New Economics Papers
on Business, Economic and Financial History
Issue of 2006‒05‒13
twelve papers chosen by

  1. Analyzing Artistic Innovation: The Greatest Breakthroughs of the Twentieth Century By David W. Galenson
  2. Una fiera senza luogo. Was Bisenzone an offshore capital market in sixteenth-century Italy? By Luciano Pezzolo; Giuseppe Tattara
  3. One World Money, Then and Now By Michael Bordo; Harold James
  4. The LDP at 50: The Rise, Power Resources, and Perspectives of Japan’s Dominant Party By Patrick Köllner
  5. The Economics of US Civil War Conscription By Timothy J. Perri
  6. The debates on Rignano's inheritance tax proposal. By Guido Erreygers; Giovanni Di Bartolomeo
  7. Economic Efficiency, Nuisance and Sewage: New Lessons from Attorney-General v Council of the Borough of Birmingham, 1858-1895 By Leslie Rosenthal
  8. The Story Behind the Post-War Decline in Women’s Housework: Prices, Income, Family Size, and Technology Effects in a Demand System By Huffman, Wallace
  9. Emigration and Regime Stability: Explaining the Persistence of Cuban Socialism By Bert Hoffmann
  10. Demand for Environmental Quality: An Empirical Analysis of Consumer Behavior in Sweden By Ghalwash, Tarek
  11. Before and After the Hartz Reforms: The Performance of Active Labour Market Policy in Germany By Lena Jacobi; Jochen Kluve
  12. Is IPO Underperformance a Peso Problem? By Andrew Ang; Li Gu; Yael V. Hochberg

  1. By: David W. Galenson
    Abstract: This paper considers not only when in their careers the greatest artists of the twentieth century made their greatest discoveries, but also how quickly they made them. The results underscore the dominant position of Picasso and Cubism in twentieth-century art: Picasso alone accounts for the two best three-year periods produced by any artist, and he and Braque account for three of the best five-year periods, all for the work the two young artists did in developing Cubism. Warhol’s innovations in Pop art and Matisse’s development of Fauvism also rank among the century’s most important breakthroughs. In general, identifying the most important short periods of artistic creativity emphasizes the differing methods of conceptual and experimental artists: great conceptual innovators, like Picasso, Matisse, and Warhol, made their greatest discoveries abruptly, whereas great experimental innovators, like Mondrian, Kandinsky, and Pollock, made their discoveries more gradually. The finding that artists who innovate early in their lives do so suddenly, while those who innovate late do so more gradually, adds an important dimension to our understanding of human creativity.
    Date: 2006–05
  2. By: Luciano Pezzolo (Department of Economics, University Of Venice Cà Foscari); Giuseppe Tattara (Department of Economics, University Of Venice Cà Foscari)
    Abstract: This paper discusses how Genoese bankers collected money at exchange fairs. This money was then lent to the King of Spain - through the asientos - from the mid-sixteenth to the early seventeenth centuries. Genoese bankers raised capital at the exchange fairs , which were typical short-term credit mechanism, where foreign bills of exchange were discounted over a three-month period. The Genoese funded long-term obligations by means of short term loans which meant they were able to enforce payment to the King and at the same time successfully manage the supply of finance from a large number of easily substitutable markets, located in different states. The Bisenzone fair of exchange was the forerunner to an efficient, widely integrated international capital market where Genoese pre-eminence was firmly established and which the Genoese kept firmly under their control. The success of the Bisenzone fairs of exchange directly challenges the theory which suggests that the laws against usury restrained the development of capital markets in early modern Italy.
    Keywords: Financial markets, market integration, financial institutions
    JEL: N20 N23 N43
    Date: 2006
  3. By: Michael Bordo; Harold James
    Abstract: The case for monetary simplification and unification has been made since the middle of the nineteenth century. It rests on four principal arguments ;reduced transaction costs; establishing credibility; preventing bad policy in other states; political integration via money. In this paper we argue that the case for monetary integration is becoming increasingly less persuasive. In making our case we posit a different concept of money to the one that underlay the nineteenth century discussions which we term "Newtonian" since it was based on the assumption of a single reference external to the state reflected in the definition of value in terms of precious metals. In the twentieth century, views of money have shifted to a more " Einsteinian" or relativistic conception. Measures of value that move relative to each other are helpful in terms of dealing with large shifts in relative prices that affect different countries very differently. In the current age of globalization, "Einsteinian" money is capable of accommodating shifts that were politically destructive in the " Newtonian" world.
    JEL: N20 F33 E42
    Date: 2006–05
  4. By: Patrick Köllner (GIGA Institute of Asian Affairs)
    Abstract: Japan’s ruling party is a prime example of a dominant party. While dominant parties in other democracies around the world have lost their grip on power or have even disappeared altogether, the LDP is still going strong. What explains the success of the party? How did the LDP acquire its dominant position and how did it manage to cling to it? In an attempt to answer these questions, this paper discusses the rise, the power (re-)sources and the perspectives of Japan’s dominant party.
    Keywords: Liberal Democratic Party, Japan, dominant party, party competition, electoral system
    Date: 2005–09
  5. By: Timothy J. Perri
    Abstract: The US government had limited power during the Civil War, including an inability to tax income. Similar to conscription plans considered in the War of 1812, Civil War conscription was not intended to compel service, but was a second-best plan to shift the tax burden to state and local governments. The time allowed communities to provide volunteers after a federal call for enlistments, along with substitution and the payment of a fee to avoid service (commutation), meant few were actually drafted---about 2% of all who served. Commutation could have lowered social cost, but appears to have been a binding ceiling on the price of a substitute.
    JEL: N11 N41 J45
    Date: 2006
  6. By: Guido Erreygers; Giovanni Di Bartolomeo
    Abstract: In the inheritance tax debates of the 1920s the proposals formulated by the Italian philosopher Eugenio Rignano occupied a prominent position. Since then, his contribution has been largely, although not completely, forgotten. This paper reviews the Rignano’s ideas by focusing upon its origins and upon the reactions to Rignano’s proposal in the 1920s, both in Italy and elsewhere.
    Keywords: inheritance tax debates, economic thought, Rignano’s proposal..
    JEL: B31 B51 H21 H24 H63
    Date: 2005–07
  7. By: Leslie Rosenthal (Keele University, Department of Economics)
    Abstract: This paper examines the post-litigation history of a celebrated and much-cited English nuisance case of 1858 concerning sewage pollution of the river Tame. This legal case is a classic citation purporting to illustrate the absence in English nuisance law of a ‘‘social benefit’’ defence for nuisance. As the court’s judgment in law found in favour of an individual landowner against the polluting city of Birmingham, population 250,000, property rights were manifestly awarded where benefits were lower. Coase’s Theorem arguments would lead to the expectation that post-litigation negotiations would ensue and evidence is presented that in this case such negotiations did occur, but broke down. The legal conflict stretched on over nearly 40 years, during which period the pollution was, in practice, allowed to continue until adequate sewage treatment techniques developed. The argument is made that the English court, in effect, by failing to enforce their decisions decisively, did take note of the calamitous social effects that would have followed an enforcement of the court’s orders.
    Keywords: Nuisance Law; Coase’s Theorem; Public Health
    JEL: K11 I18 N5
    Date: 2004–09
  8. By: Huffman, Wallace
    Abstract: This paper applies production theory to define a new set of inputs for U.S. households over the post-World War II period and uses newly constructed data on some of these inputs to fit a complete household-demand system, including inputs of women’s and men’s housework, and seven other input groups. The econometric results yield plausible price and income elasticities. Women’s and men’s housework are shown to be complements, rather than substitutes, but the other seven input categories are substitutes for women’s housework. Since the price of all inputs, except for men’s housework, has fallen significantly relative to the price of women’s time over the post-war period, substitution away from women’s household work is a major factor in its decline over the study period. Much of this decline, however, occurred from 1948 to 1980. Although the number of children under age 5 per household grew from 1948 to 1960 by 25 percentage points, family size declined from 1960 to 1985 by 27 percentage points and contributed to the post-60s decline in the demand for women’s housework. The parameters of the demand system are also used to make some standard of living comparisons for the post-war period.
    Keywords: Complete-demand system, household production, housework, women, price effects, income elasticities, post-World War II
    JEL: C5 D1 J2
    Date: 2006–05–01
  9. By: Bert Hoffmann (GIGA Institute for Ibero-American Studies)
    Abstract: The ‘Cuban safety-valve theory’ explains sustained survival of Cuban socialism in part through the high levels of emigration, following Hirschman’s model of ‘exit’ undermining ‘voice’. The article argues that this remains insufficient in two important ways. Taking a closer look at the crisis years since 1989, at least as important as the opening of exit options was the Cuban state’s capacity to rein in uncontrolled emigration and to reassure its ‘gatekeeper role’. In addition, the transnationalization of voice and exit must be taken into account as a crucial factor, as much in feeding the regime’s anti-imperialist discourse as, paradoxically, by generating sustained economic support from the emigrants.
    Keywords: Emigration, Regime Stability, Transnational Networks, Cuba, USA
    JEL: D31 H5 O15
    Date: 2005–06
  10. By: Ghalwash, Tarek (Department of Economics, Umeå University)
    Abstract: In this paper we estimate the income elasticity of demand for recreational services and <p> other traditional groups of goods in Sweden and test for potential changes in such <p> estimates over the twentieth century. Due to the difficulty of directly observing the <p> demand for recreational services, we employ an indirect methodology by using the <p> demand for some outdoor goods as a proxy for the demand for recreational services. In <p> line with most prior research, our results confirm the expectation that recreational <p> services, as a public good, is a luxury good in Sweden. Our results also show that the <p> income elasticities for traditional goods are stable over time, indicating that consumer <p> preferences for expenditure on these specific commodities do not change over time.
    Keywords: Household demand; environmental services; income elasticities; Engel curves
    JEL: D12 H41 Q26
    Date: 2006–05–05
  11. By: Lena Jacobi (RWI Essen); Jochen Kluve (RWI Essen and IZA Bonn)
    Abstract: Having faced high unemployment rates for more than a decade, the German government implemented a comprehensive set of labour market reforms during the period 2003-2005. This paper describes the economic and institutional context of the German labour market before and after these so-called Hartz reforms. Focussing on active policy measures, we delineate the rationale for reform and its main principles. As results of programme evaluation studies post-reform have become available just now, we give a first assessment of the effectiveness of key elements of German ALMP before and after the Hartz reforms. The evidence indicates that the re-organisation of public employment services was mainly successful, with the exception of the outsourcing of services. Re-designing training programmes seems to have improved their effectiveness, while job creation schemes continue to be detrimental for participants' employment prospects. Wage subsidies and startup subsidies show significantly positive effects. On balance, therefore, the reform seems to be moving the German labour market in the right direction.
    Keywords: Active Labour Market Policy, labour market reform, programme evaluation
    JEL: J0 J68 J88
    Date: 2006–04
  12. By: Andrew Ang; Li Gu; Yael V. Hochberg
    Abstract: Recent studies suggest that the underperformance of IPOs in the post-1970 sample may be a small sample effect or “Peso” problem. That is, IPO underperformance may result from observing too few star performers ex-post than were expected ex-ante. We develop a model of IPO performance that captures this intuition by allowing returns to be drawn from mixtures of outstanding, benchmark, or poor performing states. We estimate the model under the null of no ex-ante average IPO underperformance and construct small sample distributions of various statistics measuring IPO relative performance. We find that small sample biases are extremely unlikely to account for the magnitude of the post-1970 IPO underperformance observed in data.
    JEL: G12 G14 G32
    Date: 2006–05

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