New Economics Papers
on Business, Economic and Financial History
Issue of 2005‒02‒20
seven papers chosen by

  1. Does Sovereign Risk Differ for Domestic and Foreign Investors? Evidence from Scandinavian Bond Markets, 1938–1948 By Waldenström, Daniel
  2. Contrasts in Vital Rates: Madras and Punjab in the Colonial Period By Osamu Saito; Mihoko Takahama; Ryuichi Kaneko
  3. Do hedonic price indexes change history? The case of electrification By Edquist, Harald
  4. International Comparison in Historical Perspective: Reconstructing the 1934-36 Benchmark Purchasing Power Parity for Japan, Korea and Taiwan By Kyoji Fukao; Debin Ma; Tangjun Yuan
  5. Reconsidering Expectations of Economic Growth after World War II from the Perspective of 2004 By Robert W. Fogel
  6. Sustainability of Portuguese Fiscal Policy in Historical Perspective By Carlos Fonseca Marinheiro
  7. Changing with the Times: Success, Failure and Inertia in Canadian Federal Arrangements, 1945-2002 By Richard M. Bird; Francois Vaillancourt

  1. By: Waldenström, Daniel (Dept. of Economics, Stockholm School of Economics)
    Abstract: This paper shows that geographical investor heterogeneity strongly influences sovereign risk. While standard sovereign debt models mainly attribute the absence of sovereign defaults to foreign creditor retaliation, a new theoretical literature argues that domestic creditors also affect borrowing governments’ default decisions through channels of domestic politics. This paper examines this controversy using a newly assembled dataset on cross-listed Scandinavian sovereign yields traded at markets that abruptly went from integration to segmentation by capital controls and World War II. The results strongly suggest that domestic and foreign bond investors assessed different sovereign risks whereas more standard explanations based on macroeconomic factors, portfolio choice or risk aversion added little explanatory value. The study also documents large effects on recorded asset prices from institutional trading constraints (e.g., price limits), an issue largely neglected by previous research in historical long-run asset returns.
    Keywords: Sovereign risk; Investor heterogeneity; Market segmentation; Domestic debt; Political economy; Historical finance; Cliometrics
    JEL: F34 G15 G18 N20 N24 N44
    Date: 2005–02–09
  2. By: Osamu Saito; Mihoko Takahama; Ryuichi Kaneko
    Abstract: It is well known that there have been persistent differences in demographic rates between northern and southern areas in post-independence India: in the north marital fertility is higher, infant mortality higher and life expectancy shorter than in the south. As Tim Dyson has shown for infant mortality, this probably has pre-independence origins. In this paper the post-WWII contrasts in demographic performances between north and south India will be traced back to the colonial period. By choosing Madras and Punjab, by selecting districts whose registration statistics are reasonably usable in each province (Madras: Coimbatore, Salem, North Arcot, South Arcot, and Tilnelvelli; Punjab: Gurdaspur, Jallundur, Amritsar, Hoshiarpur, Ferozepore, and Ambala, Karnal and Rohtak), and then by adopting W. Brass's relational Gompertz fertility model, logit life-table system and growth balance method, as exemplified by Dyson's seminal work on Berar, we estimate annual series of e0 and TFR for both provinces. The series clearly show that even in the colonial period both fertility and mortality were higher in the north than in the south, which will have wider implications in historical contexts.
    Date: 2005–01
  3. By: Edquist, Harald (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: Rapid price decreases for ICT-products in the 1990s have been largely attributed to the introduction of hedonic price indexes. Would hedonic price indexing also have large effects on measured price and productivity during other technological breakthroughs? This paper investigates the impact of hedonic and matched model methods on historical data for electric motors in Sweden 1900–35. The results show that during the productivity boom of the 1920s, current prices for electric motors decreased by 13.2 and 12.2 percent per year depending on whether hedonic or matched model price indexes were used. This indicates high productivity growth in the industry producing electric motors in 1920–29. In contrast to Sweden, the US annual total factor productivity growth was only, according to current best estimates, 3.5 percent in Electric machinery compared to 5.3 percent in manufacturing in 1920–29. However, hedonic price indexes were not used to calculate US productivity. Finally, it is shown that the price decreases for electric motors in the 1920s were on par with the price decreases for ICT-equipment in the 1990s, even if hedonic indexing is used.
    Keywords: Hedonic price index; Electric motor; Productivity growth; Electrification; ICT revolution; Productivity growth; General Purpose Technologies
    JEL: L60 N60 O10 O14 O33 O40
    Date: 2005–02–16
  4. By: Kyoji Fukao; Debin Ma; Tangjun Yuan
    Abstract: This article provides the first expenditure approach estimate of purchasing power parity (PPP) converters for 1934-36 Japan, Korea and Taiwan. We matched all together 70 to 80 types of goods and services for private consumption, government expenditure and investment using three levels of weights derived from actual expenditure surveys. We find that the 1934-6 average prices of Korea for private consumption, investment and government expenditure were about 0.86, 0.89 and 0.98 times that of Japan respectively; and for Taiwan 0.84, 0.87 and 0.95 respectively. This gives the 1934-6 Korea and Taiwan overall GDE average price levels of 0.87 and 0.86 respectively that of Japan. Our new benchmark estimate is an improvement over existing converters based either on exchange rates or the 1990 backward projection method, which was embedded with index number biases. It provides a vital link for a long-term overview of structural change, ethnic income distribution and the historical convergence or divergence for these three economies in the past century.
    Date: 2005–01
  5. By: Robert W. Fogel
    Abstract: At the close of World War II, there were wide-ranging debates about the future of economic developments. Historical experience has since shown that these forecasts were uniformly too pessimistic. Expectations for the American economy focused on the likelihood of secular stagnation; this topic continued to be debated throughout the post-World War II expansion. Concerns raised during the late 1960s and early 1970s about rapid population growth smothering the potential for economic growth in less developed countries were contradicted when during the mid- and late-1970s, fertility rates in third world countries began to decline very rapidly. Predictions that food production would not be able to keep up with population growth have also been proven wrong, as between 1961 and 2000 calories per capita worldwide have increased by 24 percent, despite the doubling of the global population. The extraordinary economic growth in Southeast and East Asia had also been unforeseen by economists.
    JEL: O10
    Date: 2005–02
  6. By: Carlos Fonseca Marinheiro
    Abstract: This paper analyses the sustainability of Portuguese public finances, making use of a long dataset with more than a full century of observations. The use of such a long dataset is appropriate because both unit root and cointegration tests require a long period of data. The sustainability testing procedure is based on unit root and cointegration tests. We find considerable evidence in favour of sustainability for the 1903-2003 period. The overall conclusion of sustainability for the 1903-2003 period is not maintained for the more recent 1975-2003 period, which is characterised by the largest GDP deficit ratios of our sample. This latter period appears to signal a shift to an unsustainable path in Portuguese fiscal policy. Hence, our results suggest that fiscal consolidation efforts must, in fact, be continued in Portugal.
    Keywords: fiscal sustainability, sustainability of public debt, intertemporal budget constraint, government deficits and debt, Portugal
    JEL: E60 H60
    Date: 2005
  7. By: Richard M. Bird; Francois Vaillancourt (Rotman School of Management, University of Toronto)
    Abstract: In this paper, following an introductory section setting out some salient characteristics of the country and its key institutions, we examine three aspects of Canada?s federal arrangements over the last half century. We have chosen these three examples to illustrate, first, an instance in which successful changes were gradually made over time to accommodate changing economic and political circumstances, second, an instance in which the outcome of even greater efforts at changing institutions in the face of political demands was a resounding failure, and, finally, an instance in which, despite the apparent economic desirability of a change, none has even been attempted. The success story is the marked change that has taken place in the sharing of the personal income tax between the federal and the provincial governments. The failure is the unsuccessful attempt to amend the Constitution Act of 1982 to satisfy the demands of Qu?bec, the majority francophone province in Canada. Finally, the story that has not happened is the creation of a national securities commission to replace the existing provincial commissions.
    Keywords: Canada, fiscal federalism, constitutional reform, securities regulation
    JEL: H11 H77 G28 N42
    Date: 2005

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