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Saumitra Jha

 

 

 

Works in Progress

Works in progress- Gujarat, India

I am currently working on three related streams of research, all of which I intend to develop into book-length pieces. A common thread of my work lies in the use of economic theory and historical natural experiments to draw new policy lessons for solving political economy challenges in developing societies. Working titles for these books are:

Swords into Bank Shares: Financial Solutions to the Political Economy Challenges of Development.

The failure to align the incentives of self-interested groups in favor of beneficial reform is often seen as a major cause of persistent underdevelopment around the world. However, much less is known about strategies that have been successful at overcoming such political economy challenges. One approach that holds much promise, and in fact appears to have had some historical success, is the provision of financial assets that align the interests of winners and potential losers from reform by providing claims on the future.

This project analyzes the promise and limitations of financial instruments as a means for fostering broad political coalitions that favor beneficial reforms. It takes as a departure point the benchmark theory of portfolio choice, in which all agents hold the same (market) portfolio and thus political economy challenges cease to exist. It then analyzes a range of historical cases in which financial assets have succeeded or failed at making politics less conflictual over time, focusing on three revolutionary states that subsequently led the world in economic growth: England, the early United States and Meiji Japan. Finally, the oroject draws upon the theory and the historical cases to assess the promise of finance in solving political economy challenges in contemporary settings.

Related Articles and Works in Progress:

  • Sharing the Future:  Financial Innovations and Innovators in Solving the Political Economy Challenges of Development, forthcoming in Institutions and Comparative Economic Development, edited by Masahiko Aoki, Timur Kuran and Gerard Roland, Volume I of the Proceedings of the 16th World Congress of the International Economic Association, IEA Conference Series 150: Palgrave Macmillan
  • Financial Innovations and Political Development: Evidence from Revolutionary England (2010) revised from Shares, coalition formation and political development: Evidence from 17th Century England (Stanford GSB Working Paper No. 2005), August 2008, revision requested at the Quarterly Journal of Economics
  • The Administrative Foundations of Self-Enforcing Constitutions, with Avner Greif and Yadira Gonzalez de Lara: The American Economic Review: Papers and Proceedings, 2008
  • `That Speculating Phalanx’: War Veterans, Finance and Nation-Building in the early US republic.
  • The Political Spillovers of Financial Market Development: Evidence from England (with Ann Carlos).
  • Swords into Bank Shares : Financial Instruments, Violent Conflict Resolution and Reform in Meiji Japan (with Kris Mitchener).

The Aftermath of War: Veterans and Revolutionary Institutional Change (with Steven Wilkinson).

It is perhaps among the most influential theories of politics and development that shocks to the ability of non-elite groups to organize and credibly threaten violence are a fundamental driver of institutional and political change. The role of shocks to the organizational abilities of disenfranchised groups has long featured prominently in theories of democratization in Europe, broader political revolutions, as well as less dramatic shifts such as progressive taxation and changes in the identity of those in power.

We argue that wars provide a common environment where previously disenfranchised groups have historically gained and continue to be likely to gain the organizational skills to engage in private collective action to alter political institutions, particularly when external threats provide elites with little option but to allow such organizational skills to develop among non-elite groups. We explore the effects of veterans and conflict on radical institutional change and the strategies used to prevent disorder in post-conflict environments, drawing on natural experiments from post-Independence South Asia, the French Revolution, the Great Reform Act in England and other cases.

Related Articles and Works in Progress:

  • Veterans, Protests and Democratization: Evidence from England (with Toke Aidt, Raphael Franck and Steven Wilkinson)
  • War Victimization and Investment: Evidence from the Second World War (with Pauline Grosjean).
  • Swords into Bank Shares : Financial Instruments, Violent Conflict Resolution and Reform in Meiji Japan (with Kris Mitchener).

Globalization, Identity and Ethnic Violence

Globalization, the discovery of natural resources and the development of international trade promise much to developing societies in the way of economic and political development but often deliver inter-ethnic conflict and the impoverishment of indigenous communities. This research project focuses on understanding the role of international trade in inter-ethnic violence, peaceful co-existence and identity change among indigenous communities.

A short policy-oriented overview of the religious tolerance component of the research has been published in the EPSJ.

A theory of ethnic cronyism and tolerance (coming soon) develops a general model of inter-ethnic trade and violence in environments where there are "local" and "non-local" ethnic groups. The paper focuses on finding strategies that support peaceful co-existence over time: no one prefers to leave or to engage in violence with a member of a different ethnic group. The model suggests that three conditions are necessary to support peaceful coexistence between these groups over time: complementarities between groups, a high cost to replicate or expropriate the source of another group's complementarity, and a mechanism to share the gains from inter-group exchange.

The article then shows how these conditions were satisfied among Hindus and Muslim traders from the rise of Islam to European ascendance in the 17th century. Due to Muslim-specific advantages in Indian Ocean shipping, incentives to trade across ethnic lines were strongest in medieval ports, leading to the development of institutions to support inter-religious exchange.The paper characterises the institutions that emerged to bolster religious tolerance in these towns during the medieval period and that continued to support religious tolerance two centuries after the decline of Muslim dominance in overseas trade (see below). Finally, the paper draws lessons from the theory and India's institutional legacy to understand why ethnic tolerance fails and how tolerance may be fostered in contemporary settings.

Trade, institutions, and ethnic tolerance: evidence from India tests whether the institutions of religious tolerance that emerged to support inter-ethnic exchange in medieval Indian ports have had a lasting effect on contemporary religious tolerance in India. Using new town-level data spanning India's medieval and colonial history, this paper finds that medieval trading ports were 25% less likely to experience a religious riot between 1850-1950, two centuries after Europeans eliminated Muslim advantages in trade. Medieval trading ports continued to exhibit fewer and less widespread religious violence during the Gujarat riots in 2002. The paper shows that these differences are not the result of variation in geography, political histories, wealth, religious composition, of trade outside the medieval period or of the endogeneity of medieval port selection, and interprets these differences as being transmitted via the persistence of institutions that emerged to support inter-religious medieval trade.

Related Articles and Works in Progress:

  • Trade, Institutions and Ethnic Tolerance : Evidence from South Asia , 2012, revised from Trade, Institutions and Religious Tolerance: Evidence from India (Stanford GSB Working Paper No. 2004), Jan 2008 (coming soon!)
  • Sharing the Future:  Financial Solutions to the Political Economy Challenges of Development, forthcoming in the Proceedings of the International Economic Association, edited by Pranab Bardhan and Timur Kuran.
  • Global Trade, Contracts and Poverty Alleviation in Indigenous Communities: Cochineal in Mexico, April 2011, with Alberto Diaz-Cayeros
  • Trade shocks and Pro-Democracy Mass Movements: Evidence from India’s Independence Struggle, May 2011, with Rikhil Bhavnani
  • A Theory of Ethnic Cronyism and Tolerance.
  • Ethnic Complementarities and Governmental Trust: Evidence from India’s Polio Epidemic (with Aprajit Mahajan).
  • Swords into Bank Shares : Financial Instruments, Violent Conflict Resolution and Reform in Meiji Japan (with Kris Mitchener).

Other Research into South Asian Political Economy