New Economics Papers
on Business, Economic and Financial History
Issue of 2007‒02‒24
23 papers chosen by
  1. Structural Change in the Swedish economy in the late nineteenth and early twentieth century – The role of import substitution and export demand By Bohlin, Jan
  2. Macroeconomic Implications of Gold Reserve Policy of the Bank of England during the Eighteenth Century By Elisa Newby
  3. Did Vasco da Gama Matter for European Markets? Testing Frederick Lane's Hypotheses Fifty Years Later By Kevin H. O'Rourke; Jeffrey G. Williamson
  4. The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective By Bertocchi, Graziella
  5. Long Run Health Impacts of Income Shocks: Wine and Phylloxera in 19th Century France By Abhijit Banerjee; Esther Duflo; Gilles Postel-Vinay; Timothy M. Watts
  6. Immigration, Industrial Revolution and Urban Growth in the United States, 1820-1920: Factor Endowments, Technology and Geography By Sukkoo Kim
  7. War and Welfare: Britain, France and the United States 1807-14 By Kevin H. O'Rourke
  8. Why Do World War II Veterans Earn More Than Nonveterans? By Joshua D. Angrist; A. Krueger
  9. "Productivity, Capital Utilization, and Intra-firm Diffusion: A Study of Steel Refining Furnaces" By Tsuyoshi Nakamura; Hiroshi Ohashi
  10. Lange and his 1938-contribution – An early Keynesian? By Finn Olesen
  11. The Entrepreneurship-Philanthropy Nexus: Nonmarket Source of American Entrepreneurial Capitalism By Zoltan J. Acs; David Audretsch; Ronnie J. Phillips; Sameeksha Desai
  12. "Methodology and Microeconomics in the Early Work of Hyman P. Minsky" By Jan Toporowski
  13. Revisiting the Enclave Hypothesis: Miami Twenty-Five Years Later By Alejandro Portes; Steven Shafer
  14. Fiscal Policy Switching: Evidence from Japan, the U.S., and the U.K. By Arata Ito; Tsutomu Watanabe; Tomoyoshi Yabu
  15. The Farm, the City and the Emergence of Social Security By Caucutt, Elizabeth; Cooley, Thomas F; Guner, Nezih
  16. The Evolution of Unjust-Dismissal Legislation in the United States. By Alan B. Krueger
  17. Antitrust and Regulation By Dennis W. Carlton; Randal C. Picker
  18. The Political Origin of Pension Funding By Perotti, Enrico C; Schwienbacher, Armin
  19. The Human Development Index in Historical Perspective: Italy from Political Unification to the Present Day By Leandro Conte; Giuseppe Della Torre; Michelangelo Vasta
  20. Research methods in negotiation: 1965-2004 By Buelens, M.; Van De Woesteyne, M.; Steven Mestdagh; Dave Bouckenooghe
  21. The American Family and Family Economics By Shelly Lundberg; Robert A. Pollak
  22. The Effects of Minimum Wage Legislation: A Case Study of California, 1987-89. By David Card
  23. Evaluating the Effects of the Employment Tax Credit of 1977 By Orley Ashenfelter
  1. By: Bohlin, Jan (Department of Economic History, School of Business, Economics and Law, Göteborg University)
    Abstract: The paper presents input-output tables for the Swedish economy for 1885, 1898 and 1913. These tables are used to explore structural change and to decompose Swedish economic growth in 1885–1898 and 1898–1913 into different demand sources: exports, import substitution and home market growth. While the 1890’s was a decade of import substitution export demand was always important and a much more important source of demand growth than import substitution after the turn of the century 1900 <p>
    Keywords: Economic History; Input-output tables; Inter-industry economics; Structural change
    JEL: D57 N13
    Date: 2007–02–21
    URL: http://d.repec.org/n?u=RePEc:hhs:gunhis:0008&r=his
  2. By: Elisa Newby
    Abstract: By imposing a simple adjustment cost on gold purchases the Bank of England was able to manage external drains of monetary gold while maintaining the convertibility of pound during the eighteenth century. This was a period during which constant political disturbances and external shocks on the market price of gold made monetary policy a challenging task. The implications of adjustment cost were not just limited to the gold reserves of the Bank, but stabilised consumption and the price level.
    Keywords: Gold standard, Monetary policy, Monetary regimes, Adjustment Costs.
    JEL: C61 E31 E4 E5 N13
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:san:cdmawp:0708&r=his
  3. By: Kevin H. O'Rourke (Department of Economics, Trinity College); Jeffrey G. Williamson (Department of Economics, Harvard University)
    Abstract: In his seminal publications between the 1930s and 1960s, Frederick Lane offered three hypotheses regarding the impact of the Voyages of Discovery that have guided debate ever since. First, pepper and other spice prices did not rise in European markets in the century before the 1490s, and thus could not have ‘pulled in’ the oceanic explorations by their rising scarcity. Second, Portuguese circumnavigation of A frica did not lower European spice prices across the 16th century, implying that the discovery of the Cape route had no permanent effect on Euro-Asian market integration. Third, 15th century Venetian spice markets were already well integrated with those in Iberia and northern Europe, implying that Portugal could not have had an intra-European market integrating influence in the 16th century. Lane developed these influential hypotheses by relying heavily on nominal spice prices from Venice and the Levant. This paper revisits Lane’s hypotheses by using instead relative spice prices, that is, accounting for inflation. It also draws on evidence from Iberia and northern Europe. In addition, it explores European market integration before and after 1503, the year when da Gama returned from his financially successful second voyage. Lane’s three hypotheses are rejected: the impact of the Portuguese was profound on all fronts. We conclude by using a simple model of monopoly and oligopoly to decompose the sources of the Cape route’s impact on European markets.
    JEL: F14 N7
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:tcd:tcduee:tep2007&r=his
  4. By: Bertocchi, Graziella
    Abstract: Several countries have recently abolished or significantly reduced their taxes on bequests. Bequest taxes, on the other hand, were among the first to be introduced when modern systems of taxation were developed at the end of the nineteenth century. We propose an explanation for these facts which is based on a dynamic political economy model where redistribution is determined not only by wealth inequality but also by sectoral reallocation from agriculture to manufacturing. The model shows that the dynamics of capital accumulation induce a reduction of wealth inequality, which is further accelerated by the redistributive impact of the bequest tax. Through a standard politico-economic mechanism, wealth equalization pushes toward a reduced role of the bequest tax. At the same time, however, a second mechanism is at work, with structural reallocation from agriculture to manufacturing shifting the tax base from hard-to-avoid taxes on land toward easy-to-avoid taxes on capital. The differential treatment of land and capital introduces a source of asymmetry in the tax system which interferes with the determination of the dynamic political equilibrium of the model. Its effect is to compress bequest taxation but also to delay its gradual reduction due to declining wealth inequality. A number of extensions to the basic model allow to match our theory with the long-term evolution of bequest taxation in modern democracies and with the drastic discrepancies currently observed between tax systems in developed and underdeveloped countries.
    Keywords: bequest tax; redistribution; structural reallocation; voting; wealth inequality
    JEL: H20 N40 P16
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:6115&r=his
  5. By: Abhijit Banerjee; Esther Duflo; Gilles Postel-Vinay; Timothy M. Watts
    Abstract: This paper provides estimates of the long-term effects on height and health of a large income shock experienced in early childhood. Phylloxera, an insect that attacks the roots of grape vines, destroyed 40% of French vineyards between 1863 and 1890, causing major income losses among wine growing families. Because the insects spread slowly from the southern coast of France to the rest of the country, Phylloxera affected different regions in different years. We exploit the regional variation in the timing of this shock to identify its effects. We examine the effects on the adult height, health, and life expectancy of children born in the years and regions affected by the Phylloxera. The shock decreased long run height, but it did not affect other dimensions of health, including life expectancy. We find that, at age 20, those born in affected regions were about 1.8 millimeters shorter than others. This estimate implies that children of wine-growing families born when the vines were affected in their regions were 0.6 to 0.9 centimeters shorter than others by age 20. This is a significant effect since average heights grew by only 2 centimeters in the entire 19th century. However, we find no other effect on health, including infant mortality, life expectancy, and morbidity by age 20.
    JEL: I12 N32 O12
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12895&r=his
  6. By: Sukkoo Kim
    Abstract: Industrial revolution is fundamentally linked with the rise of factories and the decline of skilled artisans in manufacturing. Most scholars agree that factories as compared to artisan shops were intensive in unskilled labor. Indeed, the hallmark of the early factories is the utilization of division of labor of relatively unskilled workers. This paper explores whether the massive influx of unskilled immigrants between 1840 and 1920, by significantly increasing the ratio of unskilled to skilled labor endowment, contributed to the growth and spread of factory manufacturing in the United States. The data indicate that immigration not only contributed to the growth and spread of factories but it also contributed to the growth of cities.
    JEL: F2 J2 N3 N6 O30
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12900&r=his
  7. By: Kevin H. O'Rourke (Department of Economics, Trinity College)
    Abstract: This paper assesses the relative welfare costs of the various embargos and blockades of the years 1807-1814 in three countries: Britain, France and the United States. Relative price evidence indicates that these blockades and embargos did restrict trade, and that britain was less severely affected than her rivals. Benchmark welfare estimates for the United States are particularly high, at roughly 5% per annum. While absolute welfare estimates depend on elasticity assumptions, the US unambiguously came out worst in these disputes, and Britain almost surely suffered lower losses than France as well.
    JEL: F1 N7
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:tcd:tcduee:tep2008&r=his
  8. By: Joshua D. Angrist; A. Krueger
    URL: http://d.repec.org/n?u=RePEc:pri:indrel:254&r=his
  9. By: Tsuyoshi Nakamura (Department of Economics, Tokyo Keizai University); Hiroshi Ohashi (Faculty of Economics, University of Tokyo)
    Abstract: This paper examines the intra-firm diffusion of new technology in the Japanese steel industry. The introduction of the basic oxygen furnace was the greatest breakthrough in steel refining in the last century. Using unique panel data concerning capital utiliza- tion, the paper estimates total factor productivity by technology type, and associates the estimate with intra-firm diffusion. Estimation results reveal that the productivity difference between the old and new technologies plays an important role. The paper also finds that in operation, the old technology can better respond to changes in market demand, which brings about counter-cyclicality in the measured productivity.
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:tky:fseres:2007cf471&r=his
  10. By: Finn Olesen (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: In February 1936 John Maynard Keynes gave birth to modern macroeconomics when he published The General Theory of Employment, Interest and Money. In some ways Oskar Lange was seemly also very critical of mainstream neoclassi-cal thinking although known as a working marginalist for the greater part of his life. In this note we try to identify what Lange might have had so say of Keynesian nature especially in an important contribution from 1938. I would like to thank Danuta Tomczak, Oestfold University College Remmen, Halden, Norway, and Heine Ruppert, Department of Environmental and Busi-ness Economics, for comments to an earlier draft of this paper.
    Date: 2006–12
    URL: http://d.repec.org/n?u=RePEc:sdk:wpaper:74&r=his
  11. By: Zoltan J. Acs; David Audretsch; Ronnie J. Phillips; Sameeksha Desai
    Abstract: What differentiates American capitalism from all other forms of industrial capitalism is a historical focus on both the creation of wealth (entrepreneurship) and the reconstitution of wealth (philanthropy). Philanthropy has been part of the implicit American social contract that continuously nurtures and revitalizes economic prosperity. Much of the new wealth created historically has been given back to the community to build many of the great social institutions that have paved the way for future economic growth. This entrepreneurship-philanthropy nexus has not been fully explored by either economists or the general public. The purpose of this paper is to suggest that American philanthropists—particularly those who have made their own fortunes—create foundations that, in turn, contribute to greater and more widespread economic prosperity through knowledge creation. Analyzing philanthropy sheds light on our current understanding of how economic development has occurred, as well as the roots of American economic dominance.
    Keywords: entrepreneurship, philanthropy, capitalism, knowledge
    JEL: D64 M13 M14
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:esi:egpdis:2007-09&r=his
  12. By: Jan Toporowski
    Abstract: This paper reviews the recently published Ph.D. thesis of Hyman P. Minsky, summarizing its main contributions to methodology and microeconomics. These were aspects of economics with which Minsky is not usually associated, but which lie at the foundation of his later work. They include critical remarks on Cambridge economics. The paper then draws out some antecedents of Minsky's ideas in the work of Henry Simons, and highlights the Marshallian monetary analysis that he adopted.
    Date: 2006–11
    URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_480&r=his
  13. By: Alejandro Portes (Princeton University); Steven Shafer (Princeton University)
    Abstract: We review the empirical literature on ethnic economic enclaves after the concept was formulated twenty-five years ago. The balance of this literature is mixed, but many studies reporting negative conclusions were marred by faulty measurement of the concept. We discuss the original theoretical definition of enclaves, the hypotheses derived from it, and the difficulties in operationalizing them. For evidence, we turn to census data on the location and the immigrant group that gave rise to the concept in the first place – Cubans in Miami. We examine the economic performance of this group, relative to others in this metropolitan area, and in the context of historical changes in its own mode of incorporation. Taking these changes into account, we find that the ethnic enclave had a significant economic payoff for its founders – the earlier waves of Cuban exiles – and for their children, but not for refugees who arrived in the 1980 Mariel exodus and after. Reasons for this disjuncture are examined. Implications of these results for enclave theory and for immigrant entrepreneurship in general are discussed.
    Date: 2006–05
    URL: http://d.repec.org/n?u=RePEc:pri:cmgdev:wp0610&r=his
  14. By: Arata Ito (Graduate Student, Graduate School of Economics, Hitotsubashi University (E-mail: ged1102@srv.cc.hit-u.ac.jp)); Tsutomu Watanabe (Institute of Economic Research and Research Center for Price Dynamics, Hitotsubashi University (E-mail: tsutomu.w@srv .cc.hit-u.ac.jp)); Tomoyoshi Yabu (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: tomoyoshi.yabu@boj.or.jp))
    Abstract: This paper estimates fiscal policy feedback rules in Japan, the United States, and the United Kingdom for more than a century, allowing for stochastic regime changes. Estimating a Markov-switching model by the Bayesian method, we find the following: First, the Japanese data clearly reject the view that the fiscal policy regime is fixed, i.e., that the Japanese government adopted a Ricardian or a non-Ricardian regime throughout the entire period. Instead, our results indicate a stochastic switch of the debt-GDP ratio between stationary and nonstationary processes, and thus a stochastic switch between Ricardian and non-Ricardian regimes. Second, our simulation exercises using the estimated parameters and transition probabilities do not necessarily reject the possibility that the debt-GDP ratio may be nonstationary even in the long run (i.e., globally nonstationary). Third, the Japanese result is in sharp contrast with the results for the U.S. and the U.K. which indicate that in these countries the government's fiscal behavior is consistently characterized by Ricardian policy.
    Keywords: Fiscal Policy Rule, Fiscal Discipline, Markov-Switching Regression
    JEL: E62
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:ime:imedps:07-e-02&r=his
  15. By: Caucutt, Elizabeth; Cooley, Thomas F; Guner, Nezih
    Abstract: During the period from 1880 to 1950 publicly managed retirement security programs became an important part of the social fabric in most advanced economies. In this paper we study the social, demographic and economic origins of social security. We describe a model economy in which demographics, technology, and social security are linked together. We study an economy with two locations (sectors), the farm (agricultural) and the city (industrial). The decision to migrate from rural to urban locations is endogenous and linked to productivity differences between the two locations and survival probabilities. Furthermore, the level of social security is determined by majority voting. We show that a calibrated version of this economy is consistent with the historical transformation in the United States. Initially a majority of voters live on the farm and do not want to implement social security. Once a majority of the voters move to the city, the median voter prefers a positive social security tax, and social security emerges.
    Keywords: migration; political economy; social security
    JEL: D72 H3 H55
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:6131&r=his
  16. By: Alan B. Krueger
    URL: http://d.repec.org/n?u=RePEc:pri:indrel:258&r=his
  17. By: Dennis W. Carlton; Randal C. Picker
    Abstract: Since the passage of the Interstate Commerce Act (1897) and the Sherman Act (1890), regulation and antitrust have operated as competing mechanisms to control competition. Regulation produced cross-subsidies and favors to special interests, but specified prices and rules of mandatory dealing. Antitrust promoted competition without favoring special interests, but couldn't formulate rules for particular industries. The deregulation movement reflected the relative competencies of antitrust and regulation. Antitrust and regulation can also be viewed as complements in which regulation and antitrust assign control of competition to courts and regulatory agencies based on their relative strengths. Antitrust also can act as a constraint on what regulators can do. This paper uses the game-theoretic framework of political bargaining and the historical record of antitrust and regulation to establish and illustrate these points.
    JEL: K2 K21 K23 L4 L43 L44 L5 L51
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12902&r=his
  18. By: Perotti, Enrico C; Schwienbacher, Armin
    Abstract: This paper argues that historical political preferences on the role of capital markets shaped national choices on pension reliance on private funding. Under democratic voting, a majority will support investor protection and a privately funded pension system when the middle class has significant financial participation, while high wealth concentration favors a state-funded retirement system and weak investor rights. We present evidence that pension funding is well explained by wealth distribution shocks in the first half of the 20th Century. The effect is very significant: a large shock reduces the stock of private retirement assets by 58% of GDP. The results stand after controlling for complementary explanations, such as legal origin, past and current demographics, religion, electoral voting rules, national experiences with financial market performance, or other major financial shocks that were not specifically redistributive.
    Keywords: inflationary shocks; pension; political economy; redistribution; retirement finance
    JEL: G21 G28 G32 J26
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:6100&r=his
  19. By: Leandro Conte; Giuseppe Della Torre; Michelangelo Vasta
    Abstract: The aim of this research is to provide a long run estimate of the Human Development Index (HDI) for Italy. To this purpose we have reconstructed Italian historical series relative to life expectancy, literacy rate, school enrolment rates and income. All the series presented are the result of a study which has produced, starting from primary sources, original series disaggregated to the regional level. The possibility of having, for Italy, a basis of comparison with the main developed countries has permitted us to show that, even though there has been significant progress in the values of the single variables, the country has not appreciably improved its position in the world ranking. This seems to be due, in large part, to the trend of the education variables that displays values decidedly distant from those of the main industrialized countries. As far as regional trends are concerned, we can observe a slow process of alignment of the values of the Southern regions to the values of the other Italian regions for levels of education and longevity, while income levels for the 1990s still remain quite distant.
    JEL: N30
    Date: 2007–01
    URL: http://d.repec.org/n?u=RePEc:usi:wpaper:491&r=his
  20. By: Buelens, M.; Van De Woesteyne, M.; Steven Mestdagh; Dave Bouckenooghe
    Abstract: This study provides insight into the dominant methodological practices that have shaped the field of negotiation over the past four decades, and sheds light on possible gaps and trade-offs. We content analyzed 941 peer reviewed negotiation articles (published between 1965-2004) for methodology. We distinguished key issues in negotiation research and identified methodological trends over time (1965-2004). The results reveal significant changes in reliability, validity and triangulation issues. In addition, the rise of multivariate statistics and multiple data-sources displays a positive evolution towards more sophisticated methodologies. However, more attention is needed to address the enduring lack of longitudinal designs and qualitative techniques in negotiation research.
    Keywords: negotiation; research methodology; review; validity; triangulation
    Date: 2007–02–12
    URL: http://d.repec.org/n?u=RePEc:vlg:vlgwps:2007-7&r=his
  21. By: Shelly Lundberg; Robert A. Pollak
    Abstract: The twenty-fifth anniversary of the publication of Gary Becker's path-breaking "Treatise on the Family" provides an occasion to reexamine both the American family and family economics. We begin by discussing how families have changed in recent decades: the separation of sex, marriage, and childbearing; fewer children and smaller households; converging work and education patterns for men and women; class divergence in partnering and parenting strategies; and the replacement of what had been family functions and home production by government programs and market transactions. After discussing recent work in family economics that attempts to explain these changes, we point out some challenging areas for further analysis, and highlight issues of commitment in two primary family relationships: those between men and women, and those between parents and children. We conclude by discussing the effectiveness of policies to target benefits to certain family members (e.g., children) or to promote marriage and fertility.
    JEL: D1 J1 J2
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:12908&r=his
  22. By: David Card
    URL: http://d.repec.org/n?u=RePEc:pri:indrel:278&r=his
  23. By: Orley Ashenfelter
    URL: http://d.repec.org/n?u=RePEc:pri:indrel:110&r=his
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