Estimating Returns to Capital and Ability: Evidence from a Natural Experiment
32 Pages Posted: 11 Aug 2014 Last revised: 29 Mar 2017
Date Written: February 25, 2017
This paper estimates economic returns to physical capital and inherent ability among Indonesian fishermen using a natural experiment. By exploiting the quasi-random variation in the length of fishing boats generated by an aid program among survivors of the 2004 Indian Ocean tsunami, it is found that the relative contribution of inherent ability and physical capital in explaining long run productivity vary over time. Indonesian fishermen who were relatively more productive before the disaster retain their productive edge ex-post, controlling for the receipt and quality of aid, as well as fishing conditions. Returns to innate ability, measured by ex-ante productivity, become more important over time; while returns to physical capital become less important.
Keywords: aid, natural hazards, productivity, Indonesia
JEL Classification: D24, J24, Q54, H84, O12
Suggested Citation: Suggested Citation