New Economics Papers
on Business, Economic and Financial History
Issue of 2006‒10‒28
nineteen papers chosen by

  2. Are Elite Universities Losing their Competitive Edge? By Han Kim, E; Morse, Adair; Zingales, Luigi
  3. Income and Wealth Concentration in Spain in a Historical and Fiscal Perspective By Alvaredo, Facundo; Saez, Emmanuel
  4. A.-R.-J. Turgot and the Construction of an Economic Agent called Entrepreneur By José M. Menudo; José Mª O’kean
  5. Estimating a Cagan-type demand function for gold: 1561-1913 By Alexei Deviatov; Neil Wallace
  6. Were American Parents Really Selfish? Child Labour in the 19th Century By Bhaskar, Venkataraman; Gupta, Bishnupriya
  7. Financial Innovations and Macroeconomic Volatility By Jermann, Urban; Quadrini, Vincenzo
  8. The Value Relevance of Financial Reporting on the Oslo Stock Exchange over the Period 1964-2003 By Gjerde, Øystein; Knivsflå, Kjell Henry; Sættem, Frode
  9. International Trade and Finance under the Two Hegemons: Complementarities in the United Kingdom (1870-1913) and the United States (1920-30) By Taylor, Alan M; Wilson, Janine
  10. The French Tradition. An alternative theoretical framework By José M. Menudo; José Mª O’kean
  11. How Progessive is the US Federal Tax System? An Historical and International Perspective By Piketty, Thomas; Saez, Emmanuel
  12. Development, Democracy and Mass Killings By Easterly, William; Gatti, Roberta; Kurlat, Sergio
  14. A Stable International Monetary System Emerges: Bretton Woods, Reversed By Rose, Andrew K
  15. The Theory of the Firm, the Theory of Competition and the Transnational Corporation By Janis Kapler
  16. Creación de valor para los accionistas de Endesa By Fernandez, Pablo; Carabias, Jose M.
  17. Creación de valor para los accionistas de Bankinter By Fernandez, Pablo; Carabias, Jose M.
  18. Ranking Journals by Concentration of Author Affiliation: Thirty-Five Years of Finance Research By Lasser, Dennis; Rydqvist, Kristian
  19. Dynamique du capitalisme et guerres By Bernard Gerbier

    Abstract: The objective of this paper is to trace the development of the French auditing profession, the commissaires aux comptes, focusing on the appearance of the large Anglo-American audit firms on the French market. The French audit market has always shown a number of peculiarities, among which the continued importance of a number of local audit firms. The French audit profession finds its roots in late nineteenth century company law that introduced an obligation for companies to release audited financial statements. The profession of commissaire aux comptes became regulated in its modern form in the 1960s. The paper tries to explain the growing impact of the international audit firms on the French profession, using a framework that relates to internationalisation strategies in service industries. It also demonstrates how local professionals and the French state reacted to these developments.
    Keywords: Auditing profession, history, internationalisation, service industries, Anglo-Saxon accounting firms, France
    Date: 2006–06
  2. By: Han Kim, E; Morse, Adair; Zingales, Luigi
    Abstract: We study the location-specific component in research productivity of economics and finance faculty who have ever been affiliated with the top 25 universities in the last three decades. We find that there was a positive effect of being affiliated with an elite university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. We decompose this university fixed effect and find that its decline is due to the reduced importance of physical access to productive research colleagues. We also find that salaries increased the most where the estimated externality dropped the most, consistent with the hypothesis that the de-localization of this externality makes it more difficult for universities to appropriate any rent. Our results shed some light on the potential effects of the internet revolution on knowledge-based industries.
    Keywords: faculty productivity; firm boundaries; knowledge-based industries; theory of the firm
    JEL: D85 I23 J24 J31 J62 L23 L31 O33
    Date: 2006–05
  3. By: Alvaredo, Facundo; Saez, Emmanuel
    Abstract: This paper presents series on top shares of income and wealth in Spain over the 20th century using personal income and wealth tax return statistics, as well as employment income statistics. Top income shares are highest in the 1930s in spite of substantial individual income tax evasion biasing down our estimates. This suggests that income inequality was much higher in the pre-civil war period than it is today. Employment income concentration was moderate in the 1960s and 1970s and dropped sharply from 1975 to 1977 during the transition to democracy. Top income shares have increased significantly since the mid-1990s due to an increase in wage income concentration and a surge in realized capital gains. Financial wealth concentration has also increased in the 1990s but real estate prices have increased sharply as well. As real estate wealth is less concentrated than financial wealth, on net, top wealth shares have declined slightly during the period 1982-2002. The wealth tax exemption of stocks for owners-managers since 1994 has gradually eroded by almost 40% the taxable wealth at the top, creating a very serious loophole in the wealth tax as well as large efficiency costs.
    Keywords: income; wealth inequality
    JEL: D3 H3
    Date: 2006–09
  4. By: José M. Menudo (Department of Economics, Universidad Pablo de Olavide); José Mª O’kean (Department of Economics, Universidad Pablo de Olavide)
    Abstract: The entrepreneurial function as just one factor of production is actually being the point of a depth discussion in entrepreneurship research. It could be the cause of some confusion which impeders theoretical developments and it also makes difficult the effectiveness of pro-entrepreneurial programs. The aim of this article is to analyse the origin of this factor of production. For this purpose, we look back to the 18th century in order to analyze Turgot’s works (1727-1781) by means of a new conceptual framework that distinguishes between different productive agents. A series of analytical problems are exposed when the entrepreneurship is linked to a separate economic agent.
    Keywords: Entrepreneurship, History of economic thought, Turgot, methodology.
    JEL: M13 B1 B11 B41
    Date: 2006–10
  5. By: Alexei Deviatov (New Economic School); Neil Wallace (Pennsylvania State University)
    Abstract: Long times series on production of gold and the value of gold, taken from Jastram’s book The Golden Constant, are used to estimate a Cagan-type demand function that relates the real total value of gold to its expected rate of return. The model assumes that gold production and a latent scale variable (income or consumption) are jointly exogenous and that the data are measured with error. The data reject the model: the estimates imply that the real value of gold varies a great deal relative to the expected return and depends negatively, rather than positively, on the expected return.
    Keywords: gold, Cagan demand function, estimation
    JEL: E41
    Date: 2006–08
  6. By: Bhaskar, Venkataraman; Gupta, Bishnupriya
    Abstract: Using the US Commissioner of Labor Survey of 1890, we examine household decisions and parental altruism vis-a-vis their children. Contrary to Parsons and Goldin (1989), we find that parental location choices were dictated by constraints rather than the desire to exploit child labour opportunities. We also find signfiicant income effects on child labour supply, indicating that rising affluence played an important part in the secular decline of child labour. We also find that the effects of childrens' income on their own consumption are weak, once child labour is controlled for.
    Keywords: child labour; parental altruism
    JEL: D13 J13 N31
    Date: 2006–05
  7. By: Jermann, Urban; Quadrini, Vincenzo
    Abstract: The volatility of US business cycle has declined during the last two decades. During the same period the financial structure of firms has become more volatile. In this paper we develop a model in which financial factors play a key role in generating economic fluctuations. Innovations in financial markets allow for greater financial flexibility and generate a lower volatility of output together with a higher volatile in the financial structure of firms.
    Keywords: business cycle; debt-equity finance; financing constraints
    JEL: E3 G1 G3
    Date: 2006–06
  8. By: Gjerde, Øystein (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Knivsflå, Kjell Henry (Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration); Sættem, Frode (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: This article focuses on the value relevance of financial statements in Norway over the 40-year period from 1964 to 2003. Since Norwegian generally accepted accounting principles are based on an earnings-oriented conceptual view rather than a balance-oriented conceptual framework, like the ones adopted by the IASB and the FASB, this study provides interesting empirical evidence on the value relevance of earnings-oriented conceptual frameworks. Our main finding is that the value relevance of financial reporting for investors trading on the Oslo Stock Exchange has increased significantly over the past four decades. This result is obtained by evaluating the adjusted R2-metric from a stock market return regression over time using deflated earnings and deflated change in earnings as explanatory variables, and controlling for changes in underlying economic variables over the period. A significant time trend is consistent with the view that Norwegian accounting regulators and standard setters have been successful in achieving more value relevant financial statements over time. Norway is an example where employing an earnings-oriented conceptual framework has improved the value relevance of accounting information.
    Keywords: Capital Markets; Financial Reporting; Equity Valuation; Value Relevance
    JEL: G10 G38 M41
    Date: 2005–12–23
  9. By: Taylor, Alan M; Wilson, Janine
    Abstract: Do international trade and finance flow together? In theory, trade and finance can be substitutes or complements, so the matter must be resolved empirically. We study trade and financial flows from the United Kingdom from 1870 to 1913 and the United States in the interwar years. Trade and finance are robustly correlated, even after allowing for simultaneity. Evidence from the British Empire casts doubt on the idea that trade is a punishment device in the event of default.
    Keywords: complementarities; international investment; international trade
    JEL: F10 F30 F40 N10 N20 N70
    Date: 2006–09
  10. By: José M. Menudo (Department of Economics, Universidad Pablo de Olavide); José Mª O’kean (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper deals with the French economic thought throughout the eighteenth and nineteenth centuries. A series of distinctive concepts were developed to come to a clear understanding of the economic problems which the French authors were interested in. J.A. Schumpeter called these economists 'the French tradition'. The arguments presented in this paper aim at illustrating the process of construction of this framework of theoretical concepts which can be regarded as an unsuccessful alternative to the British classical economics. However, this fruitful view of the economy has left a legacy of important contributions to economic theory..
    Keywords: Classical and Preclassical, Economic Methodology, Entrepreneurship, Production and Organisations.
    JEL: B1 B41 M13 D2
    Date: 2006–10
  11. By: Piketty, Thomas; Saez, Emmanuel
    Abstract: This paper provides estimates of federal tax rates by income groups in the United States since 1960, with special emphasis on very top income groups. We include individual and corporate income taxes, payroll taxes, and estate and gift taxes. The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s. This dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labour income. The sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity. International comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity, both for time trends and for cross-country comparisons. The pattern for the United Kingdom is similar to the US pattern. France had less progressive taxes than the US or UK in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the US or the UK.
    Keywords: income tax progressivity
    JEL: H2
    Date: 2006–07
  12. By: Easterly, William; Gatti, Roberta; Kurlat, Sergio
    Abstract: Using a newly assembled dataset spanning from 1820 to 1998, we study the relationship between the occurrence and magnitude of episodes of mass killing and the levels of development and democracy across countries and over time. Mass killings appear to be more likely at intermediate levels of income and less likely at very high levels of democracy. However, the estimated relationship between democracy and probability of mass killings is not linear in the full sample. In the 20th century, discrete improvements in democracy are systematically associated with episodes involving fewer victims.
    Keywords: democracy; growth; mass killings
    JEL: N40 O10
    Date: 2006–06
  13. By: Vladimir Popov (NES)
    Abstract: This paper starts by separating the transformational recession (reduction of output in most transition economies in the first half of the 1990s) from the process of economic growth (recovery from the transformational recession) in 28 transition economies (including China,Vietnam and Mongolia). It is argued that the former (the collapse of output during transition) can be best explained as adverse supply shock caused mostly by a change in relative prices after their deregulation due to distortions in industrial structure and trade patterns accumulated during the period of central planning, and by the collapse of state institutions during transition period, while the speed of liberalization, to the extent it was endogenous, i.e. determined by political economy factors, had an adverse effect on performance. In contrast, at the recovery stage the ongoing liberalization starts to affect growth positively, whereas the impact of pre-transition distortions disappears. Institutional capacity and reasonable macroeconomic policy, however, continue to be important prerequisites for successful performance.
    Date: 2006–08
  14. By: Rose, Andrew K
    Abstract: A stable international monetary system has emerged since the early 1990s. A large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks. These countries place few restrictions on capital mobility and allow their exchange rates to float. The domestic focus of monetary policy in these countries does not have any obvious international cost. Inflation targeters have lower exchange rate volatility and less frequent “sudden stops” of capital flows than similar countries that do not target inflation. Inflation targeting countries also do not have current accounts or international reserves that look different from other countries. This system was not planned and does not rely on international coordination. There is no role for a center country, the IMF, or gold. It is durable; in contrast to other monetary regimes, no country has yet abandoned an inflation-targeting regime in crisis. Succinctly, it is the diametric opposite of the post-war system; Bretton Woods, reversed.
    Keywords: capital; controls; durable; exchange; finance; fixed; inflation; rate; regime
    JEL: F02 F10 F34
    Date: 2006–09
  15. By: Janis Kapler
    Abstract: se’s 1937 paper on “The Nature of the Firm” formed the basis of the transaction-cost and internalization theories of transnational enterprises in the 1970s-1990s. These emphasized the problem of firms transferring intangible assets across national borders. Newer theories of the firm adopt resourcebased Penrosian, knowledge-based, capabilities and evolutionary perspectives, yet most continue to explain the international firm as a function of transaction-cost economizing. It is argued that Coase’s intention was to present a theory of the firm abstracted from its competitive environment. The application of this approach to a theory of the TNC is flawed because it cannot explain the TNC without reference to competitive conditions. This leaves us with incomplete theories of multinational firms in their competitive environments, because they address transactioncost problems and solutions to the exclusion of many other competitive considerations that must influence the transnational step in the firm’s evolution. The newer knowledge-based theories of the firm represent progress because they focus on the institutional details of dynamic firm creation of (investment in) the intangible or knowledge-based competitive assets by which firms transform their environments. For international firms, this has global consequences. Most recently, theory has begun to emphasize the advantages and not just the costs of internationalization. Additionally, the necessity to address the juxtaposition of internalization and externalization by global firms provides a context for creating a dynamic explanation of both. The key is to recognize the process of standardization as a part of the process of innovation at the heart of learningbased theories. This can help to explain the hierarchical division of labor both within and between firms.
    Keywords: Transnational Corporation, Theory of the Firm
    JEL: F23
  16. By: Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School)
    Abstract: En este documento se cuantifica la creación de valor para los accionistas de Endesa entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de Endesa fue de 18.994 millones de euros; el aumento del valor para los accionistas fue de 24.619 millones de euros, y la creación de valor para los accionistas fue de 13.090 millones de euros (expresado en euros de 2005). La rentabilidad media anual para los accionistas de Endesa fue del 15,2%, sensiblemente superior a la del IBEX 35 (14,0%): cada euro invertido en acciones de Endesa en diciembre de 1991 se convirtió en 7,63 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX 35 se convirtió en 6,26 euros. La inflación media fue del 3,4%, y la rentabilidad media de todas las empresas del IBEX, exceptuando Endesa, fue del 13,9%. La rentabilidad para los accionistas de Endesa fue positiva todos los años, excepto en 1994 y en 1999-2002. La capitalización de Endesa durante estos años osciló entre el 5,3% y el 13,5% de la capitalización del IBEX 35. En diciembre de 1991, Endesa fue la segunda empresa por capitalización (tras Telefónica). En junio de 2006, Endesa fue la cuarta empresa por capitalización del IBEX 35 (tras BSCH, Telefónica y BBVA.
    Keywords: creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas;
    JEL: G12 G31 M21
    Date: 2006–07–19
  17. By: Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School)
    Abstract: En este documento se cuantifica la creación de valor para los accionistas de Bankinter entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de Bankinter fue de 2.834 millones de euros, el aumento del valor para los accionistas fue de 4.120 millones de euros; y la creación de valor para los accionistas fue de 2.847 millones de euros (expresado en euros de 2005). La rentabilidad media anual para los accionistas de Bankinter fue del 17,3%, sensiblemente superior a la del IBEX35 (14,0%): cada euro invertido en acciones de Bankinter en diciembre de 1991 se convirtió en 9,38 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX35 se convirtió en 6,26 euros. La inflación media fue del 3,4%. La rentabilidad para los accionistas de Bankinter fue positiva en nueve de los catorce años analizados. La capitalización de Bankinter durante estos años osciló entre el 0,83 y el 1,6% de la capitalización del IBEX 35. En diciembre de 1991, Bankinter fue la 18ª empresa por capitalización del IBEX, mientras que en junio de 2006 fue la 22ª empresa. Bankinter fue el banco más rentable para sus accionistas (entre los 23 bancos internacionales analizados) en el período 2003-2005.
    Keywords: creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas;
    JEL: G12 G31 M21
    Date: 2006–09–07
  18. By: Lasser, Dennis; Rydqvist, Kristian
    Abstract: This paper presents a new metric for journal ranking that has the advantage of ranking more journals with a longer time-series at a low cost relative to impact factors and survey-based methods. We simultaneously rank journals and institutions by the degree of concentration of top journal publications among top rated institutions. The resulting rank of journals by concentration is similar to the rank by impact factors, but the concentration rank includes several journals which are not in the Social Science Citation Index. We also examine the index with thirty-five years of finance research, document a strong secular decline for most journals, a widening gap between higher and lower tier journals, and study the impact on journal competition from the Review of Financial Studies.
    Keywords: concentration index; financial economics; impact factor; institution ranking; journal ranking
    JEL: A11 G00 I23
    Date: 2006–06
  19. By: Bernard Gerbier (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II])
    Abstract: Bien que la guerre soit un phénomène économique majeur, elle est peu étudiée par les économistes. Pour tenter d'attirer l'attention de la profession sur ce manque, l'article propose une explication économique de la guerre en termes de cycles hégémoniques (centenaires) et de cycles Kondratieff. Il en ressort que les guerres sont des éléments essentiels de la dynamique de l'accumulation (disponibilité des ressources, technologies, capacité de financement) et qu'elles constituent des moments-clés de la dynamique du capitalisme par (re)définition des règles du jeu de l'économie mondiale.
    Keywords: guerre ; capitalisme ; économie mondiale
    Date: 2006–10–10

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