Shanon Hsuan-Ming Hsu (Alesina Seminar)

Speaker & Title

Shanon Hsuan-Ming Hsu, "Coercive Growth: Forced Resettlement and Ethnicity-Based Agglomeration"

Abstract

While the clustering of people can raise productivity through social interactions, social divisions such as ethnic segregation and tension may limit these benefits. I study how such divisions shape the gains from agglomeration, leveraging an ethnic-based resettlement program in 1950s British Malaya that forcibly relocated 600,000 rural Chinese into villages across the country. I find that areas with higher resettlement remained more densely populated and had higher Chinese population shares decades later, driven by both the program's direct impact and subsequent internal migration. Moreover, these areas were wealthier and more industrialized, with greater labor market specialization. However, the economic benefits were concentrated among the Chinese population. Other ethnic groups saw only marginal gains when working outside agriculture, and evidence suggests that segregation and deeper cultural and linguistic barriers hindered cross-ethnic spillovers. To evaluate the aggregate impact of the program, I estimate a quantitative spatial model that allows agglomeration externalities to vary by sector and ethnic composition. While the resettlement raises total output, the economic gains are insufficient to offset the welfare losses from forced relocation.