We exploit differences in early colonial experience to estimate the effect of institutions on economic performance. Our argument is that Europeans adopted very different colonization policies in different colonies, with different associated institutions. The choice of colonization strategy was, at least in part, determined by the feasibility of whether Europeans could settle in the colony. In places where Europeans faced high mortality rates, they could not settle and they were more likely to set up worse (extractive) institutions. These early institutions persisted to the present. We document these hypotheses in the data. Exploiting differences in mortality rates faced by soldiers, bishops and sailors in the colonies during the 18th and 19th centuries as an instrument for current institutions, we estimate large effects of institutions on income per capita. Our estimates imply that a change from the worst (Zaire) to the best (US or New Zealand) institutions in our sample would be associated with a five fold increase in income per capita.

This paper measures the importance of borrowing constraints on ed-ucation decisions. Empirical identification of borrowing constraints is secured by the economic prediction that opportunity costs and direct costs of schooling affect borrowing-constrained and unconstrained persons differently. Direct costs need to be financed during school and impose a larger burden on credit-constrained students. By con-trast, gross forgone earnings do not have to be financed. We explore the implications of this idea using four methodologies: schooling at-tainment models, instrumental variable wage regressions, and two structural economic models that integrate both schooling choices and schooling returns into a unified framework. None of the methods produces evidence that borrowing constraints generate inefficiencies in the market for schooling in the current policy environment. We conclude that, on the margin, additional policies aimed at improving credit access will have little impact on schooling attainment.

Abstract not found

the remaining shortcomings of the paper. Several previous studies have relied on religious affiliation and the proximity to Catholic schools as exogenous sources of variation for identifying the effect of Catholic schooling on a wide variety of outcomes. Using three separate approaches, we examine the validity of these instrumental variables. We find that none of the candidate instruments is a useful source of identification of the Catholic school effect, at least in currently available data sets. We also investigate the role of exclusion restrictions versus nonlinearity as the source of identification in bivariate probit models. The analysis in the paper may be useful as a template for the assessment of instrumental variables strategies in other applications. 1

Many important economic questions hinge on the extent to which new goods either crowd out or complement consumption of existing products. Recent methods for studying new goods are based on demand models that rule out complementarity by assumption, so their applicability to these questions has been limited. I develop a new model that relaxes this restriction, and use it to study the specific case of competition between print and online newspapers. Using new micro data from the Washington DC market, I show that the major print and online papers appear to be strong complements in the raw data, but that this is an artifact of unobserved consumer heterogeneity. I estimate that the online paper reduced print readership by 27,000 per day, at a cost of $5.5 million per year in lost print profits. I find that online news has provided substantial welfare benefits to consumers and that charging positive online prices is unlikely to substantially increase firm profits. JEL classification:C25,L82

This paper uses the housing market to develop estimates of the local welfare impacts of Superfund sponsored clean-ups of hazardous waste sites. We show that if consumers value the clean-ups, then the hedonic model predicts that they will lead to increases in local housing prices and new home construction, as well as the migration of individuals that place a high value on environmental quality to the areas near the improved sites. We compare housing market outcomes in the areas surrounding the first 400 hazardous waste sites chosen for Superfund clean-ups to the areas surrounding the 290 sites that narrowly missed qualifying for these clean-ups. We find that Superfund clean-ups are associated with economically small and statistically indistinguishable from zero local changes in residential property values, property rental rates, housing supply, total population, and the types of individuals living near the sites. These findings are robust to a series of specification checks, including the application of a regression discontinuity design based on knowledge of the selection rule. Overall, the preferred estimates suggest that the local benefits of Superfund clean-ups are small and appear to be substantially lower than the

Growing concerns over the inadequate achievement of U.S. students have led to proposals to reward good teachers and penalize (or fire) bad ones. The leading method for assessing teacher quality is “value added” modeling (VAM), which decomposes students ’ test scores into components attributed to student heterogeneity and to teacher quality. Implicit in the VAM approach are strong assumptions about the nature of the educational production function and the assignment of students to classrooms. In this paper, I develop falsification tests for three widely used VAM specifications, based on the idea that future teachers cannot influence students ’ past achievement. In data from North Carolina, each of the VAMs’ exclusion restrictions is dramatically violated. In particular, these models indicate large “effects” of fifth grade teachers on fourth grade test score gains. I also find that conventional measures of individual teachers ’ value added fade out very quickly and are at best weakly related to long-run effects. I discuss implications for the use of VAMs as personnel tools.

www.cepr.org Available online at: www.cepr.org/pubs/dps/DP5736.asp www.ssrn.com/xxx/xxx/xxx

Abstract – Recommendations for the aggressive recruitment of minority teachers are based on hypothesized role-model effects for minority students as well as evidence of racial biases among non-minority teachers. However, prior empirical studies have found little or no association between exposure to an own-race teacher and student achievement. This paper presents new evidence on this question by examining the test score data from Tennessee’s Project STAR class-size experiment, which randomly matched students and teachers within participating schools. Specification checks confirm that the racial pairings of students and teachers in this experiment were unrelated to other student traits. Models of student achievement indicate that assignment to an own-race teacher significantly increased the math and reading achievement of both black and white students.

We study the brutal 1991-2002 Sierra Leone civil war using nationally representative household data on conflict experiences, postwar economic outcomes, local politics and collective action. Individuals whose households directly experienced more intense war violence are robustly more likely to attend community meetings, more likely to join local political and community groups, and more likely to vote. Tests using prewar controls and alternative samples suggest that selection into victimization is unlikely to be driving the results. More speculatively, the findings could help partially explain the rapid postwar political and economic recoveries observed in Sierra Leone and after several other recent African civil wars.