Importance of history for economic development : lessons from natural experiment of history

Defence date: 15 September 2011Examining board: Luigi Guiso, European University Institute; Andrea Ichino (Supervisor), University of Bologna and EUI; Leszek Jasinki, Institute of Economics Polish Academy of Science; Paolo Pinotti, Bocconi UniversityPDF of thesis uploaded from the Library digital archive of EUI PhD thesesDoes history matter for economic development? How do events taking place a long time ago continue to affect long term economic performance? To answer these questions I examine the long run impacts of the 19th century division of Poland into Prussian- and Russian- controlled sectors. Using micro-level data in a regression discontinuity framework, I show that the exposure to different socio-economic conditions during 100 years led to emergence of marked differences in development between regions in Poland. I find evidence that those differences persisted until the present through transmission by norms and beliefs. Nowadays, people living in the former Prussian sector have 12% higher referenda turnout, 11% higher general trust and 28% higher income. Various falsification tests indicate that there is something distinct about the historic frontier. Interestingly, the differences resisted subsequent switches in regimes from a market to centrally planned economy and back again to a market economy. The results are put in the context of the ongoing debate in the literature about the possible channels of persistence of distant historic events. Additionally, an extensive historical discussion is provided to shed some light on socio-economic differences in the 19th century between Prussian- and Russian-controlled sectors