b e rna rd b l ac k j o s é-a n ton i o e sp í n-s á n c h e z e ri c f re n c h kat e l i t va k A B S T R A CT We use the best available longitudinal data set, the Health and Retirement Study, and a battery of causal inference methods to provide both central estimates and bounds for the long-term effect of health insurance on health and mortality among the near-elderly (initial age 50-61) over a 20-year period. Compared with matched insured persons, those uninsured in 1992 consume fewer health-care services, but their health (while alive) does not deteriorate relative to the insured, and, in our central estimates, they do not die significantly faster than the insured. Our upper and lower bounds suggest that prior studies have greatly overestimated the health and mortality benefits of providing health insurance to the uninsured.

Water is an essential good for human life but there is controversy on whether it should be allocated using markets. In 1966, the irrigation community in Mula (Murcia, Spain) switched from a market institution, an auction which had been in place in the town for over 700 years, to a system of xed quotas with a ban on trading to allocate water from the town's river. We present a model in which farmers face liquidity constraints (LC) to explain why the new, non-market institution is more ecient. We show that farmers underestimate water demand in the presence of LC. We use a dynamic demand model and data from the auction period to estimate both farmers' demand for water and their nancial constraints, thus obtaining unbiased estimates. In our model, markets achieve the rst-best allocation only in the absence of LC. In contrast, quotas achieve the rst-best allocation only if farmers are homogeneous in productivity. We compute welfare under both types of institutions using the estimated parameters. We nd that the quota is more ecient than the market. This result implies that one should be cautious in advocating for water markets, especially in developing areas where LC might be a concern.JEL Codes: D02, D53, G14, Q25

No abstract

In 1966, after more than 700 years, the irrigation community in Mula (Spain) switched from auctions to quotas to allocate water from its river. This change happened in the absence of either political or technological change. Quotas develop a model in which poor farmers cannot credibly commit to purchase water rights. I show that empirical evidence on savings and prices is consistent with this interpretation. A temporary increase in output prices in the 1950s and commitment problem.dangerous to carry through, than to initiate a new order of things."Niccolò Machiavelli, The Prince T he literature on institutional persistence has grown in recent years. This is not a new topic (North 1990;Alston, Eggertsson, and North 1996), but it was not until recently that an extensive set of empirical papers on the topic emerged. These new empirical papers focus on particular historical episodes and regions of the world, including India (Jha 2013), South America (Dell 2010), and Europe (Guiso, Sapienza, and Zingales 2008; Voigtländer and Voth 2012) among other areas. These papers document institutional persistence and present robust empirical results, but lack a formal mechanism that explains the persistence. Persistent Inef cient Institutions in Spain 693In this article I provide a general framework to explain institutional persistence and institutional change. While I test the model through a particular empirical application, the model can be applied more generally. Traditional explanations for institutional persistence require technological or political change to spark institutional change. This article provides an alternative mechanism, called Institutional Inertia, which explains institutional change in the absence of political change or changes in technology or relative prices. In addition to providing an explicit mechanism for Institutional Inertia, this article also advances the notion of a transitional institution: a temporary institution whose sole purpose is to implement the change from the old institution to the new one.I applied this model of institutional change to a particular historical case. In 1242 the Christian kingdom of Castile and the Muslim kingdom of Murcia signed a treaty stating that Murcia would become a protectorate of Castile. The treaty established that Castile would have political control over Murcia, but Muslims living there would keep their assets, their customs, and their lives. The Muslim governors of the cities of Mula and Lorca rejected the agreement. The Christian army then conquered both cities by force and expropriated the water property rights. In both towns, the conquerors then created a shareholder-owned corporation to hold the water property rights. The corporations in each town ran periodic auctions to sell water usage rights and paid dividends to the owners at the end of the year. All the other towns and cities in the region kept their pre-Reconquista system, in which land and water rights were linked to their land holdings.cient and observed neighbors in most surrounding towns alloc...