Browsing by Author "Olsson, Ola"

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A Microeconomic Analysis of Institutions
(2000) Olsson, Ola; Department of Economics
This survey paper has three themes; a microeconomic analysis of institutions, an institutional analysis of microeconomics, and a discussion on the scope for an "institutional microeconomics" that takes insights from psychology and older institutional theory into account. Institutions are defined as the long-run rules of the economy that have the character of public goods and whose main function is the reduction of transaction costs. The institutional requirements for the Walrasian equilibrium and for a cooperative solution in a Prisoner's Dilemma-like game, are thoroughly analyzed. The paper briefly surveys the main results from the OIE and NIE-schools and discusses the possibilities of an interdisciplinarily oriented institutional microeconomics.
A Western Reversal since the Neolithic? The long-run impact of early agriculture
(2013-01) Olsson, Ola; Paik, Christopher; Dept of Economics, University of Gothenburg
While it is widely believed that regions which experienced a transition to Neolithic agriculture early also become institutionally and economically more advanced, many indicators suggest that within the Western agricultural core (including Europe, North Africa, the Middle East, and Southwest Asia), communities that adopted agriculture early in fact have weaker institutions and poorly functioning economies today. In the current paper, we attempt to integrate both of these trends in a coherent historical framework. Our main argument is that countries that made the transition early also tended to develop autocratic societies with social inequality and pervasive rent seeking, whereas later adopters were more likely to have egalitarian societies with stronger private property rights. These di¤erent institutional trajectories implied a gradual shift of dominance from the early civilizations towards regions in the periphery. We document this relative reversal within the Western core by showing a robust negative correlation between years since transition to agriculture and contemporary levels of income and institutional development, on both the national and the regional level. Our results further indicate that the reversal had become manifest already before the era of European colonization.
After Janjaweed? Socioeconomic Impacts of the Conflict in Darfur
(2010-01-29T09:56:44Z) Olsson, Ola
In this article, we use a unique database on 542 villages in southwestern Darfur to analyze patterns of population growth and land reallocation that have emerged as a consequence of the recent conflict. Our analysis demonstrates that a displacement from this region alone of more than 300,000 people from three targeted African groups has occurred and that villages have been repopulated by Arab and other African groups. Almost a fourth of all villages have been squatted by newly settled populations. The probability of squatting is shown to be largest in peripheral areas with good access to surface water, where soils are of good quality, and where many households from targeted tribes have fled. A key challenge in post-conflict reconstruction will therefore be the restoration of rights to land.
Biogeography and Long-Run Economic
(2000) A. Hibbs Jr., Douglas; Olsson, Ola; Department of Economics
The transition from a hunter-gather economy to agricultural production, which made possible the endogenous technological progress that ultimately led to the industrial revolution, is one of the most important events in the thousands of years of humankind's economic development. In this paper we present theory and evidence showing that exogenous geography and initial condition biogeography exerted decisive influence on the location and timing of transitions to sedentary agriculture, to complex social organization and,eventually, to modern industrial production. Evidence from a large cross-section of countries indicates that the effects of geographic and biogeographic endowments on contemporary levels of economic development are remarkably strong.
Conditional Persistence? Historical Disease Exposure and Government Response to COVID-19
(University of Gothenburg, 2023-08) Lindskog, Annika; Olsson, Ola; Department of Economics, University of Gothenburg
Drawing on the literature on cultural adaptations to historical disease exposure, we investigate differences in government containment policies to the COVID-19 pandemic. We hypothesize that a higher historical exposure to disease led to a stricter government response, particularly during the first year of the pandemic characterized by fundamental uncertainty. Our empirical analysis confirms this hypothesis, both for differences in government responses to disease dynamics between countries and for state-level containment policies within the United States. Our results suggest that a persistent effect of historical health legacies on contemporary outcomes, may be conditional on the character of the public health risk at hand. Deep cultural norms, determined by historical experiences, may play a minor role most of the time but are activated in times of fundamental uncertainty.
Conflict Diamonds
(2003) Olsson, Ola; Department of Economics
’Conflict diamonds’ refers to the fatal role that diamonds are believed to have played in several African conflicts. The article analyzes the impact of diamond abundance on economic growth in light of the broader, previously discovered empirical finding of a ’curse of natural resources’. By extending the theory of appropriative conflict, a predator-prey game is outlined in which a rebel chooses between peaceful production and predation on natural resources controlled by the ruler. It is shown that whereas an increase in natural resources might increase the ruler’s public utility investments, it might also lead to a crowding-out in favor of defense spendings, which depresses growth. As predicted by the model, a cross-country regression analysis suggests that diamond abundance has a ’U-shaped’ relationship with economic growth.
Congo: The Prize of Predation
(2003) Congdon, Heather; Olsson, Ola; Department of Economics
The article analyzes the war against Mobutu (1996-97) and the more recent war (1998-) in the Democratic Republic of the Congo with particular attention to greed and grievance as motivating factors in these two wars. Whereas our usage of the term ‘greed’ simply reflects the desire to gain control of natural resource rents, we model ‘grievance’ as deliberate institutional differences, implemented by the ruler, between the formal and informal sectors. On the basis of quantitative and qualitative evidence, we outline a model of a predatory conflict between a kleptocratic ruler and a group of potential predators within a given region. The potential predators choose between peaceful production and predation on the ruling elite, who control the country’s natural resource rents. It is shown that institutional grievance between the formal and informal sectors, along with the relative strength of the ruler's defense, play a key role for the initiation of a war. This observation is used to explain the timing of the two wars analyzed in this article. The model also shows that once a war has commenced, the abundance of natural resources and the ruler’s kleptocratic tendencies determine conflict intensity. This result is also well in line with experience from the most recent Congolese war.
Country Size and the Rule of Law: Resuscitating Montesquieu
(2006) Olsson, Ola; Hansson, Gustav; Department of Economics
The political and economic impact of country size has been a frequently discussed issue in social science. In accordance with the general hypothesis of Montesquieu, this paper demonstrates that there is a robust negative relationship between the size of country territory and a measure of the rule of law for a large cross-section of countries. We propose that there are two main reasons for this regularity; firstly that institutional quality often has the character of a local public good that is imperfectly spread across space from the capital to the hinterland, and secondly that a large territory usually is accompanied by valuable rents that tend to distort property rights institutions. Our empirical analysis further shows that whether the capital is centrally or peripherally located within the country matters for the average level of rule of law.
Endogenous Institutional Change After Independence
(2005) Olsson, Ola; Congdon Fors, Heather; Department of Economics
A key event in economic history was the independence of nearly ninety former colonies after World War II. On the basis of qualitative and quantitative evidence, we argue that independence often constituted an institutional disequilibrium that the new regimes reacted to in very different ways. We present a model of endogenous changes in property rights institutions where an autocratic post colonial ruler faces a basic trade-off between stronger property rights, which increases his dividends from the modern sector, and weaker property rights that increases his ability to appropriate resource rents. The model predicts that revenuemaximizing regimes in control of an abundance of resource rents and with insignificant interests in the modern sector will rationally install weak institutions of private property, a prediction which we argue is well in line with actual developments in for instance DR Congo, Ghana, and Zambia.
Ethnic Cleansing or Resource Struggle in Darfur? An empirical analysis
(2009-12-09T09:47:34Z) Olsson, Ola; Siba, Eyerusalem
The con ict in Darfur has been described both as an ethnic cleansing campaign, carried out by the Sudanese government and its allied militias, and as a local struggle over dwindling natural resources between African farmers and Arab herders. In this paper, we construct a theoretical framework for understanding the choice between ethnic cleansing and resource capture and use a previously unexploited data set on 530 villages in Southwestern Darfur to analyze the determinants of attacks in the region. Our results clearly indicate that Janjaweed attacks have been targeted at villages dominated by the major rebel tribes, resulting in a massive displacement of those populations. Resource variables, capturing access to water and land quality, also have some explanatory power but are not consistently signi cant. These patterns suggest that attacks in the area had ethnic cleansing as a primary objective.
Geography and Institutions: A Review of Plausible and Implausible Linkages
(2003) Olsson, Ola; Department of Economics
In recent years, empirical investigations have shown that various aspects of physical geography are closely related to the quality of a country’s economic institutions. For instance, distance from the equator in latitude degrees is positively correlated to both institutional quality and to levels of economic development. In order to reach a better understanding for this type of regularities, this article reviews the growing empirical literature on geography and institutions, as well as a large body of older and newer theoretical works on the social impacts of geography. It is argued that the most plausible candidates for explaining the broadest cross-continental variance in institutional quality are those focusing on historical differences in biogeographical potential for early agriculture and on the importance of disease geography for European colonization strategy.
Geography, Biogeography and Why Some Countries are Rich and Others Poor
(2004) Olsson, Ola; Hibbs, Jr., Douglas A.; Department of Economics
The most important event in human economic history before the Industrial Revolution was the Neolithic transition from a nomadic hunter-gatherer lifestyle to sedentary agriculture, beginning about 10,000 years ago. The transition made possible the human population explosion, the rise of non-foodproducing specialists, and the acceleration of technological progress that led eventually to the Industrial Revolution. But the transition occurred at different times in different regions of the world, with big consequences for the present-day economic conditions of populations indigenous to each region. In this paper we show that differences in biogeographic initial conditions and in geography largely account for the different timings of the Neolithic transition, and thereby ultimately help account for the 100-fold differences among the prosperity of nations today. The effects of biogeography and geography on the wealth of nations are partly mediated by the quality of presentday institutions, but are also partly independent of institutional quality.
Land Property Rights, Cadasters and Economic Growth: A Cross-Country Panel 1000-2015 CE
(University of Gothenburg, 2021-03) D´Arcy, Michelle; Nistotskaya, Marina; Olsson, Ola; Department of Economics
Since the transition to agricultural production, property rights to land have been a key institution for economic development. Clearly defined land rights provide economic agents with increased access to credit, secure returns on investment, free up resources used to defend one's land rights, and facilitate land market transactions. Formalized land records also strengthen governments' capacity to tax land-owners. Despite a large body of extant micro-level empirical studies, macro-level research on the evolution of formal rights to land, and their importance for economic growth, has so far been lacking. In this paper, we present a novel data set on the emergence of state-administered cadasters (i.e. centralized land records) for 159 countries over the last millennium. We also analyze empirically the association between the development of cadastral institutions and long-run economic growth in a panel of countries. Our findings demonstrate a substantive positive effect of the introduction of cadasters on modern per capita income levels, supporting theoretical conjectures that states with more formalized property rights to land should experience higher levels of economic growth.
Land Property Rights, Cadasters and Economic Growth: A Cross-Country Panel 1000-2015 CE
(2021-03) D’Arcy, Michelle; Nistotskaya, Marina; Olsson, Ola; The Quality of Government institute
Since the transition to agricultural production, property rights to land have been a key institution for economic development. Clearly defined land rights provide economic agents with increased access to credit, secure returns on investment, free up resources used to defend one’s land rights, and facilitate land market transactions. Formalized land records also strengthen governments’ capacity to tax land-owners. Despite a large body of extant micro-level empirical studies, macro-level research on the evolution of formal rights to land, and their importance for economic growth, has so far been lacking. In this paper, we present a novel data set on the emergence of state-administered cadasters (i.e. centralized land records) for 159 countries over the last millennium. We also analyze empirically the association between the development of cadastral institutions and long-run economic growth in a panel of countries. Our findings demonstrate a substantive positive effect of the introduction of cadasters on modern per capita income levels, supporting theoretical conjectures that states with more formalized property rights to land should experience higher levels of economic growth.
Land Property Rights, Cadasters and Economic Growth: A Cross-Country Panel 1000-2015 CE
(2021) D’Arcy, Michelle; Nistotskaya, Marina; Olsson, Ola; QoG The Quality of Government Institute
Since the transition to agricultural production, property rights to land have been a key institution for economic development. Clearly defined land rights provide economic agents with increased access to credit, secure returns on investment, free up resources used to defend one’s land rights, and facilitate land market transactions. Formalized land records also strengthen governments’ capacity to tax land-owners. Despite a large body of extant micro-level empirical studies, macro-level research on the evolution of formal rights to land, and their importance for economic growth, has so far been lacking. In this paper, we present a novel data set on the emergence of state-administered cadasters (i.e. centralized land records) for 159 countries over the last millennium. We also analyze empirically the association between the development of cadastral institutions and long-run economic growth in a panel of countries. Our findings demonstrate a substantive positive effect of the introduction of cadasters on modern per capita income levels, supporting theoretical conjectures that states with more formalized property rights to land should experience higher levels of economic growth.
Long-Run Cultural Divergence: Evidence From the Neolithic Revolution
(2015-05) Olsson, Ola; Paik, Christopher; Dept. of Economics, University of Gothenburg
This paper investigates the long-run infuence of the Neolithic Revolution on contemporary cultural norms and institutions as reflected in the dimension of collectivism-individualism. We outline an agricultural origins-model of cultural divergence where we claim that the advent of farming in a core region was characterized by collectivist values and eventually triggered the out-migration of individualistic farmers towards more and more peripheral areas. This migration pattern caused the initial cultural divergence, which remained persistent over generations. The key mechanism is demonstrated in an extended Malthusian growth model that explicitly models cultural dynamics and a migration choice for individualistic farmers. Using detailed data on the date of adoption of Neolithic agriculture among Western regions and countries, the empirical findings show that the regions which adopted agriculture early also value obedience more and feel less in control of their lives. They have also had very little experience of democracy during the last century. The findings add to the literature by suggesting the possibility of extremely long lasting norms and beliefs infuencing today's socioeconomic outcomes.
On the Institutional Legacy of Mercantilist and Imperialist Colonialism
(2007-03-07T08:09:34Z) Olsson, Ola
The article features a temporal approach to modelling the social impact of Western colonialism. We collect a data set for all former colonies and dependencies that are regarded as countries today (143 observations). Our data, as well as existing theory, suggest that the very heterogeneous era of colonization might be divided into an early ’mercantilist’ wave and a much later ’imperialist’ wave with quite different characteristics. We demonstrate that a commonly used determinant of institutional quality - colonial settler mortality - had a much weaker effect on institutional outcomes during the imperialist scramble for Africa. When we broaden the analysis, it is shown that the positive effect of colonial duration on democracy is strongest among countries colonized during the imperialist era. Controlling for colonial duration, our results further indicate that a long history of statehood is bad for democracy while there is almost no effect of the national identity of the colonizer.
Origins of the Sicilian Mafia: The Market for Lemons
(2012-05) Dimico, Arcangelo; Isopi, Alessia; Olsson, Ola; Dept of Economics, University of Gothenburg
Since its first appearance in the late 1800s, the origins of the Sicilian mafia have remained a largely unresolved mystery. Both institutional and historical explanations have been proposed in the literature through the years. In this paper, we develop an argument for a market structure-hypothesis, contending that mafia arose in towns where firms made unusually high profits due to imperfect competition. We identify the produc tion of citrus fruits as a sector with very high international demand as well as substantial fixed costs that acted as a barrier to entry in many places and secured high profits in others. We argue that the mafia arose out of the need to protect citrus production from predation by thieves. Using the original data from a parliamentary inquiry in 1881-86 on Sicilian towns, we show that mafia presence is strongly related to the production of orange and lemon. This result contrasts recent work that emphasizes the importance of land reforms and a broadening of property rights as the main reason for the emergence of mafia protection.
Perspectives on knowledge and growth
(2000) Olsson, Ola
Pharaoh´s Cage: Environmental Circumscription and Appropriability in Early State Development
(2019-11) Mayoral, Laura; Olsson, Ola; Department of Economics, University of Gothenburg
What explains the origins and survival of the first states around five thousand years ago? In this research, we focus on the role of productivity shocks for early state development in a single region: ancient Egypt. We introduce a model of extractive state consolidation that predicts that political instability should be low whenever environmental circumscription is high, i.e., whenever there is a large gap between the productivity of the area under state control (core) and that of the surrounding areas (hinterland). In these periods the elite can impose high levels of taxation that the population will be forced to accept as exit is not an attractive option. In order to test this hypothesis, we develop novel proxies for historical productivities on the basis of high-resolution paleoclimate archives. Our empirical analysis then investigates the relationship between proxies of the productivity of the Nile banks and of the Egyptian hinterland on the one hand, and political outcomes such as ruler and dynastic tenure durations and the intensity of pyramid construction on the other, during 2685 - 750 BCE. Our results show that while both too high or too low Nile floods are associated with a greater degree of political instability, periods with a greater rainfall in the hinterland (and hence a lower degree of environmental circumscription) are associated with an immediate rise in military and pyramid construction activity but also with a delayed increase in political instability, since the decline in effective circumscription provides the farming population with an outside option in the hinterland.