nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2005‒11‒09
seventeen papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. Transferring Rhineland Capitalism to the Polish-German Border: Perceptions of Bank Governance and Practice in Zgorzelec-Görlitz By Bernardo Batiz-Lazo; Robert Locke; Kristine Müller
  3. The Empire Effect: Country Risk in the First Age of Globalization, 1880-1913 By Niall Ferguson; Moritz Schularick
  4. China’s banking reform: An assessment of its evolution and possible impact By Alicia Garcia-Herrero; Sergio Gavila; Daniel Santabarbara
  5. The Modern World: The effect of democracy, colonialism and war on economic growth 1820-2000 By Branko Milanovic
  7. Historical Legacies: A Model Linking Africa's Past to its Current Underdevelopment By Nathan Nunn
  8. The evolution of city size distribution in Portugal: 1864-2001 By Ana Paula Delgado; Isabel Maria Godinho
  9. Korea's Fading Economic Miracle 1990-97 By Harvie, Charles; Lee, Hyun-Hoon
  10. Maquiladoras and Standard of Living in Mexico Before and After NAFTA By Julio Huato
  11. La Banque à distance en Tunisie : Comment rattraper le retard ? By Achraf AYADI
  12. Cartuja 98, A Technological Park located at the site of Sevilla's World's Fair By Antonio Vazquez-Barquero; Emilio Carrillo
  13. Pursuit of Competitive Advantages for Entrepreneurship: Development of Enterprise as a Learning Organization. International and Russian Experience By Anna Dokukina
  14. Foreign direct investment and regional convergence: an international approach By Raquel Díaz
  15. Regional competitiveness in tourist local systems By Francesco Capone
  16. How to Cope with Declining Small Urban Centres? - The Finnish Regional Centre Programme in perspective By Tatu Hirvonen
  17. The Clustering of Financial Services in London* By Gary A. S. Cook; Naresh R. Pandit; Jonathan V. Beaverstock; Peter J. Taylor; Kathy Pain

  1. By: Bernardo Batiz-Lazo (Bristol Business School); Robert Locke (University of Hawaii Manoa); Kristine Müller (Independent scholar)
    Abstract: This article looks at the past development and potential of the Rhenish capitalist model. We discuss the origins and nature of the model and the model in crisis. Because, we contend, Rhineland capitalism’s future will be decided in East-Central Europe, we focus – using a survey questionnaire – on bank customers perceptions of bank governance and practice in the Polish-German city of Zgorzelec-Görlitz. The experience of Dresdner Bank is stressed as is the fact that the local people not long before lived under Communism. A control group in the UK is used to ascertain the presence of German management traditions as opposed to Anglo-American approaches to management in the context of retail bank markets.
    Keywords: banking, corporate governance, UK, Poland, Germany, cross border services
    JEL: N
    Date: 2005–08–22
  2. By: Moritz Schularick (Free University of Berlin)
    Abstract: In this paper we take a comparative look at capital flows to less- developed countries in two eras of financial globalization. The paper extends recent research on the developmental effects of international financial integration, long-term trends in capital mobility and “globalization in historical perspective”. Analyzing the patterns of international financial integration in the three decades of the classical gold standard and after 1990 we show that investment in developing countries was a central element of 19th century financial globalization, but plays only a minor role today. The Lucas paradox of capital failing to flow from rich to poor has grown much stronger. In historical perspective, today’s financial globalization is marked by massive diversification flows between high-income economies and a relative marginalization of less-developed economies.
    Keywords: globalization, capital flows, development finance, capital market integration, economic history
    JEL: F3
    Date: 2005–09–05
  3. By: Niall Ferguson (Harvard University); Moritz Schularick (Free University of Berlin)
    Abstract: Would the movement of capital from to poor countries greatly increase, if the commitment to protecting property and allowing capital to move freely were more credible? This paper asks whether the British Empire provided global public goods that supported large-scale development finance before 1914. We reassess the importance of colonial status to investors by means of multivariable regression analysis. We show that British colonies were able to borrow in London at significantly lower rates of interest than non-colonies precisely because of their colonial status, which overruled economic factors. We conclude that these findings have important implications for the current globalization debate: lacking jurisdictional integration is a major impediment to capital flows from rich to poor.
    Keywords: sovereign risk, development finance, economic history, imperialism, globalization, bond spreads, capital market integration
    JEL: E F3 K
    Date: 2005–09–06
  4. By: Alicia Garcia-Herrero (Bank of Spain); Sergio Gavila (Bank of Spain); Daniel Santabarbara (Bank of Spain)
    Abstract: The Chinese banking system, characterized by massive government intervention, poor asset quality and low capitalization, has started a reform process based on three main pillars: (i) bank restructuring, through the cleaning-up of non-performing loans and public capital injections, particularly in the four largest state-owned banks; (ii) financial liberalization, with the gradual flexibilization of quantity and price controls, the opening-up to foreign competition and cautious steps toward capital account liberalization; and (iii) strengthened financial regulation and supervision, coupled with efforts to improve corporate governance and transparency. Although the reform is still ongoing, our preliminary assessment indicates that changes are needed for the reform to be fully successful. Asset quality has improved, particularly in the recapitalized banks, but there is a high risk of a new build-up of non performing loans. Capitalization has increased in the largest banks, as a consequence of the government capital injections, but it generally remains low and profitability has fallen even further. China’s huge financing needs, to maintain high economic growth, and its commitment to fully open up its banking system to foreign competition urgently require a more comprehensive and time-bound strategy, with a long-term vision of the desired structure of the Chinese banking system. Bank recapitalization should be completed immediately, not only to ensure bank soundness, but also to increase profitability, which could be affected negatively as competition increases with full financial liberalization. Bank recapitalization, however, needs to be accompanied by a radical improvement in corporate governance, which would clearly be facilitated by a change in the property structure.
    Keywords: Chinese financial system, financial reform, bank restructuring, financial liberalization, bank regulation and supervision.
    JEL: E44 E66 G2 G21
    Date: 2005–08–22
  5. By: Branko Milanovic (World Bank)
    Abstract: The paper uses the recently available data on growth rates, democracy, protectionism, and wars over the period 1820 to 2000 to look at the determinants of economic growth over the long-term. It is motivated by the following questions: what is the effect of democracy on growth, was colonialism economically bad for colonies, does protectionism affect growth negatively, what is the effect of wars? We find that own democracy has a significant positive impact on growth which increases as country’s income goes up. (Overall level of democracy in the world however has no effect on growth.) The effect of colonialism is not statistically significant. Lower average level of protection in the world helps growth. Wars, whether civil or between the states, are strongly detrimental to economic growth.
    Keywords: growth,democracy,protectionism,war,colonialism,communism
    JEL: O P
    Date: 2005–09–06
  6. By: Ian W. McLean (University of Adelaide)
    Abstract: Between 1870 and 1890 Australian incomes per capita were 40 percent or more above those in the United States. About half this gap is attributable to Australia’s higher labor input per capita, and half to its higher labor productivity. The higher labor input is due in part to favorable demographic attributes stemming especially from the gold rush era, and partly to a favorable workforce participation rate. The higher labor productivity appears to result from an advantageous natural resource endowment. By 1914 the income lead over the U.S. had all but disappeared. This is ascribed to declines in Australia’s advantages both in labor input per capita and in labor productivity. It is argued that these declines are due neither to the effects of the 1890s depression, nor to changes in trade policy, but to the transitory or unsustainable nature of Australia’s earlier sources of income advantage.
    Keywords: comparative growth, Australian economic history
    JEL: N10 N17 O30
    Date: 2005–09–07
  7. By: Nathan Nunn (University of British Columbia)
    Abstract: Recent studies have found evidence linking Africa’s current underdevelopment to colonial rule and the slave trade. Given that these events ended long ago, why do they continue to matter today? I develop a model, exhibiting path dependence, that explains how these past events could have lasting impacts. The model has multiple equilibria: one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production. I show that external extraction, when severe enough, causes a society initially in the high production equilibrium to move to a low production equilibrium. Because of the stability of low production equilibria, the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends. The model provides one explanation why Africa’s past events continue to matter today.
    JEL: O P
    Date: 2005–08–22
  8. By: Ana Paula Delgado; Isabel Maria Godinho
    Abstract: The rank-size model - which states that the size distribution of cities in a country follows a Pareto distribution - has been recognized as one of those stylised facts or amazing empirical regularities, in spatial economics. A common problem in city size distribution studies concerns the definition of “cities”, namely the consistency of those definitions over time. In this paper we use a city-proper data base which uses a consistent definition of cities from 1864 to 1991. Portugal is a country with long established national borders and whose mainland urban system shows a constant number of cities over that period. In Portugal, empirical evidence on city size distribution based on census data shows that two large cities dominate the urban system, associated with a large number of very small cities and a clear deficit of medium-size cities. In this paper we analyse the evolution of the rank size exponent and examine the effect of varying city size cut-offs on the estimated value of that exponent. Then, we study the deviations of the rank-size distribution from linearity. Finally, we explore the dynamics underlying the evolution of the urban system by examining the relationship between city growth rates and city size. Keywords: city size distribution, Zipf’s law, rank-size, urban hierarchy, urban primacy
    Date: 2004–08
  9. By: Harvie, Charles (University of Wollongong); Lee, Hyun-Hoon
    Abstract: By the late 1980s Korea's interventionist and export-oriented development model had contributed to a number of serious structural weaknesses in the economy. Ongoing government involvement in the banking and corporate sectors, weak prudential supervision of financial institutions, and restricted financial market and corporate competition created moral hazard, as banks and corporates believed they would not be held accountable for their actions due to their close relationship with government. This resulted in financial sector risk mismanagement and highly leveraged growth of the chaebols. After 1988, when the new democratically elected civilian administration removed long-standing restrictions on union activity, rapid wage growth, in excess of productivity gains, eroded profitability. These structural weaknesses, and policy errors and mismanagement, made Korea increasingly vulnerable to external shocks during the 1990s. In mid 1995, a rapid depreciation of the Japanese yen and a world semi-conductor glut and price fall provided the trigger for a rapid slowdown in exports and industrial output, and an unprecedented wave of chaebol bankruptcies that undermined the solvency of financial institutions. Korea's long period of sustained economic growth, low inflation, strong investment and balanced budgets had lulled policy makers into complacency. They failed to act decisively to tackle the growing structural weaknesses. Korea's high exposure to short term foreign debt and loss of foreign exchange reserves through a vain and unsustainable attempt to defend the won further undermined foreign investor and creditor confidence. This paper discusses in some detail these developments and their contribution to the financial and economic crisis experienced by the country during 1997-98. It also identifies key lessons for countries contemplating similar rapid development, and key warning signs that need to be heeded to avoid similar happenings to that which occurred in Korea.
    Keywords: South Korea, export-oriented development model, structural weaknesses, financial and economic crisis
    Date: 2005
  10. By: Julio Huato (City University of New York - Graduate Center - Economics Department)
    Abstract: This study assesses the impact across states of for-export, mostly foreign-owned manufacturing plants (commonly known as 'maquiladoras') on various measures of standard of living in Mexico, namely literacy rate, school attendance rates, housing characteristics, life expectancy, infant mortality, and an overall index of human development. The main data set used is from the population and housing censuses of 1980, 1990, and 2000. The study controls for the effect of nonmaquiladora economic activity and prior growth. To remove the endogeneity, maquiladora activity is instrumented with a measure of road transportation time to the nearest major border city in the United States. The resulting IV-TS- OLS and GLS regressions, pooled and with (state and time) fixed effects, are estimated and the results of the respective Hausman specification tests are reported. I conclude that, overall, with the inclusion of state and time effects, maquiladora activity shows no impact on the measures of standard of living analyzed, with one exception: undergraduate schooling rates.
    Keywords: Maquiladoras, maquila, Mexico, manufacturing, liberalization, social welfare, standard of living, poverty
    JEL: O P
    Date: 2005–08–17
  11. By: Achraf AYADI (Institut National des Télécommunications d'Evry)
    Abstract: Cet article est une tentative d'analyser les difficultés des banques tunisiennes à adopter la banque en ligne et de proposer les principales solutions. Il a été publié dans la revue 'Le Manager' en Juillet 2005. Référence: Ayadi A. (2005), 'La Banque à distance en Tunisie : Comment rattraper le retard ?', Le Manager (Tunisie), n°108, Juillet, pp.34-36.
    Keywords: Electronic Banking
    JEL: O P
    Date: 2005–08–24
  12. By: Antonio Vazquez-Barquero; Emilio Carrillo
    Abstract: The Cartuja 93 Technological Park was created in 1993 and was located at the site of the World’s Fair that took place in Sevilla in 1992. The Park’s emergence and formation, between 1993 and 1999, was a slow and dificult process and during this period it was very common among social scientists to refer to it as as a failure, as the deserted Cartuja. At present, however, it seems that Cartuja 93 is consolidated and has become an urban Tecnological Park. Within Sevilla’s technopolis, research and development centers, technology transfer units and high technology and advanced service firms are located. The paper describes the formation and consolidation process of Cartuja 93, analyses the changes and transformation of the technopolis and asses the results of the Technological Park.
    Date: 2004–08
  13. By: Anna Dokukina
    Abstract: The range of up-to-date means to achieve success in business is rather extensive. The question is how to use them effectively taking into consideration conceptual changes in modern business strategies. Characteristics of development of the firm as a learning organization and crea-tion of corporate universities has been discussed during last decades by corporate and human resources managers, economic consultants and business education professionals. Most researchers emphasize the role of a corporate training system as an important competitive advantage in the dynamic conditions of modern business activity. Interest of Russian businessmen and economists to the new ways of solving managerial and production tasks has emerged quite recently. The pursuit of effective decision in management and production corresponding to the actual business strategies leads to the increase of significance of intellectual capital as a base of a system of com-petitive advantages of Russian enterprises. The current and planned research is devoted to the problem of pursuit and crea-tion of unique resources such as systems of corporate training and knowledge manage-ment which are main elements of strategic planning and management of a firm. The framework of research includes the following main points: · Analysis of the modern market development and related new business con-cepts. · The role of intellectual capital as an important part of a business life. · Dynamics of business environment and the necessity of learning organiza-tions’ creation and development. · Modern Corporate Universities as the most important institute of the enter-prise. · International and Russian tendencies in accumulation and application of intel-lectual capital and creation of Corporate Universities. The present article is dedicated to the consideration of the reasons and directions of conceptual changes in the business activity realization; to the problems of the devel-opment of business enterprise as learning organization and creation of the corporate universities; to the experience and tendencies of the concentration and realization of in-tellectual capital. Key words: entrepreneurship, economics of the firm, competition, intellectual capital, learning organization, knowledge management, corporate university.
    Date: 2004–08
  14. By: Raquel Díaz
    Abstract: Since the middle 1980's, as consequence of the worldwide process of liberalization, there has been an important rise in international capital flows, especially Foreign Direct Investment (FDI). In particular, during the second half of 1990’s, worldwide FDI inflows grew four times faster than domestic output, twice as fast as domestic investment and three times as fast as exports. However, the geographical distribution of these flows of international capital was highly uneven. The main receivers of these FDI inflows were the most-developed countries. The developing countries only received approximately 30% of the worldwide FDI inflows. At the same time, there has been a decrease in the speed of economic convergence among countries and regions. Between 1950 and 1990 the rate of convergence has been around 2% annually, but from the mid 1980’s, this rate decreased to the 0.2%-0.5% level on an annual basis. Immediately, a question arises: could the very high share of international capital directed to the most-developed countries, be one reason for the slowdown in the rate of economic convergence?. Most studies on the effects of the internationalization of production processes in economic growth have identified the liberalization process with international trade, excluding the effects of FDI and its consequences on regional convergence. However, the liberalization process has increased not only trade, but also international capital flows. In this paper we address this last point. The main objective is to analyze the possible relationship among FDI and economic convergence. In particular, we present arguments which support the hypothesis that FDI inflows could be one of the elements helping to slowdown the speed of convergence in recent years. We show, on one hand, that FDI is an "engine of growth", the same as international trade. The main reason is that FDI is not merely a transfer of capital. FDI contributes to strengthening the economic structure on the host country, modernizes and internationalises it as well. FDI is usually accompanied by specific intangible assets of the transnational corporation, changes in production systems and/or technological innovations, among others. There is not doubt that all these factors generate positive growth effects in the target destination. On the other hand, we show that the main receivers of this FDI are not the developing countries. The developed countries, with more than two-thirds of the worldwide FDI inflows dominate the global picture. So, if these facts are analysed together, it is possible to show that the positive effects of FDI on economic growth are concentrated mainly in the most developed countries. From this point, the negative effect of FDI on economic convergence is an obvious result.
    Date: 2004–08
  15. By: Francesco Capone
    Abstract: Since the past century, Marshall had described some industrial districts, in England, as agglomerations of small and medium enterprises specialized in a specific production activity. Starting from his contribute, in the last decades an immense literature has been written on industrial districts in Europe and around the World. Italian scholars gave particular attention to this local system of production and extended and developed the concept coined by Marshall. In other countries, different territorial models played a central role as milieu or cluster, for instance. In particular, in the last years these models have been extended to non-industrial fields like culture, rural activities and tourism. In the first part of the paper, a review of the main contributions on the territorial models applied to the tourist industry is proposed like the tourist milieu (Peyrache,-Gadeau, 2003, Bramanti, 2001), tourist cluster (Gordon, Goodall, 2000; Nedlac, 1999; Van Den Berg, Braum, Van Winden, 2001) or tourist district (Becattini et ali., 2001; Aci-Censis, 2001; Antonioli Corigliano, 1999). Thus, we define a model of tourist district and we address how extend to the tourist industry the competitive advantages created from networks of traditional marshallian industrial districts (Marshall, 1966; Becattini, 2000). In the second part of the paper, we perform a methodological exercise of spatial identification through GIS tools. The methodology of identification of industrial districts elaborated from Sforzi (1990) is extended to tourist industry and the adaptability of our model in the Italian territory is verified. The analysis starts from the travel-to-work areas (TTWAs) (Smart, 1974; Combees et al., 1982), which interprets the daily commuting flows due to work reasons defined in Italy by the ISTAT on the 1996 Intermediate Census on Industries and Services. A map of the Italian TLS is presented.
    Date: 2004–08
  16. By: Tatu Hirvonen
    Abstract: The severe depression which Finland suffered in the early 1990´s as well as the subsequent economic developments saw Finland faced not only with high unemployment and rising income disparities but also with deepening regional imbalance. As a handful of larger cities grew, many others either coped or declined altogether. In 2000 the Finnish government launched the Regional Centre Programme (RCP). Through the development of a regional network of different sized growth centres based on their particular strengths, expertise and specialization, the original purpose of the programme was not only to find new sources of economic growth but to find ways of spreading growth more evenly across regions without hindering the overall development. The aim of this paper is to assess the development trail which led to the emergence of the RCP as well as to study RCP´s role in assisting the development of small urban centres during its first three years of existence. Keywords: Regional development, Regional Centre Policy, Finland
    Date: 2004–08
  17. By: Gary A. S. Cook; Naresh R. Pandit; Jonathan V. Beaverstock; Peter J. Taylor; Kathy Pain
    Abstract: This paper reports a one-year study which investigated the clustering of financial services activity in London. A questionnaire asking about the advantages and disadvantages of a London location was sent to a stratified sample of 1,500 firms and institutions. In addition, thirty-nine on-site interviews with firms, professional institutions, government bodies and other related agencies were conducted. The study finds that banking, including investment banking, forms the cluster’s hub with most other companies depending on relationships with this sub-sector. Generally, the cluster confers many advantages to its incumbents including enhanced reputation, the ability to tap into large, specialized labor pool and customer proximity. The localized nature of relationships between skilled labor, customers and suppliers is a critical factor which helps firms achieve innovative solutions, develop new markets and attain more efficient ways to deliver services and products. Particularly important are the personal relationships which are enhanced by the on-going face-to-face contact that is possible in a compact geographical space. Many of the cluster’s advantages are dynamic in that they become stronger as agglomeration increases. The study also finds important disadvantages in the cluster which threaten its future growth and prosperity. These include the poor quality and reliability of transport, particularly the state of the London Underground and links to airports, increasing levels of regulation and government policy that is not co-ordinated with the whole of the cluster in mind. Key words: Industrial clustering, agglomeration, financial services.
    Date: 2004–08

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