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on Business, Economic and Financial History |
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Issue of 2017‒12‒03
35 papers chosen by |
| By: | Anson, Mike; Bhola, David; Kang, Miao; Thomas, Ryland |
| Abstract: | We use daily transactional ledger data from the Bank of England's Archive to test whether and to what extent the Bank of England during the mid-nineteenth century adhered to Walter Bagehot's rule that a central bank in a financial crisis should lend cash freely at a high interest rate in exchange for "good" securities. The archival data we use provides granular, loan-level insight on the price and quantity of credit, and information on its distribution to particular counterparties. We find that the Bank's behaviour during this period broadly conforms to Bagehot's rule, though with variation across the crises of 1847, 1857 and 1866. Using a new, higher frequency series on the Bank's balance sheet, we find that the Bank did lend freely, with the number of discounts and advances increasing during crises. These loans were typically granted at a rate above pre-crisis levels and, in 1857 and 1866, typically at a spread above Bank Rate, though we also find some instances in the daily discount ledgers where individual loans were made below Bank rate in 1847. Another set of customer ledgers shows that the securities the Bank purchased were debts owed by a geographically and industrially diverse set of debtors. And using new data on the Bank's income and dividends, we find the Bank and its shareholders profited from lender of last resort operations. We conclude our paper by relating our findings to contemporary debates including those regarding the provision of emergency liquidity to shadow banks. |
| Keywords: | Bank of England,lender of last resort,financial crises,financial history,central banking |
| JEL: | E58 G01 G18 G20 H12 N2 N4 N8 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eabhps:1703&r=his |
| By: | Gojko Barjamovic; Thomas Chaney; Kerem A. Coşar; Ali Hortaçsu |
| Abstract: | We analyze a large dataset of commercial records produced by Assyrian merchants in the 19th Century BCE. Using the information collected from these records, we estimate a structural gravity model of long-distance trade in the Bronze Age. We use our structural gravity model to locate lost ancient cities. In many instances, our structural estimates confirm the conjectures of historians who follow different methodologies. In some instances, our estimates confirm one conjecture against others. Confronting our structural estimates for ancient city sizes to modern data on population, income, and regional trade, we document persistent patterns in the distribution of city sizes across four millennia, even after controlling for time-invariant geographic attributes such as agricultural suitability. Finally, we offer evidence in support of the hypothesis that large cities tend to emerge at the intersections of natural transport routes, as dictated by topography. |
| JEL: | N15 N7 N75 R12 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23992&r=his |
| By: | Lino Wehrheim |
| Abstract: | Digitization and computer science have established a whole new set of methods to analyze large collections of texts. One of these methods is particularly promising for economic historians: topic models, statistical algorithms that automatically infer themes from large collections of texts. In this article, I present an introduction to topic modeling and give a very first review on the research using topic models. I illustrate their capacity by applying them on 2.675 articles published in the Journal of Economic History between 1941 and 2016. This contributes to traditional research on the JEH and to current research on the cliometric revolution. |
| Keywords: | Economic History, Topic Models, Latent Dirichlet Allocation, Cliometrics, Digitization, Methodology |
| JEL: | A12 C18 N01 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:bav:wpaper:177_wehrheim&r=his |
| By: | Barjamovic, Gojko; Chaney, Thomas; Cosar, Kerem; Hortacsu, Ali |
| Abstract: | We analyze a large dataset of commercial records produced by Assyrian merchants in the 19th Century BCE. Using the information collected from these records, we estimate a structural gravity model of long-distance trade in the Bronze Age. We use our structural gravity model to locate lost ancient cities. In many instances, our structural estimates confirm the conjectures of historians who follow different methodologies. In some instances, our estimates confirm one conjecture against others. Confronting our structural estimates for ancient city sizes to modern data on population, income, and regional trade, we document persistent patterns in the distribution of city sizes across four millennia, even after controlling for time-invariant geographic attributes such as agricultural suitability. Finally, we offer evidence in support of the hypothesis that large cities tend to emerge at the intersections of natural transport routes, as dictated by topography. |
| Keywords: | economic geography; economic history; Trade |
| JEL: | F10 N9 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12408&r=his |
| By: | David Gaukrodger (OECD) |
| Abstract: | Compensation for adjudicators is generally considered as a core issue for judicial independence and for attracting good judges in the institutional design for courts. This paper examines compensation systems for adjudicators and dispute settlement administrators in investor-state dispute settlement (ISDS). The paper uses in part a comparative perspective based on approaches in domestic courts in advanced economies, an approach rarely taken in analysing investor-state arbitration. The first section of the paper provides historical context and examines the reform of remuneration of judges to replace private litigant fees with salaries in colonial America and the United States, France and England in the 18th and early 19th centuries. Subsequent sections address debates over the impact of compensation systems on adjudicators; contemporary approaches to the compensation of judges in advanced economies; the co-existence in advanced economies of national courts with salaried judges since the early 19th century with generally strong support for commercial arbitration based on ad hoc fee-based remuneration; and similarities and differences between commercial arbitration and investment arbitration, focusing how the largely similar compensation systems may have different effects and be differently perceived by the public. Annexes to the paper report on discussions about adjudicator compensation at the 2016 OECD Investment Treaty Conference and gather some preliminary facts about adjudicator and dispute administrator compensation in investor-state arbitration as well as the investment court system included in the recent EU-Canada CETA trade and investment agreement. |
| Keywords: | Alexander Hamilton, arbitrator compensation, bilateral investment treaties, comparative law, conflicts of interest, court fees, dispute settlement, domestic courts, economic incentives, foreign investment, international commercial arbitration, international economic law, international investment, international investment agreements, international investment law, investment arbitration, investment treaties, investment treaty policy, investor protection, investor-state dispute settlement, ISDS, Jeremy Bentham, judicial compensation, legal history, litigant fees, Voltaire |
| JEL: | H4 J3 J33 J44 K23 K33 K41 L33 N20 N4 |
| Date: | 2017–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaaa:2017/5-en&r=his |
| By: | Bazzi, Samuel; Fiszbein, Martin; Gebresilasse, Mesay |
| Abstract: | In a classic 1893 essay, Frederick Jackson Turner argued that the American frontier promoted individualism. We revisit the Frontier Thesis and examine its relevance at the subnational level. Using Census data and GIS techniques, we track the frontier throughout the 1790--1890 period and construct a novel, county-level measure of historical frontier experience. We document skewed sex ratios and other distinctive demographics of frontier locations, as well as their greater individualism (proxied by infrequent children names). Many decades after the closing of the frontier, counties with longer historical frontier experience exhibit more prevalent individualism and opposition to redistribution and regulation. We take several steps towards a causal interpretation, including an instrumental variables approach that exploits variation in the speed of westward expansion induced by national immigration inflows. Using linked historical Census data, we identify mechanisms giving rise to a persistent frontier culture. Selective migration contributed to greater individualism, and frontier conditions may have further shaped behavior and values. We provide evidence suggesting that rugged individualism may be rooted in its adaptive advantage on the frontier and the opportunities for upward mobility through effort. |
| Keywords: | American Frontier; Culture; Individualism; Persistence; Preferences for Redistribution |
| JEL: | D72 H2 J11 N31 N91 P16 R11 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12406&r=his |
| By: | Marianna Belloc; Francesco Drago; Roberto Galbiati |
| Abstract: | In this paper, we study how the birth of the first universities in Italy affected the emergence of the Italian free cities-states (the commune) in the period 1000-1300 a.d. Exploiting a panel dataset of 121 cities, we show that after the foundation of a new university the distance between each city in the sample and the university negatively predicts the timing of the birth of communal institutions in the city. Our evidence is consistent with the idea that universities in the Middle Ages provided the necessary juridical knowledge and skills to build legal capacity and develop broader-based institutions. |
| Keywords: | institutional change, education, human capital accumulation, communal movement |
| JEL: | I20 I23 K00 N33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6719&r=his |
| By: | Fouquet, Roger |
| Abstract: | This paper draws lessons from long run trends in energy markets for energy and climate policy. An important lesson is that consumer responses to energy markets change with economic development. The British experience suggests that income elasticities1 of demand for energy services have tended to follow an inverse-U shape curve. Thus, at low levels of economic development, energy service consumption tends to be quite responsive to per capita income changes; at mid-levels, consumption tends to be very responsive to changes in income per capita; and, at high levels, consumption is less responsive to income changes. The paper also highlights the importance of formulating integrated energy service policies to reduce risks to developing countries of locking-in to carbon intensive infrastructure or behaviour. Without guidance and incentives, rapid economic development is likely to lock consumers into high energy service prices in the long run and bind the economy onto a high energy intensity trajectory with major long run economic and environmental impacts. Thus, effective energy service policies in periods of rapid development, such as in China and India at present, are crucial for the long run prosperity of the economy and their future ability to mitigate carbon dioxide emissions. |
| Keywords: | energy history; energy transitions; economic development; climate policy |
| JEL: | N0 |
| Date: | 2016–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:67785&r=his |
| By: | Morrison, James Ashley |
| Abstract: | Britain's 1931 suspension of the gold standard remains one of the most shocking policy shifts of the past century. Conventional explanations focus on changing international conditions alongside the rise of social democracy: when Britons refused to shoulder the increasing costs of defending the exchange rate, the Bank of England was “forced” to abandon the gold standard. This article refocuses attention on policy-makers’ causal ideas at critical moments. Drawing on numerous primary sources held in several archives, it reveals a cleavage within the Bank over the appropriate response to the flight from sterling. Following the nervous collapse of the Bank's governor, the deputy governor shifted the Bank's strategy from making defensive rate hikes to pursuing fiscal austerity. He then “temporarily” suspended gold convertibility in a gambit to forestall the election he (incorrectly) assumed would unseat the gold standard's supporters in Parliament. When the unintended experiment with a managed float proved successful, Keynes was able to persuade policy-makers to embrace the new exchange rate regime. |
| JEL: | F3 G3 |
| Date: | 2016–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:84613&r=his |
| By: | Reis, Ricardo; Mankiw, N. Gregory |
| Abstract: | This essay discusses the role of Milton Friedman’s presidential address to the American Economic Association, which was given a half century ago and helped set the stage for modern macroeconomics. We discuss where macroeconomics was before the address, what insights Friedman offered, where researchers and central bankers stand today on these issues, and (most speculatively) where we may be heading in the future. |
| JEL: | J1 |
| Date: | 2017–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:85664&r=his |
| By: | Crafts, Nicholas (University of Warwick) |
| Abstract: | British productivity growth disappointed during the early postwar period. This reflected inadequate investment in equipment and skills but also entailed inefficient use of inputs. Weak management, dysfunctional industrial relations, and badly-designed economic policy were all implicated. The policy framework was partly the result of seeking low unemployment through wage restraint by appeasement of organized labour. A key aspect was weak competition. This exacerbated corporate governance and industrial-relations problems in the British ‘variety of capitalism’ which sustained low effort bargains and managerial incompetence. Other varieties of capitalism were better placed to achieve fast growth but were infeasible for Britain given its history. |
| Keywords: | competition ; productivity ; relative economic decline ; varieties of capitalism |
| JEL: | N14 P17 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1142&r=his |
| By: | Piketty, Thomas; Yang, Li; Zucman, Gabriel |
| Abstract: | This paper combines national accounts, survey, wealth and fiscal data (including recently released tax data on high-income taxpayers) in order to provide consistent series on the accumulation and distribution of income and wealth in China over the 1978-2015 period. We find that the aggregate national wealth-income ratio has increased from 350% in 1978 to 700% in 2015. This can be accounted for by a combination of high saving and investment rates and a gradual rise in relative asset prices, reflecting changes in the legal system of property. The share of public property in national wealth has declined from about 70% in 1978 to 30% in 2015, which is still a lot higher than in rich countries (close to 0% or negative). Next, we provide sharp upward revision of official inequality estimates. The top 10% income share rose from 27% to 41% of national income between 1978 and 2015, while the bottom 50% share dropped from 27% to 15%. China's inequality levels used to be close to Nordic countries and are now approaching U.S. levels. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12410&r=his |
| By: | Gabriel Ahlfeldt; Daniel McMillen |
| Abstract: | Cities around the world are experiencing unprecedented vertical growth. Yet, the economics of skyscrapers remain empirically understudied. This paper analyzes the determinants of the urban height profile by combining a micro-geographic data set on tall buildings with a unique panel of land prices covering 140 years. We provide novel estimates of the land price elasticity of height, the height elasticity of construction cost, and the elasticity of substitution between land and capital for tall buildings. In line with improvements in construction technology, the land price elasticity of height increased substantially over time, rationalizing a trend to ever taller buildings. The land price elasticity of height is larger for commercial than for residential buildings, suggesting that the typical segregation of land uses within cities is not exclusively shaped by the demand side, but also by the supply side. |
| Keywords: | Chicago, construction cost, density, height, land value, skyscraper |
| JEL: | R20 R30 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6730&r=his |
| By: | Hevia, Constantino (Universidad Torcuato Di Tella); Nicolini, Juan Pablo (Federal Reserve Bank of Minneapolis) |
| Abstract: | In this paper, we use a simple model of money demand to characterize the behavior of monetary aggregates in the United States from 1960 to 2016. We argue that the demand for the currency component of the monetary base has been remarkably stable during this period. We use the model to make projections of the nominal quantity of cash in circulation under alternative future paths for the federal funds rate. Our calculations suggest that if the federal funds rate is lifted up as suggested by the survey of economic projections made by the members of the Federal Open Market Committee (FOMC), the fall in total currency demanded in the next two years ranges between 50 and 200 billion. Our discussion suggests that specific measures by the Federal Reserve to absorb that cash could be worth considering to make the future path of the price level consistent with the price stability mandate. |
| Keywords: | Inflation; Money demand; Currency in circulation |
| JEL: | E31 E41 E51 |
| Date: | 2017–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:744&r=his |
| By: | Michael Jetter; Saskia Moesle; David Stadelmann |
| Abstract: | This paper revisits the hypothesis that landlocked regions are systematically poorer than regions with ocean access, using panel data for 1,527 subnational regions in 83 nations from 1950-2014. This data structure allows us to exploit within-country-time variation only (e.g., regional variation within France at one point in time), thereby controlling for a host of unobservables related to country-level particularities, such as a country's unique history, cultural attributes, or political institutions. Our results suggest lacking ocean access decreases regional GDP per capita by 10 - 13 percent. We then explore potential mechanisms and possible remedies. First, national political institutions appear to play a marginal role at best in the landlocked-income relationship. Second, the income gap between landlocked and non-landlocked regions within the same nation widens as i) GDP per capita rises, ii) international trade becomes more relevant for the nation, and iii) national production shifts to manufacturing. Finally, we find evidence consistent with the hypothesis that national infrastructure (i.e., transport-related infrastructure and rail lines) can alleviate the lagging behind of landlocked regions. |
| Keywords: | landlockedness, geography, GDP per capita, trade openness, infrastructure |
| JEL: | E43 H54 O18 O40 R12 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6733&r=his |
| By: | Lankina, Tomila V.; Libman, Alexander; Obydenkova, Anastassia |
| Abstract: | Twenty-five years after the collapse of communism in Europe, few scholars disagree that the past continues to shape the democratic trajectories of postcommunist states. Precommunist education has featured prominently in this literature’s bundle of “good” legacies because it ostensibly helped foster resistance to communism. The authors propose a different causal mechanism—appropriation and subversion—that challenges the linearity of the above assumptions by analyzing the effects of precommunist literacy on patterns of Communist Party recruitment in Russia’s regions. Rather than regarding precommunist education as a source of latent resistance to communism, the authors highlight the Leninist regime’s successful appropriation of the more literate strata of the precommunist orders, in the process subverting the past democratic edge of the hitherto comparatively more developed areas. The linear regression analysis of author-assembled statistics from the first Russian imperial census of 1897 supports prior research: precommunist literacy has a strong positive association with postcommunist democratic outcomes. Nevertheless, in pursuing causal mediation analysis, the authors find, in addition, that the above effect is mediated by Communist Party saturation in Russia’s regions. Party functionaries were likely to be drawn from areas that had been comparatively more literate in tsarist times, and party saturation in turn had a dampening effect on the otherwise positive effects of precommunist education on postcommunist democracy. |
| JEL: | B14 B24 P2 P3 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:63833&r=his |
| By: | Graciela L. Kaminsky |
| Abstract: | A common belief in both academic and policy circles is that capital flows to the emerging periphery are excessive and ending in crises. One of the most frequently mentioned culprits is the cycles of monetary easing and tightening in the financial centers. Also, many focus on the role of crises in the financial center, pointing to excess international borrowing predating crises in the financial center and global retrenchment in capital flows in its aftermath. I re-examine these views using a newly-constructed database on capital flows spanning 200 hundred years. Extending the study of capital flows to the first episode of financial globalization has two major advantages: During this episode, monetary policy in the financial center is constrained by the adherence to the Gold Standard, thus providing a benchmark for capital flow cycles in the absence of an active role of central banks in the financial centers. Second, panics in the financial center are rare disasters that need to be examined in a longer historical episode. I find that boom-bust capital flow cycles in the periphery are milder in the second episode of financial globalization when the financial center follows a cyclical monetary policy. Also, cyclical monetary policy in the financial center is far more pronounced in times of crises in the financial center, cutting short capital flow bonanzas in the periphery and injecting liquidity in the aftermath of the crisis. |
| JEL: | F30 F34 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23975&r=his |
| By: | Chancel, Lucas; Piketty, Thomas |
| Abstract: | We combine household surveys and national accounts, as well as recently released tax data in a systematic way to track the dynamics of Indian income inequality from 1922 to 2014. According to our benchmark estimates, the share of national income accruing to the top 1% income earners is now at its highest level since the creation of the Indian Income tax in 1922. The top 1% of earners captured less than 21% of total income in the late 1930s, before dropping to 6% in the early 1980s and rising to 22% today. Over the 1951-1980 period, the bottom 50% group captured 28% of total growth and incomes of this group grew faster than the average, while the top 0.1% incomes decreased. Over the 1980-2014 period, the situation was reversed; the top 0.1% of earners captured a higher share of total growth than the bottom 50% (12% vs. 11%), while the top 1% received a higher share of total growth than the middle 40% (29% vs. 23%). These findings suggest that much can be done to promote more inclusive growth in India. Our results also appear to be robust to a range of alternative assumptions seeking to address data limitations. Most importantly, we stress the need for more democratic transparency on income and wealth statistics to avoid another "black decade" similar to the 2000s, during which India entered the digital age but stopped publishing tax statistics. Such data sources are key to track the long run evolution of inequality and to allow an informed democratic debate on inequality. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12409&r=his |
| By: | Kurunmaki, Liisa; Mennicken, Andrea; Miller, Peter |
| Abstract: | In recent decades, there has been an avalanche of numbers in public life, one that matches that which occurred in the first half of the nineteenth century. The difference today is that many of the numbers that are now so central to political rule pertain to performance, and depend on a felicitous interlocking of quantifying, economising, and marketising. The calculated management of life is at a critical juncture, and it is essential that we consider carefully how this is affecting who we are, what we have become, and who we wish to be. Only a few decades ago, this bandwagon seemed limited or at least focused in its reach, yet it now appears as if no domain of human endeavour can escape. We argue that it is important to differentiate quantifying, economising, and marketising, so as to counter the often phobic response to the unrelenting march of numbers in modern political rule. We call for greater attention to the role of accounting numbers, for accounting numbers go beyond the abstract models of economics and allow a form of action on the actions of others that economics does not. We argue also for greater attention to the conditionality of the performativity of quantification, so that we can identify the conditions under which numbers produce effects, and the varying nature and extent of those effects. Finally, we consider the thorny issue of “democratising” the social sphere, and note that it is only recently that quantification has been largely annexed by the phenomenon dubbed neoliberalism. |
| Keywords: | quantifying; economising; marketising; democratising; performativity; accounting; neoliberalism; subjectifying |
| JEL: | M40 |
| Date: | 2016–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:67549&r=his |
| By: | David Schindler; Mark Westcott |
| Abstract: | Can attitudes towards minorities, an important cultural trait, be changed? We show that the presence of African American soldiers in the UK during World War II reduced anti-minority prejudice, a result of the positive interactions which took place between soldiers and the local population. The change has been persistent: in locations in which more African American soldiers were posted there are fewer members of the UK’s leading far-right party, less implicit bias against blacks and fewer individuals professing racial prejudice, all measured around 2010. We show that persistence has been higher in rural areas and areas with less subsequent in-migration. |
| JEL: | J17 N00 Z10 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6723&r=his |
| By: | Edwards, Jeremy |
| Abstract: | This paper investigates the Becker-Woessmann (2009) argument that Protestants were more prosperous in nineteenth-century Prussia because they were more literate, a version of the Weber thesis, and shows that it cannot be sustained. The econometric analysis on which Becker and Woessman based their argument is fundamentally flawed, because their instrumental variable does not satisfy the exclusion restriction. When an appropriate instrumental-variable specification is used, the evidence from nineteenth-century Prussia rejects the human-capital version of the Weber thesis put forward by Becker and Woessmann. |
| Keywords: | Human capital, Protestantism, economic history, instrumental variables |
| JEL: | C26 I20 N33 Z12 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82346&r=his |
| By: | A.B. Leonard (The Cambridge Group for the History of Population and Social Structure) |
| Keywords: | contract enforcement, insurance, law merchant |
| JEL: | N33 |
| Date: | 2017–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:cmh:wpaper:30&r=his |
| By: | Novokmet, Filip; Piketty, Thomas; Zucman, Gabriel |
| Abstract: | This paper combines national accounts, survey, wealth and fiscal data (including recently released tax data on high-income taxpayers) in order to provide consistent series on the accumulation and distribution of income and wealth in Russia from the Soviet period until the present day. We find that official survey-based measures vastly under-estimate the rise of inequality since 1990. According to our benchmark estimates, top income shares are now similar to (or higher than) the levels observed in the United States. We also find that inequality has increased substantially more in Russia than in China and other ex-communist countries in Eastern Europe. We relate this finding to the specific transition strategy followed in Russia. According to our benchmark estimates, the wealth held offshore by rich Russians is about three times larger than official net foreign reserves, and is comparable in magnitude to total household financial assets held in Russia. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12411&r=his |
| By: | Frieling, Julius (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | Since the Industrial Revolution, the economy of the UK has transformed from that of an industrial manufacturing giant to a service economy and a central hub for the financial sector. Energy and energy services derived from fossil fuels have played a key role as drivers behind this structural change. Using data from 1855—2015 on capital, labor, and energy in a CES production function, we show that during this period input factors were mostly gross complements. However, between 1960 and 1980, the elasticity of substitution of energy increased substantially, from around 0.7 to more than 2.4. These high elasticity estimates were not permanent, and this wave of change that characterized the transition has since dissipated. Elasticities have since returned to even lower values around 0.3, indicating that energy services which depend primarily on fossil fuel inputs, such as transportation, pose a serious limit to the efficacy of efforts aimed at reducing fossil fuel consumption. |
| Keywords: | Elasticity of substitution; Energy inputs; Aggregate Production; Industrialization; Structural change |
| JEL: | E13 E23 N10 Q43 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2017_007&r=his |
| By: | Scott, Susan V.; Van Reenen, John; Zachariadis, Markos |
| Abstract: | We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6,848 banks in 29 countries in Europe and the Americas with the full history of adoption since SWIFT’s initial operations in 1977. Our results suggest that the adoption of SWIFT (i) has large effects on profitability in the long-term; (ii) is greater for small than for large banks; and (iii) exhibits significant network effects on performance. We use an in-depth field study to better understand the mechanisms underlying the effects on profitability. |
| Keywords: | Technology adoption; bank performance; financial services; network innovation; SWIFT |
| JEL: | F3 G3 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:83641&r=his |
| By: | Baier, Jessica; Baten, Jörg |
| Abstract: | Does mining increase interpersonal violence? While the impact of natural resources on civil war and interstate conflict is well examined, its link to a second form of violence -namely the everyday, interpersonal form- is less explored. We assess the effect of silver mining on homicide rates, choosing silver because it was an important mining product for many countries over a substantial time span. We use a newly collected, global sample of countries for more than 100 years from 1890 to 1990 and find that high silver production leads to heightened violence. The effect is particularly pronounced in the interaction with autocratic governance systems. To rule out endogeneity, we use silver prices and silver deposit sites per area as instrumental variables. The takeaway message is that economies majorly dependent on mining resources are not only prone to get involved in violent conflict, but are also at risk to have a higher day-to-day violence level. |
| Keywords: | crime; Homicide Rate; resource curse; Silver Mining; Violence |
| JEL: | N00 Q01 Q34 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12397&r=his |
| By: | Evenett, Simon J; Fritz, Johannes |
| Abstract: | The trade distortions implemented during the Great Depression of the 1930s and the global slump of the early 1980s influenced the subsequent evolution of the world trading system, not least because policymakers recognised the deficiencies in existing trade rules. Evidence is presented here on the incidence and trade coverage of the principal means by which governments have discriminated against foreign commercial interests since the onset of the global economic crisis. This evidence is hard to square with claims that multilateral trade rules held back protectionism. Preparing the ground to fix the flaws in current rules and in dispute settlement should be part of the WTO's future work programme. |
| Keywords: | global economic crisis; protectionism; world trade; WTO |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12412&r=his |
| By: | Oscar Bajo-Rubio (Department of Economics, Universidad de Castilla-La Mancha, 13071 Ciudad Real, Spain); Vicente Esteve (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia, Spain) |
| Abstract: | We analyse the possible optimality of the path followed by the current account of the Spanish economy over the period 1850-2015, according to the intertemporal approach to the current account and using a present-value model. In particular, from the estimation of a bivariate VAR model for the current account, we try to assess to which extent the latter has been used to smooth private consumption along time in the presence of temporary shocks that the economy might suffer. In general, the evidence does not seem to be particularly favourable to the validity of the model over the period of analysis. |
| Keywords: | external imbalances, current account, intertemporal approach, Spanish economy |
| JEL: | F32 F41 F43 N10 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1710&r=his |
| By: | Feld, Lars P.; Köhler, Ekkehard A.; Nientiedt, Daniel |
| Abstract: | Ordoliberalism is often accused as being responsible for Germany's policy stance during the Eurozone crisis. Ordoliberalism originates from the so-called Freiburg School of Economics, founded by Walter Eucken during the 1930s at the University of Freiburg, which is in fact in Germany. It is however neither true that ordoliberal thought has continuously been predominant and a prevailing idea in German macroeconomic policy, nor that it is responsible for Germany's policy stance during the crisis in EMU. In this paper, we show why a proper analysis must arrive at this conclusion by referring to Eucken's thinking and the development of German ordoliberalism across time in relation to the "Rules vs. Discretion" debate and to Constitutional Economics. Although ordoliberalism may have had some influence on the design of EMU, pragmatism, the status-quo and national interests are dominant in German economic policy. |
| Keywords: | Ordoliberalism,Eurozone Crisis,Constitutional Economics,Monetary and Fiscal Policy |
| JEL: | B13 B26 B31 D78 E61 E63 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluord:1703&r=his |
| By: | Humberto Barreto (Department of Economics and Management, DePauw University) |
| Abstract: | The primary ideas in Piketty’s Capital should be incorporated into the economics curriculum. Unfortunately, its theoretical foundation—the Solow Model—when conventionally taught with a Solow diagram or analytical solution, is beyond the reach of the typical undergraduate. The model, however, can be effectively presented via simulation, with steady-state and comparative statics properties directly observed. A single, standalone, macro-enhanced Excel workbook, Capital.xlsm, is all that is needed to teach the main ideas in Piketty’s Capital. Download it here www.depauw.edu/learn/econexcel or from this direct link: www.depauw.edu/learn/econexcel/Capital.x lsm |
| Keywords: | inequality, simulation, Excel, income distribution, Solow Model, economic growth |
| JEL: | A10 A20 J10 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:dew:wpaper:2017-02&r=his |
| By: | Accominotti, Olivier; Eichengreen, Barry |
| Abstract: | New data documenting European bond issues in major financial centres from 1919 to 1932 show that conditions in international capital markets and not just in borrowing countries are important for explaining the surge and reversal in capital flows. In particular, the sharp increase in stock market volatility in the major financial centres at the end of the 1920s figured importantly in the decline in foreign lending. This article draws parallels with Europe after 2008 |
| JEL: | N0 F3 G3 |
| Date: | 2016–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:84308&r=his |
| By: | Prescott, Edward Simpson (Federal Reserve Bank of Cleveland); Balla, Eliana (Federal Reserve Bank of Richmond); Mazur, Laurel (University of Maryland); Walter, John R. (Federal Reserve Bank of Richmond) |
| Abstract: | Failure rates of small commercial banks during the banking crisis of the late 1980s were about 7.6%, which is significantly higher than the 5.7% failure rate during the recent crisis. The higher rate is surprising because small banks had significantly increased their commercial real estate (CRE) lending by the second crisis, which is riskier than other types of lending, and economic shocks were more severe in the recent crisis. We compare failure rates in the two periods using a statistical model that allows us to decompose the effect of changes in bank characteristics and economic shocks on failure rates. We find that the severe economic shocks of the recent crisis had a larger impact on high bank failure rates than bank characteristics. Increases in risk from CRE lending were offset by higher capital levels and other changes in bank characteristics. The failure rate would have been much lower in the later crisis if banks were subject to the less severe economic shocks of the earlier crisis. To the extent that higher capital levels were due to Basel I and the prompt corrective action (PCA) provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991, we find that these reforms were beneficial. We also compare Federal Deposit Insurance Corporation (FDIC) losses on failed banks between the two periods. Here, despite the PCA reforms, losses on failed banks were higher in the recent crisis than in the earlier one. These differences are not accounted for by changes in CRE concentrations or the relative size of economic shocks. On this dimension, the reforms of the early 1990s did not seem to help. Finally, we find that a discretionary accounting variable, interest accrued but not yet received, is predictive of both failure and higher FDIC losses in both crises. |
| Keywords: | Bank failures; Regulations; |
| JEL: | G21 G28 |
| Date: | 2017–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1719&r=his |
| By: | Alvaredo, Facundo; Assouad, Lydia; Piketty, Thomas |
| Abstract: | In this paper we combine household surveys, national accounts, income tax data and wealth data in order to estimate the level and evolution of income concentration in the Middle East for the period 1990-2016. According to our benchmark series, the Middle East appears to be the most unequal region in the world, with a top decile income share as large as 61%, as compared to 36% in Western Europe, 47% in the USA and 55% in Brazil. This is due both to enormous inequality between countries (particularly between oil-rich and population-rich countries) and to large inequality within countries (which we probably under-estimate, given the limited access to proper fiscal data). We stress the importance of increasing transparency on income and wealth in the Middle East, as well as the need to develop mechanisms of regional redistribution and investment. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12405&r=his |
| By: | Blanchet, Thomas; Fournier, Juliette; Piketty, Thomas |
| Abstract: | We define generalized Pareto curves as the curve of inverted Pareto coefficients b(p), where b(p) is the ratio between average income or wealth above rank p and the p-th quantile Q(p) (i.e. b(p) = E[X|X > Q(p)]/Q(p)). We use them to characterize entire distributions, including places like the top where power laws are a good description, and places further down where they are not. We develop a method to nonparametrically recover the entire distribution based on tabulated income or wealth data as is generally available from tax authorities, which produces smooth and realistic shapes of generalized Pareto curves. Us- ing detailed tabulations from quasi-exhaustive tax data, we demonstrate the precision of our method both empirically and analytically. It gives better results than the most com- monly used interpolation techniques. Finally, we use Pareto curves to identify recurring distributional patterns, and connect those findings to the existing literature that explains observed distributions by random growth models. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12404&r=his |
| By: | Jaremski, Matthew (Colgate University); Wheelock, David C. (Federal Reserve Bank of St. Louis) |
| Abstract: | Bank lending booms and asset price booms are often intertwined. Although a fundamental shock might trigger an asset boom, aggressive lending can push asset prices higher, leading to more lending, and so on. Such a dynamic seems to have characterized the agricultural land boom surrounding World War I. This paper examines i) how banks responded to the asset price boom and how they were affected by the bust; ii) how various banking regulations and policies influenced those effects; and iii) how bank lending contributed to rising farm land values in the boom, and how bank closures contributed to falling prices in the bust. We find that rising crop prices encouraged bank entry and balance sheet expansion in agriculture counties. State deposit insurance systems amplified the impact of rising crop prices on the size and risk of bank portfolios, while higher minimum capital requirements dampened the effects. Further, increases in county farm land values and mortgage debt were correlated with the number of local banks ex ante and increases in bank loans during the boom. When farm land prices collapsed, banks that had responded most aggressively to the asset boom had a higher probability of closing, while counties with more bank closures experienced larger declines in land prices than can be explained by falling crop prices alone. |
| Keywords: | Asset booms and busts; banks; bank lending; bank entry; bank closure; deposit insurance; regulation |
| JEL: | E58 N21 N22 |
| Date: | 2017–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2017-036&r=his |