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on Business, Economic and Financial History |
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Issue of 2004‒12‒20
eighteen papers chosen by |
| By: | William J. Collins (Department of Economics, Vanderbilt University) |
| Abstract: | In this paper, we study the incentives for market concentration of (online and traditional) auction houses. Would sellers and buyers be better off if two separate auction houses merged? We suppose that each auction house has a separate clientele of sellers and buyers. Sellers value their (identical) units at 0, while buyers have independent private values. Each auction house uses an ascending auction or by revenue equivalence any auction mechanism that allocates units efficiently among those buyers at that auction house. If no buyers are lost upon the merger, we find that efficiency gains increase, but that the expected sellers' revenue increases by more than the efficiency gains, leaving the buyers worse off. This result extends Bulow and Klemperer's (1996) insight that the competition of an additional bidder increases auction revenue by more than the ability to commit to an optimal auction with one less bidder; in our model, the extra competition created by having all of the bidders bid against each other after the merger more than offsets any supply effects. With an example, we show that if buyers choose whether to participate or not, it is possible upon a merger that so many buyers are lost, the sellers are actually worse off. We conclude that without transfers from sellers to buyers, the merger may or may not be profitable for sellers. |
| Keywords: | Fair housing, residential segregation |
| JEL: | J70 R0 |
| Date: | 2003–02 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0304&r=his |
| By: | Yoshiro Miwa (Faculty of Economics, University of Tokyo); J. Mark Ramseyer (Harvard Law School) |
| Abstract: | In a series of pathbreaking articles, Sylla argues that successful economies experience "financial revolutions" before they undergo their periods of rapid growth. In turn, governments generate these revolutions by putting public finance in order, and thereby giving private investors the incentive to create banks and securities markets. In the U.S., suggests Sylla, Hamilton masterminded the revolution. Might Matsukata, he continues, have done the same in Japan? Consistent with much of Sylla's work, Japan did indeed experience a financial revolution in the late 19th century. Matsukata, however, did not mastermind the revolution in advance of private-sector demand. Instead, private investors created the financial infrastructure in response to demand from industrial firms. What is more, most firms (at least in the pivotal silk industry) raised the funds they needed through trade credit rather than securities markets or banks. In this environment, the financial revolution contributed to economic growth in three ways: (a) the new securities markets funded the very largest firms, particularly the railroad firms; (b) the new banks sold the transactional services that merchants used to provide their trade credit, and (c) the banks supplied some of the funds that the merchants as intermediaries then re-lent to the manufacturing firms. |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2004cf311&r=his |
| By: | B. Zorina Khan; Kenneth L. Sokoloff |
| Abstract: | Employing a sample of renowned U.S. inventors that combines biographical detail with information on the patents they received over their careers, we highlight the impact of early U.S. patent institutions in providing broad access to economic opportunity and in encouraging trade in new technological knowledge. Through setting low fees and establishing administrative procedures for application, the United States deliberately created a patent system that allowed a much wider range, in socioeconomic class terms, of technologically creative individuals to obtain property rights to their inventions than did European patent institutions. Moreover, by requiring that applications be examined for novelty by technical experts, and by enforcing patent rights strictly, the U.S. system reduced uncertainty about the validity of patent rights, and in that way lowered the cost of transacting in them. Creating secure assets in new technological knowledge and facilitating access to markets in technology in this way both stimulated specialization at invention and further enhanced the opportunities available to technologically creative individuals who would otherwise have lacked the capital to directly extract returns from their efforts. Indeed, we show that until the late 19th century, the 'great inventors' of the U.S. generally had backgrounds that permitted them only limited formal schooling, and made extensive use of their abilities under the patent system to extract returns from trading their patent rights. The usefulness of the 19th century U.S. patent system to inventors with humble origins may have implications for the design of intellectual property institutions in contemporary developing countries. |
| JEL: | N10 N71 O31 O34 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:10966&r=his |
| By: | William J. Collins (Department of Economics, Vanderbilt University); Robert A. Margo (Department of Economics, Vanderbilt University) |
| Abstract: | Between 1964 and 1971, hundreds of riots erupted in American cities, resulting in large numbers of injuries, deaths, and arrests, as well as in considerable property damage that was concentrated in predominantly black neighborhoods. There have been few studies of a systematic, econometric nature that examine the impact of the riots on the relative economic status of African Americans, or on the cities and neighborhoods in which the riots took. We present two complementary empirical analyses. The first uses aggregate, city-level data on income, employment, unemployment, and the area's racial composition from the published volumes of the federal censuses. We estimate the "riot effect" by both ordinary least squares and two-stage least squares. The second empirical approach uses individual-level census data from the Integrated Public Use Microdata Series for 1950, 1970, and 1980. The findings suggest that the riots had negative effects on blacks' income and employment that were economically significant and that may have been larger in the long run (1960-1980) than in the short run (1960-1970). We view these findings as suggestive rather than definitive for two reasons. First, the data are not detailed enough to identify the precise mechanisms at work. Second, the wave of riots may have had negative spillover effects to cities that did not experience severe riots; if so, we would tend to underestimate the riots' overall effect. |
| Keywords: | Civil disturbances, Watts |
| JEL: | J15 R0 |
| Date: | 2003–12 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0324&r=his |
| By: | Marc Weidenmier |
| Abstract: | Many states that formed the Southern Confederacy defaulted on sovereign debt sold in international capital markets during the 1840s. The Confederacy also elected President Jefferson Davis, who openly advocated the repudiation of U.S. states' debts while a member of Congress. Despite its poor credit record, the Confederate government managed to float cotton bonds in England that constituted under two percent of its expenditures. The bonds were largely issued to settle overdue debts with gun contractors who had cut off trade credit. The South serviced the bonds as late as March 1865, a time of domestic hyperinflation and weeks before the fall of Richmond. Although the Confederate experience shows that trade sanctions can promote debt repayment, the gunboat model can only account for a small amount of lending. A reputation or another type of sanction would be necessary to support higher levels of lending in international capital markets. |
| JEL: | F34 N2 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:10960&r=his |
| By: | Antoine Bommier; Ronald Lee; Timothy Miller; Stephane Zuber |
| Abstract: | Public transfer programs in industrial nations have massive long term fiscal imbalances, and apparently permit the elderly to benefit through pension and health care programs at the cost of the young and future generations. However, the intergenerational picture is turned upside down when public education is included in generational accounts along with pensions and health care. We calculate the net present value (NPV) of benefits received minus taxes paid for US generations born 1850 to 2090, and find that all generations born from 1950 to 2050 are net gainers, while many of today's old people are net losers. Windfall gains for early generations when Social Security and Medicare started up partially offset windfall losses when public education was started, roughtly consistent with the Becker-Murphy theory. |
| JEL: | H0 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:10969&r=his |
| By: | Norbert Janssen (Bank of England); Charles Nolan; Ryland Thomas (Bank of England) |
| Abstract: | This paper constructs a consistent series for the market value of UK Government debt over almost 300 years. We analyse how monetary and fiscal policy affect the path of the price level in the UK. Specifically, the paper examines the interactions between debts, deficits, the monetary base and the price level. Overall, the price level has been closely related to the evolution of the base money supply. Across different sample periods, there is little econometric evidence that fiscal policy has affected the course of the price level (or of the exchange rate under the Gold Standard). Government debt has not significantly affected the base money stock either. |
| Keywords: | Fiscal policy, debt, monetary policy, price level determination. |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:san:cdmawp:0407&r=his |
| By: | Shinji Takagi (Independent Evaluation Office, International Monetary Fund, Washington, D.C.); Mototsugu Shintani (Department of Economics, Vanderbilt University); Tetsuro Okamoto (Faculty of Economics, Osaka Sangyo University) |
| Abstract: | Data from Okinawa's monetary union with the United States in 1958 and with Japan in 1972 are used to obtain a quantitative indication of how monetary union might affect the behavior of nominal and real shocks across two economies. With monetary union, the variance of the real exchange rate between two economies declines, and their business cycle linkage becomes stronger. A VAR analysis of output and price data for Okinawa and Japan further indicates that the contribution of asymmetric nominal shocks in business cycles becomes smaller. Monetary union thus seems to facilitate both nominal and real convergence. |
| Keywords: | Currency union, foreign exchange rates, Japanese economy, price convergence, San Francisco Peace Treaty, vector autoregressions |
| JEL: | E42 F15 F33 F36 |
| Date: | 2003–07 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0315&r=his |
| By: | Guisan, Maria-Carmen; Aguayo, Eva; Carballas, David |
| Abstract: | We present an international comparison of economic development of 5 Central European countries, with special reference to Poland and Hungary, with some European Union Countries for the period 1950-2002. We analyse different stages of their evolution: 1) In 1950-60 the evolution of production per inhabitant and rates of growth of this variable, in comparison with Spain, where very alike. 2) In 1960-75 the differences increased dramatically in favour of Spain. 3) In 1975-85 the differences diminished with a better performance of Hungary in comparison with Poland. 4) In 1985-91 the differences in the evolution of economic development increased again in favour of Spain. 5) Since 1991 to 2002 the evolution of these Central European countries generally improved and their rates of growth were more similar to those of Spain. We analyse the main factors that have explained the lower average rate of growth of production per inhabitant in Central Europe as a whole in comparison with Spain, Austria and other EU countries. We focus on human capital, manufacturing capacity, foreign trade and other relevant factors of production, mainly from a supply side approach. We also analyse the differences among Central European countries, outstanding the special case of Slovenia, country which has reached a position very similar to that of Spain in the level of income per inhabitant. |
| Keywords: | Growth, Development and Cycles in Central Europe |
| JEL: | C5 C51 O52 O57 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:eaa:ecodev:79&r=his |
| By: | Tetsuji Okazaki (Faculty of Economics, University of Tokyo) |
| Abstract: | In this paper I describe the outline of the historical evolution of corporate governance in Japan, and intend to derive some insights on its future. While two alternative systems, the holding company-based system and the bank-based system were available in the 1920s, the former started to proliferate. However, the experiences during the Second World War made the corporate system choose the other fork in the road, the bank-based system. The changes in employment system and production management were complementary with the changes in corporate governance and finance. The Japanese corporate system, which was faced with a bifurcation in the 1920s and the 1930s, is now facing another bifurcation. |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2004cf310&r=his |
| By: | Richard H. Steckel |
| Abstract: | For over a quarter century anthropometric historians have struggled to identify and measure the numerous factors that affect adult stature, which depends upon diet, disease and physical activity from conception to maturity. I simplify this complex problem by assessing nutritional status in a particular year using synthetic longitudinal data created from measurements of children born in the same year but measured at adjacent ages, which are abundantly available from 28,000 slave manifests housed at the National Archives. I link this evidence with annual measures of economic conditions and new measures of the disease environment to test hypotheses of slave owner behavior. Height-by-age profiles furnish clear evidence that owners substantially managed slave health. The short-term evidence shows that weather affected growth via exposure to pathogens and that owners modified net nutrition in response to sustained price signals. |
| JEL: | N3 I1 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:10993&r=his |
| By: | Mario J. Crucini (Department of Econics, Vanderbilt University); James Kahn (Research Department, Federal Reserve Bank of New York) |
| Abstract: | In this paper we revisit the issues addressed in Crucini and Kahn (1996) in the light of recent research on the Great Depression. In that paper we had argued that particular features of the Hawley-Smoot tariffs could have provided them with a stronger impact than conventional wisdom had held, and we described the magnitudes in a calibrated general equilibrium model. We suggested that while the tariffs could directly account for only a small part of the Great Depression, they nonetheless had a significant, recession-sized impact, "small" only in the context of the Great Depression. Here we reformulate our arguments in the context of the business cycle accounting framework of Chari, Kehoe, and McGrattan (2002) and show that tariff increases in our model correspond primarily to an increased efficiency wedge in a prototype one-sector model. Moreover, the efficiency wedge implied by tariffs correlates well with the productivity wedge measured by CKM. Our model fails to produce a labor wedge of any consquence, which combined with large empirical estimates of the labor wedge in the U.S. by Mulligan (2002a) is the basis of his critique of the role we attribute to tariffs. While we agree that a complete understanding of the Great Depression will require an accounting for the labor wedge, its existence does not in any way contradict our case for a modest e¢ciency effect of the tariff war. |
| Keywords: | Business cycles, great depression, Smoot-Hawley tariff, |
| JEL: | F4 F13 |
| Date: | 2003–08 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0316&r=his |
| By: | William J. Collins (Department of Economics, Vanderbilt University); Robert A. Margo (Department of Economics, Vanderbilt University) |
| Abstract: | African-Americans entered the post-Civil War era with extremely low levels of exposure to schooling. Relying primarily on micro-level census data, we describe racial differences in literacy rates, school attendance, years of educational attainment, age-in-grade distributions, spending per pupil, and returns to literacy since emancipation, with emphasis on the pre-1960 period. The overwhelming theme is one of educational convergence, despite overt discrimination for much of the period studied, and subject to several qualifications. We interpret this theme in light of a simple model of educational attainment. |
| Keywords: | Brown, education, Plessy |
| JEL: | I2 J7 N3 |
| Date: | 2003–06 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0313&r=his |
| By: | Marc T. Law; Gary D. Libecap |
| Abstract: | We examine three theories of Progressive Era regulation: public interest, industry capture, and information manipulation by the federal bureaucracy and muckraking press. Based on analysis of qualitative legislative histories and econometric evidence, we argue that the adoption of the 1906 Pure Food and Drugs Act was due to all three factors. Select producer groups sought regulation to tilt the competitive playing field to their advantage. Progressive reform interests desired regulation to reduce uncertainty about food and drug quality. Additionally, rent-seeking by the muckraking press and its bureaucratic allies played a key role in the timing of the legislation. We also find that because the interests behind regulation could not shape the enforcing agency or the legal environment in which enforcement took place, these groups did not ultimately benefit from regulation in the ways originally anticipated. |
| JEL: | I1 N4 L5 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:10984&r=his |
| By: | Jeremy Smith |
| Abstract: | The purpose of this report is to uncover the factors behind what has been, on average, a strong productivity performance from the Canadian gold mining industry over the past four decades. It is found that real price movements have had a substantial impact on productivity growth in the gold mining industry in Canada. The real price of gold declined steadily throughout the 1990s, squeezing the profits of mines on sites of marginal quality and thereby leading to the closure of the least productive gold mines. This had the effect of increasing the average productivity of the overall industry. The report also finds evidence that the gold mining industry in Canada was not in good health towards the end of the 1970s, despite the record gold prices of this period. Real gold mining output decreased sharply and steadily throughout the 1960s and 1970s, despite massive capital accumulation. This situation was reversed in the 1980s, with new discoveries of gold, and strong productivity growth driven by technological and organizational improvements. As these observations suggest, the productivity performance of the Canadian gold mining industry has been markedly different from decade to decade. The 1960s and 1970s witnessed productivity stagnation followed by sharp declines, but the 1980s and 1990s saw gold mining productivity growth exceeding that at the total economy level by a wide margin. Overall, the productivity gains of the past two decades have more than offset the earlier poor performance, so that the average productivity record of the gold mining industry over the past four decades remains strong. |
| Keywords: | Gold Mining, Gold Industry, Mining, Mining Industry, Canada, Productivity, Productivity Growth |
| JEL: | L72 J24 D24 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:0408&r=his |
| By: | Antonio Yunez-Naude; Fernando Barceinas Paredes |
| Abstract: | The inclusion of the agrarian sector in the North American Foreign Trade Agreement (NAFTA) has created controversy since the beginning of negotiations. Mexico’s official vision has been that free trade, as well as agricultural reforms initiated in the country in the late eighties would transform the sector and increase national income; NAFTA opponents, on the other hand, claim that the Agreement has resulted in food dependency, massive rural migration and aggravated poverty. This paper present the main results of our econometric research on the true outcomes of nearly ten years into the NAFTA and around fifteen years of agrarian reforms, in terms of prices, trade and domestic agricultural production. Our findings suggest that the much-expected transformation of the Mexican agricultural sector has not occurred. |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:277&r=his |
| By: | Canales, Juan I. (IESE Business School); Vila, Joaquim (IESE Business School) |
| Abstract: | This paper examines the interplay between top and middle level managers as strategy-making settles and in subsequent managerial action. It reports on an exploratory case study at a car service company that has an aggressive expansion strategy. The study examines the context and characteristics of the strategy-making process and the specific evolution of fourteen strategic initiatives. Of particular interest was that the interplay between top managers and middle managers was resolved through a legitimizing mechanism. This interplay took place through deliberation and agreement, with extensive participation, and developed into shared views of strategy which provided legitimation. Once settled, strategic initiatives were subsequently developed in harmony with the strategic intent. This agreement provided guidance to carry out strategic initiatives and was a source of resilient strategic conversation. From analysis of the case, a model presenting how strategic intent interacts with the creation of strategic initiatives is presented. This model aims at overcoming the mutually exclusive bottom-up and top-down sources of influence, integrating both in a process model. |
| Keywords: | Strategy-making; middle management; top management; managerial action; |
| Date: | 2004–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0573&r=his |
| By: | John J. Siegfried (Department of Economics, Vanderbilt University; American Economics Association); Molly Gardner Burba (Private Investment Banking Company LLC, New York) |
| Abstract: | The College Football Association (CFA) sold rights to broadcast live games of its members from 1984 through 1995. It competed directly with the Big Ten and Pac Ten universities that sold an alternative broadcast package. Each of the duopolists dominated certain geographic areas, so that they retained much of the monopoly power of the single NCAA cartel that they replaced. The CFA restricted output in order to elevate rights fees, and limited entry into the Association. The broadcast rights fees it collected substantially exceeded marginal cost. This article examines how the number of sellers, entry conditions, product homogeneity, and the elasticity of demand fostered the cartel, and how the cartel prevented cheating on the agreement. Eventually, disputes over the distribution of the rents led to defections. Penn State and Notre Dame left in 1990 and 1991. When the Southeastern Conference struck out independently after 1995, the CFA collapsed. It sealed its books on June 30, 1997. |
| Keywords: | Cartels, CFA, College football, football television broadcasting, NCAA |
| JEL: | L83 |
| Date: | 2003–09 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0320&r=his |