|
on Business, Economic and Financial History |
|
Issue of 2015‒02‒05
twenty-one papers chosen by |
| By: | Réka Juhász |
| Abstract: | This paper uses a natural experiment to assess whether temporary protection from trade with industrial leaders can foster development of infant industries in follower countries. Using a new dataset compiled from primary sources, I find that in the short-run regions (départements) in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803-15) increased capacity in a new technology, mechanised cotton spinning, to a larger extent than regions which remained more exposed to trade. Temporary protection had long term effects. In particular, by exploiting the fact that the post-war location of the cotton industry was determined to a large extent by the historical accident of the wars, I first show that the location of cotton spinning within France was persistent, and firms located in regions with higher post-war spinning capacity were more productive 30 years later. Second, I find that after the restoration of peace, exports of cotton goods from France increased substantially, consistent with evolving comparative advantage in cottons. Third, I show that as late as 1850, France and Belgium - both part of the French Empire prior to 1815 - had larger cotton spinning industries than other Continental European countries which were not protected from British trade during the wars; this suggests that adoption of the new technology was far from inevitable. |
| Keywords: | infant industry; technology adoption; industrial revolution |
| JEL: | F14 N63 O14 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60697&r=his |
| By: | Xu, Cheng-Gang |
| Abstract: | China was the largest economy in the world before the end of the 19th century; then became one of the poorest countries in the world in a few decades. Now China is returning to its historical past. To understand China’s development, and to understand where and how far China will move forward, this paper examines how its institution functioning. |
| Keywords: | China; development; institution; political economy |
| JEL: | A10 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10320&r=his |
| By: | Luca Fiorito |
| Abstract: | The aim of this paper is to investigate in some detail the origins of Knight’s antipositism and to assess the main influences that brought him to a change in methodological perspective after 1921. As importantly, what follows is also an attempt to increase our general understanding of the methodological debates taking place during the early decades of the last century and to shed new light on the inherently pluralistic character of US interwar economics. This paper is organized as follows: the first section outlines Knight’s methodological views as presented in his early works; the second section discusses Knight’s “recantation” and his attack on behavioristic social science; the third section analyze Knight’s discussion of the nature and limitations of scientific economics; the fourth section offers a brief digression on Knight’s relationship with American institutionalism; the fifth section deals with the later developments of Knight’s antipositivism; the final section presents some conclusions |
| Keywords: | Knight, Frank; Economic methodology; Economics and physics; American institutionalism |
| JEL: | B31 B41 B40 B21 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:705&r=his |
| By: | James Foreman-Peck (Cardiff University); Leslie Hannah (Cardiff University) |
| Abstract: | The consensus among legal and economic historians that British law provided little protection to corporate shareholders is based on formal provisions in the Companies Acts . In fact these Acts applied only to companies registered by the Board of Trade. Moreover both criminal and corporate law for statutory companies was codified in the Companies Clauses Consolidation Act of 1845. We show that, while the governance rules of private companies were largely unconstrained, for most of the Victorian period most capital in quoted companies (which were mainly statutory) scored highly on the "anti-director" rights index under mandatory rules. When registered companies came to dominate stock exchanges, nearer the end of the nineteenth century, they voluntarily adopted similar rules, which professionals serving the stock exchange and IPOs recognised had advantages for raising capital. The main exception was the omission of tiered voting rules (whose record in protecting minorities was at best debatable), in favour of one-share-one-vote. Unlike the prevailing consensus, our reinterpretation is consistent with evidence on the large size of the London Stock Exchange and extensive divorce of ownership from control in listed UK companies before 1914. |
| Keywords: | Corporate governance, anti-directors rights, voluntary regulation |
| JEL: | K22 L51 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0072&r=his |
| By: | Di Liberto, Adriana (University of Cagliari); Sideri, Marco (University of Cagliari) |
| Abstract: | We study the connection between economic performance and the quality of government institutions for the sample of 103 Italian NUTS3 regions, including new measures of institutional performance calculated using data on the provision of different areas of public services. In order to address likely endogeneity problems, we use the histories of the different foreign dominations that ruled Italian regions between the 16th and 17th century and over seven hundred years before the creation of the unified Italian State. Our results suggest that past historical institutions play a significant role on the current public administration quality and show that the latter makes a difference to the economic performance of regions. Overall, our analysis confirms that the quality of institutions matters for development, and that history can be used to find suitable instruments. |
| Keywords: | economic development, institutions, history, instrumental variables |
| JEL: | O11 O43 C26 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8776&r=his |
| By: | Andreas Ortmann (School of Economics, Australian School of Business, the University of New South Wales); Benoit Walraevens (Centre for Research in Economics and Management,Université de Caen Basse Normandie) |
| Abstract: | Analyzing the rhetorical structure of The Wealth of Nations (Smith WN) and its context, we make the case for the central importance of its Book V, "Of the Revenue of the Sovereign or Commonwealth”, which tends to be neglected in most accounts of Smith’s oeuvre (even, most recently, in the outstanding Phillipson 2010) but which in our reading is, rather than a general treatise on optimal taxation and spending, a book focused on the future of an empire being threatened by a Mercantilist system. The Empire in question was, of course, the British one. Book V follows Book IV, in which Smith -- after having documented the slow and unnatural progress of opulence in, among others, England and Scotland in Book III – had undertaken a “very violent attack” (Smith EPS p. 208; Smith Corr. p. 251) on those responsible for the low growth rates (“opulence”) in Scotland and, even more, England: manufacturers and merchants and those politicians who propagated Mercantilist philosophies and practices of the commercial class. Aware that those he targeted would not take kindly to the attack, Smith made his case against the Mercantilist system as well as its colonial policy by marshaling his earlier insights into rhetorical theory and practice. We explain why and how he organized his attack. |
| Keywords: | Adam Smith, The Wealth of Nations, rhetoric, rhetorical structure of The Wealth of Nations |
| JEL: | B10 B12 C70 C72 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2014-11a&r=his |
| By: | Pablo Fajgelbaum; Stephen Redding |
| Abstract: | This paper uses the natural experiment of Argentina’s integration into world markets in the late-nineteenth century to provide evidence on the role of internal geography in shaping the effects of external integration. We develop a quantitative model of the distribution of economic activity across regions and sectors. The model predicts a spatial Balassa-Samuelson effect, in which locations with better access to world markets have higher population densities, higher shares of employment in the non-traded sector, higher relative prices of non-traded goods, and higher land prices relative to wages. We use the model and data on population density and sectoral employment shares to recover sufficient statistics that isolate the economic mechanisms through which external and internal integration affect economic development. Our analysis highlights the role of complementary investments in internal infrastructure and technology adoption in mediating the economy’s response to external integration. |
| Keywords: | External integration; economic development; structural transformation |
| JEL: | F11 F14 O13 O14 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60285&r=his |
| By: | Sultan Barakat; John Skelton |
| Abstract: | The reconstruction of Kuwait, following its occupation by Saddam Hussein’s Iraq in 1990, constitutes a significant though rarely studied episode of post-war recovery. On the eve of liberation in 1991, Kuwait faced a number of challenges including physical rehabilitation and reconstruction, political and constitutional issues, reconciling a deeply divided population and socio-economic recovery. The passing of more than twenty years since Kuwait’s liberation allows the paper to reflect, from a long-term perspective, on the decisions which were taken following liberation and how these have impacted the country’s subsequent political, social and economic trajectory. The timeliness of such an examination has been highlighted by the contemporary ongoing political crisis in Kuwait in the context of the Arab Spring, at the centre of which stands a widely perceived, long-standing deficit of the Al Sabah regime’s political legitimacy. The paper argues that had Kuwait’s reconstruction assumed a different shape, it is conceivable that the country would have experienced a profoundly different development trajectory over the following two decades. The authors contend that Kuwait’s contemporary political and socio-economic crises have their roots in a post-war reconstruction model which delivered substantial success in physical and rapid macro-economic recovery, but which did not fully realise opportunities to establish an accountable and trusted governance system, promote reconciliation and equality between divided groups, and encourage sustainable social and economic development. The paper argues that the opportunity to deliver long-term benefits was undermined by a non-holistic post-war vision dominated by notions of regime security which in turn necessitated renewed post-war business-as-usual authoritarianism, exclusionary nationalist policies and the recreation of the pre-war power-for-welfare political trade-off. |
| JEL: | N0 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:55337&r=his |
| By: | Wen, Yi (Federal Reserve Bank of St. Louis); Luo, Jinfeng (Tsinghua University) |
| Abstract: | We use cross-country data and instrumental variables widely used in the literature to show that (i) institutions (such as property rights and the rule of law) do not explain industrialization and (ii) agrarian countries and industrial countries have entirely different determinants for income levels. In particular, geography, rather than institutions, explains the income differences among agrarian countries, while institutions appear to matter only for income variations in industrial economies. Moreover, we find it is the stage of economic development (or the absence/presence of industrialization) that explains a country’s quality of institutions rather than vice versa. The finding that institutions do not explain industrialization but are instead explained by industrialization lends support to the well-received view among prominent economic historians—that institutional changes in 17th and 18th century England did not cause the Industrial Revolution. |
| Keywords: | geography; institutions; development; income gaps; industrialization |
| JEL: | O11 P16 P51 |
| Date: | 2015–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2015-001&r=his |
| By: | Grossman, Richard; Rockoff, Hugh T |
| Abstract: | In this paper we trace the evolution of the lender of last resort doctrine—and its implementation—from the nineteenth century through the panic of 2008. We find that typically the most influential economists “fight the last war”: formulating policy guidelines that would have dealt effectively with the last crisis or in some cases the last two or three. This applies even to the still supreme voice among lender-of-last-resort theorists, Walter Bagehot, who wrestled with the how to deal with the financial crises that hit Britain between the end of the Napoleonic Wars and the panic of 1866. Fighting the last war may leave economists unprepared for meeting effectively the challenge of the next war. |
| Keywords: | Bagehot; Bank of England; central banks; lender of last resort; subprime crisis |
| JEL: | B0 N2 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10361&r=his |
| By: | Broadberry, Stephen (London School of Economics); Ghosal, Sayantan (University of Glasgow); Proto, Eugenio (University of Warwick) |
| Abstract: | Although the Industrial Revolution is often characterized as the culmination of a process of commercialisation, the precise nature of such a link remains unclear. This paper models and analyzes such link: the role of commercialisation in raising efficiency wages as impersonal and anonymous labour market transactions replace personalized customary relations. In the presence of an aggregate capital externality, we show that the resulting shift in relative factor prices leads to higher capital-intensity in the production technology, resulting in a faster rate of technological progress. We provide historical evidence using European data to show that England was among the most urbanized and the highest wage countries at the onset of the Industrial Revolution. We finally calibrate the model to quantify the impact of a higher degree of anonymity on industrial production growth in England between 1300 and 1800. |
| Keywords: | efficiency wages, anonymity, industrial revolution, commercialisation, learning by doing |
| JEL: | N13 O14 O43 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8791&r=his |
| By: | Jeanet Bentzen (Department of Economics, Copenhagen University.); Jacob Gerner Hariri (Department of Economics, Copenhagen University); James A. Robinson (Department of Government, Harvard University) |
| Abstract: | We document that rules for leadership succession in ethnic societies that antedate the modern state predict contemporary political regimes; leadership selection by election in indigenous societies is associated with contemporary representative democracy. The basic association, however, is conditioned on the relative strength of the indigenous groups within a country; stronger groups seem to have been able to shape national regime trajectories, weaker groups do not. This finding extends and qualifies a substantive qualitative literature, which has found in local democratic institutions of medieval Europe a positive impulse towards the development of representative democracy. It shows that contemporary regimes are shaped not only by colonial history and European in uence; indigenous history also matters. For practitioners, our findings suggest that external reformers' capacity for regimebuilding should not be exaggerated. |
| Date: | 2014–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1430&r=his |
| By: | Janet Hunter |
| Abstract: | Contemporary concerns about the difficulties faced by the Japanese economy following the Great Kantō Earthquake of 1923 soon appeared to be unfounded as the economy recovered relatively quickly. This paper suggests that despite its limited impact on Japan’s longer term economic trajectory this disaster can tell us a great deal about the ways in which individuals, organisations and officialdom respond to a devastating event, and help us better to understand the process of transition from immediate relief to longer term recovery, not just in Japan, but more broadly. It analyses the impact of the disaster on market transactions, showing that the scale and nature of market disruption went far beyond direct physical destruction, that the collective and individual responses of government, producers, traders and consumers had the potential to make matters worse, rather than better, and that the existence of integrated markets spread the effects of the disaster across the Japanese archipelago. It also suggests that re-establishing market stability following the crisis was one of the keys to longer term recovery, and further research will help us understand the causal factors in that process. |
| JEL: | N0 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:57693&r=his |
| By: | Ferreira, Pedro Cavalcanti; Pessôa, Samuel; Santos, Marcelo dos |
| Date: | 2014–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:epgewp:762&r=his |
| By: | Adam S. Posen (Peterson Institute for International Economics); Gary Clyde Hufbauer (Peterson Institute for International Economics); Cathleen Cimino (Peterson Institute for International Economics); Tyler Moran (Peterson Institute for International Economics); Jaana Remes (McKinsey Global Institute); Theodore H. Moran (Peterson Institute for International Economics); Lindsay Oldenski (Peterson Institute for International Economics); Barbara Kotschwar (Peterson Institute for International Economics); Jeffrey J. Schott (Peterson Institute for International Economics); Thomas F. McLarty (McLarty Associates); Eduardo M. Mora (Ambassador of Mexico to the United States) |
| Abstract: | Enactment of the North American Free Trade Agreement (NAFTA) among the United States, Mexico, and Canada 20 years ago advanced economic integration and started a public debate running to today about the merits of trade agreements in the era of globalization. As the first major trade accord between two wealthy countries and a relatively poor country, NAFTA created enormous opportunities in all three economies while generating anxieties about job losses and other kinds of displacement. Mexico and the United States have clearly reaped great gains at the aggregate level from their more open trading and investment relationship, but NAFTA is frequently invoked as a job-killing precedent by opponents of further US trade agreements with poorer countries. On July 15, 2014, the Peterson Institute for International Economics convened a conference, "Mexico and the United States: Building on the Benefits of NAFTA," to assess both benefits and costs derived from this important trade accord. In addition, the Institute's president, Adam S. Posen, has summarized his view of the impact in an op-ed essay. This report, part of a new series of publications called PIIE Briefings, collects recent writings by PIIE scholars on NAFTA, including some previously published papers and the transcript of the NAFTA conference. The Institute is proud that these papers and presentations are in keeping with our customary intellectual rigor, objectivity, and research-based conclusions. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iie:piiebs:piieb14-3&r=his |
| By: | Farber, Henry (Princeton University); Rothstein, Jesse (University of California, Berkeley); Valletta, Robert G. (Federal Reserve Bank of San Francisco) |
| Abstract: | Unemployment Insurance benefit durations were extended during the Great Recession, reaching 99 weeks for most recipients. The extensions were rolled back and eventually terminated by the end of 2013. Using matched CPS data from 2008-2014, we estimate the effect of extended benefits on unemployment exits separately during the earlier period of benefit expansion and the later period of rollback. In both periods, we find little or no effect on job-finding but a reduction in labor force exits due to benefit availability. We estimate that the rollbacks reduced the labor force participation rate by about 0.1 percentage point in early 2014. |
| Keywords: | extended unemployment benefits, job search, labor force |
| JEL: | J64 J65 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8784&r=his |
| By: | Oscar Jorda (Federal Reserve Bank of San Francisco and University of California, Davis); Moritz Schularick (University of Bonn and Centre for Economic Policy Research and Hong Kong Institute for Monetary Research); Alan M. Taylor (University of California, Davis and National Bureau of Economic Research and Centre for Economic Policy Research) |
| Abstract: | Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We exploit the implications of the macroeconomic policy trilemma to identify exogenous variation in monetary conditions: countries with fixed exchange regimes often see fluctuations in short-term interest rates unrelated to home economic conditions. We use novel instrumental variable local projection methods to demonstrate that loose monetary conditions lead to booms in real estate lending and house prices bubbles; these, in turn, materially heighten the risk of financial crises. Both effects have become stronger in the postwar era. |
| Keywords: | Financial Crises, Monetary Policy, Leverage, Credit, House Prices, Local Projections, Instrumental Variables |
| JEL: | C14 C38 E32 E37 E42 E44 E51 E52 F41 G01 G21 N10 N20 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:312014&r=his |
| By: | Luciana Lazzeretti (Dipartimento di Scienze per l'Economia e l'Impresa); Francesco Capone (Dipartimento di Scienze per l'Economia e l'Impresa) |
| Abstract: | Over the last decade, the debate on Evolutionary Economic Geography has been enriched thanks to the ecological approach and its application to the concept of resilience to social systems. Resilience is not only the capacity to absorb shocks and maintain functions, but also includes the capacity for renewal, reorganisation and development. This “adaptive capacity” may be consider in creative approaches as a “creative capacity” able to generate ideas and innovations after a shock, in a creative milieu such a creative city. This paper aims to contribute to the still under-researched debate on resilience and innovation, integrating the resilience approach with the creative one, and developing the still neglected idea of a creative and resilient city. We focus on the city of Florence and on the innovations in conservation sciences developed after the 1966 flood. Combining these perspectives, we consider the city of art as a creative and resilient system, not only to absorb shocks, but also to transform ad renew itself through a “creative adaptive capacity”, where the cultural and art heritage may be both a source for innovation and a source for resilience. We investigate lateral and transversal innovations developed from cross-fertilisation processes in the scientific and humanistic knowledge embedded in the territory. In particular, we focus on the innovations in chemistry in conservation sciences of cultural heritage developed by a scientific network rooted in Florence. The flood was the starting point for the rise of a new innovative trajectory, forming a new scientific niche in modern conservation sciences. |
| Keywords: | Resilience, restoration, cultural heritage, chemical innovations, flood, Florence |
| JEL: | O31 L65 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpmmos:wp2015_01.rdf&r=his |
| By: | Raúl Sánchez de la Sierra (Harvard University) |
| Abstract: | When do states arise? When do they fail to arise? This question has generated scholarship across all social sciences. A dominant view is that states first arise when violent actors impose a monopoly of violence in order to extract taxes (Carneiro, 1970, Tilly, 1985). One fundamental fact affects all existing studies: functioning states precede most statistics. There is therefore no statistical evidence on the causes of state formation. As a foundation for this study, I organized the collection of village-level panel data on violent actors, managing teams of surveyors, village elders, and households in 380 war-torn areas of DRC. I introduce optimal taxation theory to the decision of violent actors to establish local monopolies of violence. The value of such decision hinges on their ability to tax the local population. A sharp rise in the global demand for coltan, a bulky commodity used in the electronics industry, leads violent actors to impose monopolies of violence and taxation systems in coltan sites, which persist years after the demand collapses. A similar rise in the demand for gold, easier to conceal and more difficult to tax, does not. My findings support the view that the expected revenue from taxation, determined in particular by tax base elasticity, can explain the first stages of state formation. |
| URL: | http://d.repec.org/n?u=RePEc:hic:wpaper:194&r=his |
| By: | Bernardo Alves Furtado; Patrícia Alessandra Morita Sakowski |
| Abstract: | Este texto está inserido no projeto Modelagem de Sistemas Complexos para Políticas Públicas e faz uma resenha dos autores clássicos que, em conjunto, contribuíram com os elementos do que seria uma “ciência da complexidade”. Com base no pensamento original destes autores, os conceitos centrais de sistemas complexos são discutidos, a saber: i) a interação entre agentes (homogêneos ou heterogêneos) e o ambiente; ii) as propriedades emergentes e a auto-organização; iii) a importância da não linearidade e das escalas; iv) as regras e seu determinismo; v) a ênfase na dinâmica e retroalimentação; e vi) as noções de adaptação, aprendizado e evolução. Por fim, críticas contemporâneas são apresentadas. Elas sugerem que os argumentos de sistemas complexos não sustentam epistemologicamente a constituição de suposta nova ciência, mas não rejeitam os avanços propostos nos estudos de complexidade. This text was written as part of the project ‘Modelling of Complex Systems for Public Policy’. It reviews the classical authors who jointly contributed to establish the elements of what could constitute a ‘science of complexity’. Based on the original writings of these authors, the text discusses the central concepts of complex systems: i) the interaction between (homogeneous or heterogeneous) agents and the environment; ii) emergence and self-organization; iii) the importance of not nonlinearity and scales; iv) the determinism of rules; v) the emphasis on dynamics and feedback; and vi) the notions of adaptation, learning and evolution. Finally, contemporary critics are presented. They suggest that the arguments of complex systems do not support the establishment of a supposed new science epistemologically, but they do not reject the advances proposed by complexity studies |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:2019&r=his |
| By: | Thomas Kemeny |
| Abstract: | This paper reviews a growing literature investigating how ‘immigrant’ diversity relates to urban economic performance. As distinct from the labor-supply focus of much of the economics of immigration, this paper reviews work that examines how growing heterogeneity in the composition of the workforce may beneficially or harmfully affect the production of goods, services and ideas, especially in regional economies. Taking stock of the existing literature, the paper argues that the low-hanging fruit in this field has now been picked, and lays out a set of open issues that need to be taken up in future research in order to fulfil the promise of this work. |
| Keywords: | diversity; immigration; cities; regional economic performance |
| JEL: | J28 J31 O15 O18 O31 O4 R0 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58458&r=his |