Ernesto Dal Bó’s research while affiliated with Berkeley College and other places

The production of economic surplus, or “prosperity,” was fundamental to financing the rise of pristine civilizations. Yet, prosperity attracts predation, which discourages the investments required for civilization. To the extent that the economic footing of civilization creates existential security threats, civilization is paradoxical. We claim that, in addition to surplus production, civilizations require surplus protection, or “security.” Drawing from archaeology and history, we model the trade-offs facing a society on its path to civilization. We emphasize preinstitutional forces, especially the geographical environment, that shape growth and defense capabilities and derive the conditions under which these capabilities help escape the civilizational paradox. We provide qualitative illustration of the model by analyzing the rise of the first two civilizations, Sumer and Egypt.

Standard models of hierarchy assume that agents and middle managers are better informed than principals. We estimate the value of the informational advantage held by supervisors—middle managers—when ministerial leadership—the principal—introduced a new monitoring technology aimed at improving the performance of agricultural extension agents (AEAs) in rural Paraguay. Our approach employs a novel experimental design that elicited treatment‐priority rankings from supervisors before randomization of treatment. We find that supervisors have valuable information—they prioritize AEAs who would be more responsive to the monitoring treatment. We develop a model of monitoring under different scales of treatment roll‐out and different treatment allocation rules. We semiparametrically estimate marginal treatment effects (MTEs) to demonstrate that the value of information and the benefits to decentralizing treatment decisions depend crucially on the sophistication of the principal and on the scale of roll‐out.

We provide a model of self-selection by candidates in a probabilistic voting environment to shed light on the forces shaping the quality of politicians from both the supply and demand sides of politics. The model highlights the idea that the patterns of selection and the comparative statics of politician quality depend critically on how the costs of running for office vary for candidates with different qualities. The model offers predictions on how the quality of the political class will vary with key parameters pertaining to both the supply and demand for candidates. We use the model to frame a review of the empirical literature on political selection that has emerged over the past two decades. We contrast areas where significant progress has been made with others where important theoretical predictions remain untested or existing evidence does not allow a consensus, highlighting areas for future research. Expected final online publication date for the Annual Review of Economics Volume 10 is August 2, 2018. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

Can a democracy attract competent leaders, while attaining broad representation? Economic models suggest that free-riding incentives and lower opportunity costs give the less competent a comparative advantage at entering political life. Moreover, if elites have more human capital, selecting on competence may lead to uneven representation. This paper examines patterns of political selection among the universe of municipal politicians and national legislators in Sweden, using extraordinarily rich data on competence traits and social background for the entire population. We document four new facts that together characterize an “inclusive meritocracy.” First, politicians are on average significantly smarter and better leaders than the population they represent. Second, this positive selection is present even when conditioning on family (and hence social) background, suggesting that individual competence is key for selection. Third, the representation of social background, whether measured by parental earnings or occupational social class, is remarkably even. Fourth, there is at best a weak tradeoff in selection between competence and social representation, mainly due to strong positive selection of politicians of low (parental) socioeconomic status. A broad implication of these facts is that it is possible for democracy to generate competent and socially-representative leadership.

Most of the political-economy literature blames inefficient policies on institutions or politicians' motives to supply bad policy, but voters may themselves be partially responsible by demanding bad policy. In this paper, we posit that voters may systematically err when assessing potential changes in policy by underappreciating how new policies lead to new equilibrium behavior. This biases voters towards policy changes that create direct benefits - welfare would rise if behavior were held constant - even if those reforms ultimately reduce welfare because people adjust behavior. Conversely, voters are biased against policies that impose direct costs even if they induce larger indirect benefits. Using a lab experiment, we find that a majority of subjects vote against policies that, while inflicting direct costs, would help them to overcome social dilemmas and thereby increase welfare. Subjects also support policies that, while producing direct benefits, create social dilemmas and ultimately hurt welfare. Both mistakes arise because subjects fail to fully anticipate the equilibrium effects of new policies. More precisely, we establish that subjects systematically underappreciate the extent to which policy changes will affect the behavior of other people, and that these mistaken beliefs exert a causal effect on the demand for bad policy.

Throughout history, many types of labor arrangement have involved the use of coercion. While the determinants of coercion have been studied extensively, less is known about the consequences of coercion for human capital accumulation. First, we develop a model of labor market coercion under an elite-controlled regime, and show that it depresses the effective wages of unskilled labor, inducing workers to demand more schooling than in the case without coercion. Guided by this model, we use unique micro data from Puerto Rico, where unskilled laborers were forced to work for legally-titled landowners during 1849-1874. We estimate the schooling responses to variation in the relative demand for unskilled labor and local government resources from exogenous changes in coffee prices in regimes with and without coercion. During the coercive period, governments allocated more public resources towards coercive labor measures and fewer resources towards primary schooling, but there was no associated decrease in individuals' literacy rates, consistent with coercion generating a significant increase in the skill premium. In contrast, and consistent with a drop in the skill premium, literacy rates declined 12 percent following the abolition of coercive measures in 1874. These results support the notion that although labor market liberalization reduced the returns to literacy, it also moderated the extraction of rents from unskilled laborers' wages.

We model religious faith as a "demand for beliefs," following the logic of the Pascalian wager. We then demonstrate how an experimental intervention can exploit standard elicitation techniques to measure religious belief by varying prizes associated with making choices contrary to one's belief in a, crucially, falsifiable religious proposition. We implemented this approach with a group that expected the "End of the World" to happen on May 21, 2011 by offering prizes payable before and after May 21st. The results suggest the existence of a demand for extreme, sincere beliefs that was unresponsive to experimental manipulations in price.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

We study a recent recruitment drive for public sector positions in Mexico. Different salaries were announced randomly across recruitment sites, and job offers were subsequently randomized. Screening relied on exams designed to measure applicants' intellectual ability, personality, and motivation. This allows the first experimental estimates of (i) the role of financial incentives in attracting a larger and more qualified pool of applicants, (ii) the elasticity of the labor supply facing the employer, and (iii) the role of job attributes (distance, attractiveness of the municipal environment) in helping fill vacancies, as well as the role of wages in helping fill positions in less attractive municipalities. A theoretical model guides each stage of the empirical inquiry. We find that higher wages attract more able applicants as measured by their IQ, personality, and proclivity towards public sector work – i.e., we find no evidence of adverse selection effects on motivation; higher wage offers also increased acceptance rates, implying a labor supply elasticity of around 2 and some degree of monopsony power. Distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities.