro
We investigate the impact of social media on the 2016 referendum on the United Kingdom membership of the European Union. We leverage 18 million geo-located Twitter messages originating from the UK in the weeks before the referendum. Using electoral wards as unit of observation, we explore how exogenous variation in Twitter exposure affected the vote share in favor of leaving the EU. Our estimates suggest that in electoral wards less exposed to Twitter the percentage who voted to leave the EU was greater. This is confirmed across several specifications and approaches, including two very different IV identification strategies to address the non-randomness of Twitter usage. To interpret our findings, we propose a model of how bounded rational voters learn in social media networks vulnerable to fake news, and we validate the theoretical framework by estimating how Remain and Leave tweets propagated differently on Twitter in the two months leading to the EU referendum.
"You Reap What You Know: Origins and Dynamics of State Capacity", joint with Fabian Wahl
We provide a theoretical model linking limits to the observability of soil quality to state rulers' ability to tax agricultural output, which leads to a higher political fragmentation. We introduce a spatial measure to quantify state planners' observability in an agricultural society. The model is applied to spatial variation in the 1378 Holy Roman Empire, the area with the highest political fragmentation in European history. We find that differences in the observability of agricultural output explain the size and capacity of states as well as the emergence and longevity of city states. Grid cells with higher observability of agricultural output intersect with a significantly lower number of territories within them. Our results highlight the role of agriculture and geography, for size, political, and economic organization of states. This sheds light on early, though persistent, determinants of industrial development within Germany, and also within Central Europe.
"The State Built on Sandy Ground: How Geography formed Brandenburg-Prussia"
What explains the emergence of a strong state in Brandenburg-Prussia? I combine an incomplete contract model of an agricultural society with historical narrative and empirical evidence. A long run comparison of the soils of Brandenburg-Prussia with its main rivals questions the consensus of its geographical disadvantage. My analysis of province-level data from 1650–1682 suggests that the uniform geography
in Brandenburg left behind a unique combination of a landed nobility dependent on a central state. Favorable geography eased taxation, allowed centralization after the Thirty Years War, and created the nucleus of the later Prussian state.
State: Preparing for submission
"How Britain Unified Germany: Endogenous Trade Costs, and the Formation of a Customs
Union", joint with Nikolaus Wolf
We analyze the foundation of the German Zollverein as an example of how geography can shape institutional change. We show how the redrawing of the European map at the Congress of Vienna 1815–notably Prussia's control over the Rhineland and Westphalia–affected the incentives for policymakers to cooperate. Our argument comes in three steps. First, we show that the new borders were not endogenous to trade. They were at odds with the strategy of Prussia in 1815, but followed from Britain's intervention at Vienna regarding the Polish-Saxon question. Second, we develop a theoretical framework, where state planners set tariffs on imports and transits to maximize revenue. We show that in a world with transit tariffs a revenue-maximizing state planner faces a trade-off between benefits from cooperation and the cost of losing the geographical advantage. In a third step, we calibrate the model combining historical data on tariffs, freight rates, market sizes with GIS data on lowest costs routes under endogenous tariffs. We then run counterfactuals to show how borders affected incentives: if Prussia would have succeeded with her strategy to gain the entire Kingdom of Saxony instead of the western provinces, the Zollverein would not have formed. We conclude that geography can shape institutional change. To put it differently, as collateral damage to her intervention at Vienna ``Britain unified Germany''.
State: Preparing for submission