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on Business, Economic and Financial History |
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Issue of 2010‒01‒23
ten papers chosen by |
| By: | Peter Murrell (Department of Economics, University of Maryland) |
| Abstract: | A fundamental question in economic development is how societies first acquire a successful set of institutions. To examine this question, the paper focuses on a paradigmatic example, England in the years surrounding the Glorious Revolution of 1688. North and Weingast (1989) view the constitutional changes following 1688 as an explicit attempt to design a new polity, having the effect of radically altering the functioning of the English political and economic system. The rise of England as a world economic power followed. In contrast, Hayek (1960) views the late 17th century changes as simply summarizing what was already in existence, a product of experience accumulated through trial and error and selective survival of productive institutions, ideas, and habits. This paper argues that the English experience of institutional development cannot be described as creation by design. The rise of England fits Hayek's evolutionary perspective. This conclusion rests on three composite pieces of evidence. First, a search for structural breaks in myriad data sets reveals that socioeconomic change was under way well before 1688. Second, an examination of the historical context and institutional content of each clause of the critical laws shows either that the clauses were already a part of effective law by 1688 or that they did not survive as viable constitutional measures. Third, an analysis of institutional and administrative innovations shows that many key developments affecting government finance were a product of the era before 1688. |
| Keywords: | Institutions, institutional development, constitutions, Glorious Revolution, design, evolution, Hayek, Bill of Rights |
| JEL: | O1 N0 O52 K1 N43 N13 H1 P5 B31 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:umd:umdeco:09-001&r=his |
| By: | Ingrid Henriksen (Department of Economics, University of Copenhagen); Markus Lampe (Department of Economics, University of Copenhagen); Paul Sharp (Department of Economics, University of Copenhagen) |
| Abstract: | The usual story of the “first era of globalization” at the end of the nineteenth century sees Denmark as something as an outlier: a country which, like Britain, resisted the globalization backlash in the wake of the inflow of cheap grain from the New World, but where agriculture, rather than going into decline, in fact flourished. Key to the success of Danish agriculture was an early diversification towards dairy production. We dispute this simple story which sees Denmark as something of a liberal paragon. Denmark’s success owed much to a prudent use of trade policy which favoured dairy production. Moreover, this favouritism continued even after a more general movement to free trade in the 1860s. Using micro-level data from individual dairies, we quantify the implied subsidy to dairy production from the tariffs, and demonstrate that this in many cases ensured the profitability of individual dairies. |
| Keywords: | dairies; Denmark; protection; tariffs; cheese |
| JEL: | N5 N7 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1004&r=his |
| By: | Becker, Sascha O.; Woessmann, Ludger |
| Abstract: | This paper uses recently discovered data on nearly 300 Prussian counties in 1816 to show that Protestantism led to more schools and higher school enrollment already before the industrialization. This evidence supports the human capital theory of Protestant economic history of Becker and Woessmann (2009), where Protestantism first led to better education, which in turn facilitated industrial development. It rules out that the existing end-of-19th-century evidence can be explained by a Weberian explanation, where a Protestant work ethic first led to industrialization which then increased the demand for education. |
| Keywords: | Pre-Industrialization; Protestantism; Education |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2010-01&r=his |
| By: | Paul Sharp (Department of Economics, University of Copenhagen) |
| Abstract: | It is often assumed that Britain’s colonies followed the British doctrine of free trade in the second half of the nineteenth century. Malta, which became a British colony in 1814, did indeed become an early free trader. However, she failed to liberalize the grain trade, even when the mother country famously repealed the Corn Laws. This paper documents that although institutions changed over the years, the ad valorem equivalents of the duties on wheat did not. The reason for this seems to be that administrators were convinced that is was not possible to fund government spending in any other way. The duties on grain in Malta were therefore not protectionist, but rather for revenue purposes, in contrast to the UK Corn Laws. Taxing an inelastic demand for foreign wheat by Maltese, who were unable to grow enough food to support themselves, was certainly an effective way of raising revenue, but probably not the fairest one, as contemporaries were well aware. |
| Keywords: | Malta; wheat; trade policy; British Empire |
| JEL: | N4 N5 N7 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1003&r=his |
| By: | Pierre-Cyrille Hautcoeur; Amir Rezaee; Angelo Riva |
| Abstract: | Theoretical and historical experience suggests a financial centre may either include a single, consolidated and loosely regulated stock exchange attracting all intermediaries and actors, or a variety of exchanges going from strictly regulated to completely unregulated and adapted to the needs of different categories of intermediaries, investors and issuers. Choosing between these two solutions is uneasy because few substantial changes occur at this "meta-regulatory" level. The history of the Paris exchanges provides a good example, since two legal changes in opposite directions occurred in the late 19th century, when Paris was the second financial centre in the world. In 1893, a law threatened the existing two-exchanges equilibrium by diminishing the advantages of the more regulated exchange; in 1898, another law brought them back. We analyse the impact of these two changes on the competition between the exchanges in terms of securities listed, traded volumes and spreads. We conclude competition among exchanges is a delicate matter and efficiency is not always where one would think. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2010-01&r=his |
| By: | Karl Aiginger (WIFO) |
| Abstract: | This paper compares the depth of the recent crisis and the Great Depression. We use a new data set to compare the drop in activity in the industrialised countries for seven activity indicators. This is done under the assumption that the recent crisis levelled off in mid-2009 for production and will do so for unemployment in 2010. Our data indicate that the recent crisis indeed had the potential to be another Great Depression, as shown by the speed and simultaneity of the decline in the first nine months. However, if we assume that a large second dip can be avoided, the drop in all indicators overall will have been smaller than during the Great Depression. This holds true specifically for GDP, employment and prices, and least for manufacturing output. The difference in the depth of the crises concurs with differences in policy reaction. This time monetary policy and fiscal policy were applied courageously, speedily and partly internationally coordinated. During the Great Depression for several years fiscal policy tried to stabilise budgets instead of aggregate demand, and either monetary policy was not applied or was rather ineffective insofar as deflation turned lower nominal interest rates into higher real rates. Only future research will be able to prove the exact impact of economic policy, but the current tentative conclusion is that economic policy prevented the recent crisis from developing into a second Great Depression. This is also a partial vindication for economists. The majority of them might not have been able to predict the crisis, but it shows that the science did learn its lesson from the Great Depression and was able to give decent policy advice to at least limit the depth of the recent crisis. |
| Date: | 2009–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2009:i:354&r=his |
| By: | Hantke, Max; Spoerer, Mark |
| Abstract: | Weimar’s politicians used to attribute the continuous budget crises after the currency stabilization of 1923–4 to the burden put on the German economy by the Treaty of Versailles, in particular the reparation payments. This argument, which is still popular, neglects the fact that the restriction of the German military to 115,000 men relieved the German central budget considerably. In a counterfactual analysis we assess the savings in additional military costs and compare them to the reparation payments. Depending on the character of the foreign policy pursued by an unrestricted Germany, we find that the net effect of the Treaty’s stipulations on the German central budgets was either much lower than hitherto thought or even positive. This finding gives support to the argument that Germany suffered from home-made political failure even in the relatively stable period from 1924 to 1929. |
| Keywords: | Treaty of Versailles; reparations; military budget; Dawes plan; Weimar Germany; peace dividend |
| JEL: | H60 N44 |
| Date: | 2010–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20054&r=his |
| By: | Rui Esteves; David Khoudour-Casteras |
| Abstract: | This paper addresses the question whether the substantial financial flows received by emigration countries in the four decades running up to World War I contributed to domestic financial development in peripheral Europe. We quantify a sizable and significant relation between remittances and measures of development of the financial sector that is both larger than the contribution of other international capital flows and than the best estimates of the same relation in our days. Given that financial development is regularly included among the conditions for economic growth and catch up of developing nations, this paper adds to our understanding of the multiple impacts of the mass migration phenomenon on the economies of emigration countries. |
| Keywords: | International migration; remittances; financial development |
| JEL: | F24 N13 O16 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2009-12&r=his |
| By: | Adolfo Meisel; Juan D. Barón |
| Abstract: | Este documento explora la relación entre la independencia del banco central y los niveles de inflación en América Latina, usando como estudio de caso la experiencia de Colombia (1923-2008). Desde su creación en 1923 la independencia y objetivos del banco central en Colombia han sido modificados substancialmente. Entre 1923 y 1951 el banco central fue un ente privado e independiente, teniendo como objetivo principal la estabilidad de precios. En 1962 la responsabilidad monetaria se dividió entre la Junta Monetaria, encargada del diseño de la política monetaria, y el banco central, que la ejecutaba. A principios de los años noventa el banco recobró su independencia y su objetivo pasó a ser el control de la inflación. Los niveles de inflación en estos períodos fueron diferentes. El análisis sugiere que la combinación de un banco central independiente con un objetivo de estabilidad de precios produce mejores resultados en tales términos. |
| Date: | 2010–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:col:000101:006406&r=his |
| By: | Erik Gartzke; Dominic Rohner |
| Abstract: | Nations have historically sought power and prosperity through control of physical space. In recent decades, however, territorial empire has largely ceased. Most states that can take and hold territory no longer appear eager to do so, while the weak are unable to expand. Have powerful countries become 'kinder and gentler', or has something fundamental changed about the logic of empire? We offer a theory of imperialism and decolonization that explains both historic cycles of expansion and decline and the demise of the urge to colonize. Technological shocks enable expansion, while military technology gradually disseminates, diluting imperial advantage. At the same time, economic development has led to a secular decline in the payoffs for appropriating land, minerals, and reluctant labor. Once conquest no longer pays for great powers, the systemic imperative to vertically integrate production also becomes archaic. |
| Keywords: | Imperialism, decolonization, development, democracy, mercantilism |
| JEL: | D74 N40 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:466&r=his |