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on Business, Economic and Financial History |
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Issue of 2012‒03‒14
ten papers chosen by |
| By: | Matthias Morys |
| Abstract: | This paper asks why the Classical Gold Standard (1870s - 1914) emerged: Why did the vastmajority of countries tie their currencies to gold in the late 19th century, while there was onlyone country – the UK – on gold in 1850? The literature distinguishes a number of theories toexplain why gold won over bimetallism and silver. We will show the pitfalls of these theories(macroeconomic theory, ideological theory, political economy of choice between gold andsilver) and show that neither the early English lead in following gold nor the German shift togold in 1873 were as decisive as conventional accounts have it. Similarly, we argue that thesilver supply shock materializing in the early 1870s was only the nail in the coffin of silverand bimetallic standards. Instead, we focus on the impact of the 1850s gold supply shock (dueto the immense gold discoveries in California and Australia) on the European monetarysystem. Studying monetary commissions in 13 European countries between 1861 and 1874,we show that the pan-European movement in favour of gold monometallism was motivatedby three key factors: gold being available in sufficient quantities to actually contemplate thetransition to gold monometallism for a larger number of countries (while silver had becomeextremely scarce in the bimetallic bloc, which was the single most important currency area interms of GDP), widespread misgivings over the working of bimetallism and the fact that goldcould encapsulate substantially more value in the same volume than silver (i.e. coinconvenience). In our view, then, the emergence of the Classical Gold Standard was imminentin the late 1860s; which European country would move first – which is often erroneouslyattributed to Germany – is of secondary importance. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:yor:cherry:12/01&r=his |
| By: | Burton A. Abrams (Department of Economics, university pf Delaware); Jing Li; James G. Mulligan (Department of Economics, University of Delaware) |
| Abstract: | The United States witnessed substantial growth in manufacturing and urban populations during the last half of the nineteenth century. To date, no convincing evidence has been presented to explain the shift in population to urban areas. We find evidence that capital intensity, particularly new capital in the form of steam horsepower, played a significant role in drawing labor into counties and by inference into urban areas. This provides support for the hypothesis that the locational decisions of manufacturers and their placement of capital in urban areas fueled urban growth in the nineteenth century. |
| Keywords: | urbanization, capital intensity, regional population growth, technological change |
| JEL: | J61 N11 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dlw:wpaper:12-02.&r=his |
| By: | Diewert, Erwin |
| Abstract: | There are four main approaches to bilateral index number theory: the fixed basket, stochastic, test and economic approaches. The paper reviews the contributions of Irving Fisher to these approaches to index number theory which are still in use today. The paper also reviews Fisher’s contributions to multilateral index number theory. The main themes of the paper are developed in the context of a review of the early history of index number theory: a history that conveys a wealth of information and insight into the making and use of index numbers today. |
| Keywords: | Price indexes, quantity indexes, bilateral price indexes, multilateral price indexes, the Fisher ideal index, the test approach to index number theory |
| JEL: | B16 B31 C43 C81 E01 E31 |
| Date: | 2012–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ubc:bricol:erwin_diewert-2012-9&r=his |
| By: | Sebastián Galiani (Department of Economics, Washington University in St Louis); Guido Porto (Development Research Group, The World Bank) |
| Abstract: | This paper provides new evidence on the impacts of trade reforms on wages. We first introduce a model of trade that combines a non-competitive wage setting mechanism due to unions with a factor abundance hypothesis. The predictions of the model are then econometrically investigated using Argentine data. Instead of achieving identification by comparing industrial wages before and after one episode of trade liberalization, our strategy exploits the recent historical record of policy changes adopted by Argentina: from significant protection in the early 1970s, to the first episode of liberalization during the late 1970s, then back to a slowdown of reforms during the 1980s, and finally to the second episode of liberalization in the 1990s. These swings in trade policy represent broken trends in trade reforms that we can compare with observed trends in wages and wage inequality. We use unusual historical data sets of trends in tariffs, wages, and wage inequality to examine the structure of wages in Argentina and to explore how it is affected by tariff reforms. We find that i) trade liberalization, ceteris paribus, reduces wages; ii) industry tariffs reduce the industry skill premium; iii) conditional on the structure of tariffs at the industry level, the average tariff in the economy is positively associated with the aggregate skill premium. These findings suggest that the observed trends in wage inequality in Latin America can be reconciled with the Stolper-Samuelson predictions in a model with unions. |
| Keywords: | Trade liberalization, Stolper-Samuelson, Wage inequality, non-competitive wages and unions. |
| JEL: | F14 F16 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0124&r=his |
| By: | Engartner, Tim |
| Abstract: | Despite severe economic turmoil within the last decade the stock diagnosis for most market insufficiencies has been: the state must be 'slimmed down'. Satisfying social needs through the free market under the slogan of 'less government is good government' has been a constitutive feature of economic policy since the rise of neoliberalism in the 1980s. But even as the deregulation of the markets and the 'downsizing' of the state causes growing social turbulences - especially in the context of the current financial and economic meltdown - politicians, scholars and the media still cling to the idea of an omnipotent market. Deeprooted and widely-spread anti-statism still fulfils the role of a creed serving to legitimize the necessity of market-centred 'reforms'. -- |
| Keywords: | anti-statism,free-market economy,laissez-faire,lean state,liberalism,neoliberalism,Mont Pèlerin Society |
| JEL: | A11 B22 B26 L3 N20 P16 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cessdp:28&r=his |
| By: | Slim Bridji |
| Abstract: | Using the business cycle accounting framework [Chari V., P. Kehoe and E. McGrattan 2007. Business Cycle Accounting. Econometrica 75, 781-836.], this paper sheds new light on the French Great Depression. Frictions that reduce the efficiency with which factor inputs are used (efficiency wedge) were the primary factor in the economic downturn. The decline in consumption can be attributed to distortions in the Euler equation (investment wedge). In addition, frictions creating a gap between the marginal rate of substitution and the marginal product of labor (labor wedge) contributed to the slowdown of the economy after 1936. This drop in the efficiency wedge might have resulted from financial frictions and tariff policies, whereas the investment wedge might have been caused by financial frictions due to agency costs. A potential explanation for the decline of the labor wedge after 1936 is institutionals changes in the labor market. |
| Keywords: | Business cycle accounting, French economy, Great Depression |
| JEL: | E32 N14 N44 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:065&r=his |
| By: | van Bochove, Christiaan; Boerner, Lars; Quint, Daniel |
| Abstract: | This paper studies Anglo-Dutch premium auctions used in the secondary market for financial securities in eighteenth-century Amsterdam, Europe's financial capital at the time. An Anglo-Dutch premium auction consists of an English auction followed by a Dutch auction, with a cash premium paid to the winner of the first round regardless of the second-round outcome. To rationalize the introduction and continued use of this auction format, we need to determine whether bidding behavior was consistent with equilibrium play. We model this auction format theoretically, and show that the likelihood of a bid in the second round should be higher when there is greater uncertainty about the value of the security being sold. We then test this prediction on data from 16,854 securities sold at auction on 469 days over an 18-year period in the late 1700s; using several different proxies for the uncertainty of a given security's value, we find support for this theoretical prediction. -- |
| JEL: | D44 N23 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:20123&r=his |
| By: | Giorgio Gobbi (Bank of Italy); Enrico Sette (Bank of Italy) |
| Abstract: | This paper sheds new light on the value of relationship lending by studying whether, after Lehman's default, banks provided a steadier flow of credit and charged lower interest rates, to those firms they established a closer relation with. By exploiting the presence of multiple banking relationships, we are able to control for firms' and banks' unobserved characteristics. Results show that credit growth has been higher if: i) the lending relation was longer; ii) the distance between the bank and the firm shorter; iii) the bank held a larger share of total credit. Similarly, banks increased the cost of credit less to firms they had a longer relation with and they were closer to. We also explore whether the eÏect of relationship lending depended upon bank or firm characteristics, or on the concentration of the local credit market. Finally, we test whether the eÏect of relationship lending changed during the crisis with respect to a pre-crisis period. |
| Keywords: | cost of credit, credit supply, financial crisis, relationship lending |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:59&r=his |
| By: | Matthias Morys |
| Abstract: | Drawing on a new data set of monthly observations, this paper investigates similarities and differences in discount rate policy of 12 European countries under the Classical Gold Standard; it asks, in particular, whether bank rate policy followed different patterns in core and peripheral countries. Based on OLS, ordered probit and pooled estimations of central bank discount rate behaviour, two main findings emerge: first, the discount rate decisions of core countries were motivated by keeping the exchange-rate within the gold points. In stark contrast, the discount rate decisions of peripheral countries reflected changes in the domestic cover ratio. The main reason for the different behaviour was the limited effectiveness of the discount rate tool for peripheral countries which resulted in more frequent gold point violations. Consequently, peripheral countries relied on high reserve levels and oriented their discount rate policy towards maintaining the reserve level. Second, interest rate decisions were influenced by Berlin and London to a similar degree, suggesting that the European branch of the Classical Gold Standard was less London-centered than hitherto assumed. In establishing general patterns of discount rate policy, this paper aims to contribute to the wider question of monetary policy under the gold standard and the core-periphery dichotomy. |
| Keywords: | gold standard, rules of the game, balance-of-payment adjustment, central banking |
| JEL: | E4 E5 E6 F3 N13 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:yor:cherry:12/02&r=his |
| By: | Juma, Calestous (Harvard University) |
| Abstract: | Science and innovation have always been the key forces behind agricultural growth in particular and economic transformation in general. More specifically, the ability to add value to agricultural production via the application of scientific knowledge to entrepreneurial activities stands out as one of the most important lessons of economic history. The Green Revolution played a critical role in helping to overcome chronic food shortages in Latin America and Asia. The Green Revolution was a result of both the creation of new institutional arrangements aimed at using existing technology to improve agricultural productivity, as well as new scientific breakthroughs leading to superior agricultural inputs, particularly improved strains of wheat and rice. In the wake of the recent global economic crisis and continually high food prices, the international community is reviewing its outlook on human welfare and prosperity. Much of the current concern on how to foster development and prosperity in developing countries reflects the consequences of recent neglect of sustainable agriculture and infrastructure as drivers of development. But all is not lost. Instead, those developing countries that have not yet fully embraced agricultural technology now have the chance to benefit from preexisting scientific advances in agriculture, particularly in biotechnology. Areas of the developing world lagging in the utilization and accumulation of technology have the ability not only to catch up to industrial leaders in biotechnology, but also to attain their own level of research growth. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp12-008&r=his |