New Economics Papers
on Business, Economic and Financial History
Issue of 2005‒02‒27
seven papers chosen by

  1. Useful Knowledge as an Evolving System: the view from Economic History. By J. Mokyr
  2. The Globalization of Trade and Democracy, 1870-2000 By J. Ernesto Lopez-Cordova; Christopher M. Meissner
  3. Financial Liberalization in Latin-America in the 1990s: A Reassessment By Joshua Aizenman
  4. Anticipating Artistic Success (or, How to Beat the Art Market): Lessons from History By David W. Galenson
  5. "The Genesis and the Development of the Pre-war Japanese Stock Market" By Yasushi Hamao; Takeo Hoshi; Tetsuji Okazaki
  6. Technical Change and the Wage Structure During the Second Industrial Revolution: Evidence from the Merchant Marine, 1865-1912 By Chinhui Juhn; Aimee Chin; Peter Thompson
  7. REEXAMINING THE DISTRIBUTION OF WEALTH IN 1870 By Joshua L. Rosenbloom; Gregory W. Stutes

  1. By: J. Mokyr
    Abstract: The process of modern growth is different from the kind of growth experienced in Europe and the Orient before 1800 in that it is sustained. Whereas in the premodern past, growth spurts would always run into negative feedback, no such ceiling seems to have been limiting the economic expansion of the past two centuries. The enigma of modern growth has led to a great deal of modeling and speculation amongst economists interested in the topic. One important strand in the literature has been that the Malthusian models that provided much of the negative feedback before 1800, have been short-circuited by the desire and ability of a growing number of individuals to reduce their fertility. Another has been institutional change, which has reduced opportunistic behavior and uncertainty. What has not been stressed enough is that the new technology was made possible by ever increasing "useful knowledge" as Kuznets called it. The sources of this growth in knowledge, surprisingly, have not been fully analyzed. How does "useful knowledge" emerge and develop? Why does it occur in one society and not another, at one time, and why does it take the form it does? This paper examines the details of how new knowledge is created by various combinations of luck, trial and error, inference, and experiment. To analyze the history of useful knowledge, an evolutionary framework to the economic history of useful knowledge is employed.
  2. By: J. Ernesto Lopez-Cordova; Christopher M. Meissner
    Abstract: We study whether international trade fosters democracy. The likely endogeneity between democracy and trade is addressed via the gravity model of trade, allowing us to obtain a measure of natural openness. This serves as our instrumental variable for actual trade openness à la Frankel and Romer (1999). We use this powerful instrument to obtain estimates of the causal impact of openness on democratization. A positive impact of openness on democracy is apparent from about 1895 onwards. Late nineteenth century trade globalization may have helped generate the "first wave" of democratization. Between 1920 and 1938 countries more exposed to international trade were less likely to become authoritarian. Finally, our post-World War II results suggest that a one standard deviation increase in trade with other countries could bring countries like Indonesia, Russia or Venezuela to be as democratic as the US, Great Britain or France. We also see some variation in the impact of openness by region and note that commodity exporters and petroleum producers do not seem to become more democratic by exporting more of such items.
    JEL: F1 N0
    Date: 2005–02
  3. By: Joshua Aizenman
    Abstract: This paper studies the experience of Latin-America [LATAM] with financial liberalization in the 1990s. The rush towards financial liberalizations in the early 1990s was associated with expectations that external financing would alleviate the scarcity of saving in LATAM, thereby increasing investment and growth. Yet, the data and several case studies suggest that the gains from external financing are overrated. The bottleneck inhibiting economic growth is less the scarcity of saving, and more the scarcity of good governance. A possible interpretation for these findings is that in countries where private savings and investments were taxed in an arbitrary and unpredictable way, the credibility of a new regime could not be assumed or imposed. Instead, credibility must be acquired as an outcome of a learning process. Consequently, increasing the saving and investment rates tends to be a time consuming process. This also suggests that greater political instability and polarization would induce consumers to be more cautious in increasing their saving and investment rates following a reform. Hence, reaching a sustained take-off in Latin-America is a harder task to accomplish than in Asia.
    JEL: F21 F23 F36 F43
    Date: 2005–02
  4. By: David W. Galenson
    Abstract: The recent history of modern art provides clues as to how important artists can be identified before their work becomes generally known. Advanced art has been dominated by conceptual innovators since the late 1950s, and the importance of formal art education in the training of leading artists has also increased during this period. A few schools have been particularly prominent. Auction market records reveal that during the past five decades the Yale School of Art has produced a series of graduates who have achieved great success commercially as well as critically. Recognizing Yale%u2019s role can allow collectors to identify important artists before they become widely recognized, and therefore before their early innovative work rises in value.
    JEL: J4
    Date: 2005–02
  5. By: Yasushi Hamao (Marshall School of Business, University of Southern California); Takeo Hoshi (Graduate School of International Relations and Pacific Studies, University of California, San Diego); Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: This paper examines the development of the Tokyo Stock Exchange since its inception in 1878 to the mid-1930s. Special attention is paid to the increases in the number of listed stocks throughout this period. By the mid-1930s, the Tokyo Stock Exchange had grown to a market bigger (measured relative to GDP) than many contemporary stock exchanges in major economies. Even compared with the stock exchanges in major countries today, the pre-war Tokyo Stock Exchange was quite large. New listings in the spot market section of the Tokyo Stock Exchange were not restricted for most of this period. Our regression analysis reveals that many firms decided to list their stocks on the Tokyo Stock Exchange as they became older and bigger. The commercial code change in 1911, which increased the protection of outside shareholders, also had a positive impact on the listings on the Tokyo Stock Exchange. The Tokyo Stock Exchange reform of 1918 that aimed at standardization of the spot transactions increased the listings on the Exchange. The analysis also suggests that in the earlier period, there was a "home bias" that the companies located in the Eastern part of Japan (closer to the Tokyo Stock Exchange) were more likely to be listed in the Tokyo Stock Exchange, but the effect diminished after the Exchange reform of 1918.
    Date: 2005–02
  6. By: Chinhui Juhn (Department of Economics, University of Houston); Aimee Chin (Department of Economics, University of Houston); Peter Thompson (Department of Economics, Florida International University)
    Abstract: Using a large, individual-level wage data set, we examine the impact of a major technological innovation—the steam engine—on skill demand and the wage structure in the merchant shipping industry. We find that the technical change created a new demand for skilled workers, the engineers, while destroying demand for workers with skills relevant only to sail. It had a deskilling effect on production work—able-bodied seamen (essentially, artisans) were replaced by unskilled engine room operatives. On the other hand, mates and able-bodied seamen employed on steam earned a premium relative to their counterparts on sail. A wholesale switch from sail to steam would increase the 90/10 wage ratio by 40%, with most of the rise in inequality coming from the creation of the engineer occupation.
    JEL: I20 J24 J31
    Date: 2004–08
  7. By: Joshua L. Rosenbloom; Gregory W. Stutes
    Abstract: We use data from the IPUMS sample of the 1870 US Population Census to analyze the distribution of real and personal property wealth. Wealth was relatively more equally distributed near the beginning of U.S. industrialization than it would be 50 years later. Disaggregating the data by demographic groups and spatially we find evidence consistent with Kuznets¡¯ conjecture that urbanization and industrialization were associated with rising inequality in the nineteenth century. But we also find that inequality was high in the South, even though it remained in 1870 highly rural and agricultural. Finally we find evidence that increasing literacy may have helped to reduce inequality.
    Date: 2005–01

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