New Economics Papers
on Business, Economic and Financial History
Issue of 2006‒11‒12
thirteen papers chosen by

  1. Foreign ownership in Mexican Banking: A Self- Correcting Phenomenon By Tschoegl, Adrian
  2. The rising wage inequality in Mexico, 1984-2000: A distributional analysis By Popli, Gurleen
  3. The Rich in Argentina over the Twentieth Century: 1932-2004 By Facundo, Alvaredo
  4. The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph By Mette Ejrnæs; Karl Gunnar Persson
  5. La théorie et la modélisation macroéconomiques, d'hier à aujourd'hui. By Michel De Vroey; Pierre Malgrange
  6. Reversal of fortunes: a cohort analysis of lifetime earnings in Iran By Marenglen Marku; Djavad Salehi-Isfahani
  7. Causas y consecuencias de la evolución reciente del precio del petróleo By Ruiz, Juan
  8. The Control of Land Rent in the Fortified Farming Town By John Hartwick
  9. Minimum wages and wage structure in Mexico By Fairris, David; Popli, Gurleen; Zepeda, Eduardo
  10. The Financial System of the EU 25 By Allen, Franklin; Laura, Bartiloro; Oskar, Kowalewski
  11. Revolution and redistribution in Iran: poverty and inequality 25 years later By Djavad Salehi-Isfahani
  12. Methodology in mission statement research: where are we, and were should we go? An analysis of 20 years of empirical research By S. DESMIDT; A. HEENE
  13. Datation du Cycle du PIB Camerounais entre 1960 et 2003 By Odia Ndongo, Yves Francis

  1. By: Tschoegl, Adrian
    Abstract: Currently, foreign banks own the banks that hold about 80 percent of the assets in Mexican banks. The paper argues that this is the third instance in which foreign-owned banks have initially comprised a large part of the Mexican banking system, and that in the first two cases (1865-1910 and 1920-1935), the degree of foreign ownership will recede. The argument is that reform and competition among the banks will cause the conditions that attracted the foreign banks to erode and the domestic banks to be able to grow more rapidly. Therefore, in subsequent decades many foreigner owners are likely to sell their subsidiaries to local banks and investors. Thus over time the ratio of assets in foreign-owned banks to total banking system assets should decline, even in the absence of government policies that aim for that result.
    Keywords: Mexico; foreign banks; ecological succession; banking history
    JEL: N26 G21
    Date: 2006
  2. By: Popli, Gurleen
    Abstract: In this paper we look at the distribution of wages to examine the extent and cause of the increasing wage inequality in Mexico over the last two decades (1984 to 2000). To understand the causes of the increase in inequality over time we do a counterfactual analysis. We find that over the last two decades not only did the inequality increase, there also was an erosion of real wages, and it's the middle class which was affected the most. Main reason for the decrease in real wages was the declining unionization in the country. While the main reason for the rise in inequality was the changing distribution of skills.
    Keywords: kernel density estimation; counterfactual distribution ; unions; trade liberalization; changing distribution of skills
    JEL: C14 J31
    Date: 2006
  3. By: Facundo, Alvaredo
    Abstract: This paper presents series on top shares of income in Argentina from 1932 to 2004 based on personal income tax return statistics. Our results suggest that income concentration was higher during the 1930s and the first half of the 1940s than it is today. The recovery of the economy after the Great Depression, favored but the international trade conditions during and after the Second World War, and the visible effects of the peronist policy between 1945 and 1955 generated an inverted U shape in the dynamics of top shares. The peronist redistributive policy, successful and visible, seemed to have proved limited when compared with the central economies. Since then, and after a new upward movement between 1955 and 1959, top shares seem to have described the U-shape pattern found in the developed English-speaking economies. The levels of concentration in 1953 were very similar to those found in 1997.
    Keywords: income inequality taxation
    JEL: O1 D3 H3
    Date: 2006–11–01
  4. By: Mette Ejrnæs (Department of Economics, University of Copenhagen); Karl Gunnar Persson (Department of Economics, University of Copenhagen)
    Abstract: This paper looks at the gains from improved market efficiency in long-distance grain trade in the second half of the 19th century when violations of the law of one price were reduced due to improved information transmission. Two markets, a major export centre, Chicago, and a major importer, Liverpool, are analyzed. We show that there was a law of one price equilibrium throughout the period but that markets displayed spells of demand- or supply-constrained trade when the law of one price was violated. Over time adjustments back to equilibrium, as measured by the half-life of a shock, become faster, violations of the law of one price become smaller and hence less persistent. There were also significant gains from improved market efficiency but that improvement took place after the information ‘regime’ shifted from pre-telegraphic communication to a regime with swift transmission of information in an era which developed a sophisticated commercial press and telegraphic communication. Improved market efficiency probably stimulated trade more than falling transport costs.
    Keywords: market integration; error correction; law of one price
    JEL: F1 C5 N7
    Date: 2006–10
  5. By: Michel De Vroey; Pierre Malgrange
    Abstract: Nous retraçons à grands traits l'évolution de la macroéconomie de sa naissance à nos jours, son émergence dans les années 1930, puis la période de règne sans partage de la macroéconomie keynésienne des années 1950 à 1970. L'étape suivante de son évolution est l'offensive menée par Milton Friedman et Robert Lucas contre la macroéconomie keynésienne. Les travaux de ces auteurs ont débouché sur un changement de perspective qui nous paraît mériter d'être épinglé comme une "révolution scientifique" à la Kuhn, l'émergence de la macroéconomie dynamique et stochastique. Avec celle-ci, le centre d'intérêt de la théorie et de la modélisation macroéconomie se déplace. Le thème des défaillances de l'économie de marché, et en particulier du chômage, est délaissé au profit d'un examen des phénomènes du cycle et de la croissance, ceux-ci étant étudiés à partir de l'hypothèse d'un fonctionnement efficace du système. Ces dernières années ont vu l'émergence d'une "nouvelle synthèse néoclassique" rejouant le jeu de la synthèse ancienne avec une combinaison d'éléments keynésiens et classiques, tout en adoptant la méthodologie nouvelle de discipline de l'équilibre et de rationalité des agents. ### [english abstract: An outline of the evolution from the birth up to present days of the macroeconomics is laid out, its emergence during the thirties, then the period of the domination of the Keynesian macroeconomics of the years 1950 to 1970. The following stage of the evolution has been the attack from Milton Friedman and Robert Lucas against Keynesian macroeconomics. We consider the works of these authors deserve the label of a "scientific revolution à la Kuhn", with the emergence of the dynamic and stochastic macroeconomics. Associated with this, the focus of macroeconomics has shifted. Themes linked to market failures, and especially to unemployment disappear, in favour of cycle and growth analysis, these last being studied from the postulate of efficient working of the system. These last years have seen the emergence of a "New Neoclassical Synthesis" mimicking the old synthesis in combining keynesian and classical elements, while adopting the new methodology of equilibrium discipline and of agents rational behaviour.] ###
    Date: 2006
  6. By: Marenglen Marku; Djavad Salehi-Isfahani
    Abstract: The Islamic Revolution of 1979, the eight-year war (1980-88) with Iraq, and the collapse of oil prices in 1986 dealt huge blows to Iran's economy. In this paper we use a pseudo panel constructed from annual multiple surveys during 1984-2004 to understand how individuals and families have fared through these tumultus times. Using a well-known technique developed in \citeN{deaton:85} and \citeN{deaton:94}, we are able to track earnings and consumption of cohorts born as early as the 1930s to as late as 1970. Our results show that cohorts born before 1950, who were well into their careers at the time of the Revolution, enjoyed steady increase in lifetime earnings, whereas those born after the mid 1960s, who started their careers during the Revolution and the war with Iraq (the ``Revolution generation" for short), experienced losses relative to previous cohorts. Their loss would have been even worse had their schooling not increased relative to earlier cohorts. We present a (counterfactual) decomposition that controls for cohort education and shows a steeper loss of lifetime earnings. Interestingly, decompositions of per capita household income and expenditures, using the age of the household head to define cohorts, tell a different story, one of continuously rising cohort effects. We discuss the role of several factors in explaining the divergence in cohort effects between individual earnings and household level variables: the selection effect caused by the ability of the more well to do to form their own households, income and consumption smoothing between generations within the same family, and public transfers. We conclude by proposing that loss of lifetime earnings by the Revolution generation explains the widespread economic dissatisfaction in Iran which persists despite robust economic growth in recent years.
    Keywords: Iran, life-time earnings, cohorts
    Date: 2006
  7. By: Ruiz, Juan
    Abstract: The price of oil has had a marked increase since 2002. The prices of Brent and West Texas Intermediate (WTI) crude -the two main benhcmarks of the market- have surpassed their historical maximum reached in 1991 during the first Gulf War, though, in real terms, the price of oil is still below that of 1980. This increase in prices, and the risk of further increments, justifies an evaluation of the consequences on global growth and inflation. This article presents a brief review of the recent evolution of the price of oil and tries to identify the main factors behind its increase. In addition, some factors that can influence the future evolution of the price of oil in the short and long run are presented, as well as an estimation of the effect of a further increase in the price of oil over growth and inflation for the main industrial economies.
    Keywords: Oil price; growth; inflation; global economy
    JEL: E17 E66 Q43
    Date: 2004–12–16
  8. By: John Hartwick (Queen's University)
    Abstract: We consider costly administration at the center of a farming community surrounding a fortified village. Land rent taxation is high cost mode of financing central administration in a tax incidence sense. Participatory administration by the governed is a lower cost alternative. We speculate why the low cost option has been out-competed by its higher cost alternative throughout history. We also take up constraints on predation on farmers by a landlord at the center.
    Keywords: administrative structure, public goods, welfare cost
    JEL: H41 H11
    Date: 2006–10
  9. By: Fairris, David; Popli, Gurleen; Zepeda, Eduardo
    Abstract: Instead of merely setting a lower bound on the wages of formal sector workers, minimum wages serve as a norm for wage setting more generally throughout the Mexican economy. Our results suggest that wages are commonly set at multiples of the minimum wage, and that changes in minimum wages influence wage changes across the occupational distribution. Moreover, our findings suggest that these normative features of minimum wages have their greatest impact on the mid-to-lower tail of the wage distribution, including the informal sector of the economy. Thus, the results lend support to the view that declining real minimum wages and stabilization programs that strengthened the link between wage levels, wage changes, and minimum wages, might account for a portion of the growing wage inequality in Mexico over the period of the late 1980s and early 1990s.
    Keywords: wage distributions; minimum wages; wage inequality; Mexico
    JEL: J31 J38
    Date: 2006
  10. By: Allen, Franklin; Laura, Bartiloro; Oskar, Kowalewski
    Abstract: We present an overview of the financial structure of the enlarged European Union with 25 countries. We start by describing the financial system development in all member states since 1995, and then compare the structure between the old and new countries. Using financial measures we document the prevailing substantial differences in the financial structure between new and old member states after the enlargement in 2004. Finally, we compare the financial structures of an enlarged EU with those of the United States and Japan.
    Keywords: Financial System
    JEL: G20
    Date: 2005–06
  11. By: Djavad Salehi-Isfahani
    Abstract: Despite nearly three decades of revolutionary government rule in Iran poverty and inequality remain the central issues of political debate in Iran. Public dissatisfaction, as demonstrated by the electoral success of the populist candidate in the 2005 presidential election, has been widely attributed to rising poverty and inequity. In this paper I use household survey data to describe the trends in poverty and inequality for the last three decades. The evidence shows that poverty, having substantially declined in recent years, is quite low by international standards and in comparison to pre-revolution years. Inequality improved significantly immediately after the Revolution but has remained relatively stable during the last 15 years. Significantly, poverty sharply declined and inequality decreased somewhat in the five years leading up to the election. Increased welfare of the poor over the period is also evident in access to basic services, such as electricity and safe water, as well as in ownership of household appliances. The wide gap between the evidence presented here, which shows improvement in the welfare of the poor, and popular sentiments in Iran, which indicate worsening poverty and inequality, raises important questions about the political economy of redistribution in Iran. I suggest that in the context of a distributive economy such as Iran's, in which wealth accumulation is seen to depend more on political access than individual productivity, more subjective feelings of envy and fairness may matter more than objective indicators of poverty and inequality.
    Keywords: Iran, Poverty, Inequality, Redistribution
    Date: 2006
  12. By: S. DESMIDT; A. HEENE
    Abstract: The study at hand analyses the research strategies applied in empirical articles addressing the concept of mission statements. We systematically scanned eight computerized databases in order to delimit the field of empirical mission statement research. This scanning process resulted in 63 articles. Consequently the detected articles were analyzed by means of a code sheet. The code sheet comprised five general sets of research strategy characteristics: (1) primary data location and means of data collection, (2) level of analysis, (3) sample characteristics, (4) type of analysis / analytic techniques and (5) time frame. The results of the content analysis enabled us to assess the validity and robustness of research conducted within the field of mission statement research. Suggestions are made to increase the level of validity of future research. We claim that the results of the study at hand will contribute to the maturation of the field. They will provide insights into the possible future development of mission statement research methodology and facilitate the transition of the field from predominantly descriptive to empirically grounded.
    Keywords: Mission statements, empirical research, research strategies, content analysis, validity
    Date: 2006–09
  13. By: Odia Ndongo, Yves Francis
    Abstract: This work aims to analyse the dynamics of macroeconomic fluctuations in Cameroon and to determine the resulting business and growth cycles turning point chronology. The construction of a reference turning point chronology poses some problems related to the choice of the methods to be used. In this work, we use the Bry and Broschan algorithm and the HODRICK-PRESCOTT filter to estimate the Cameroonian classical business cycle and growth cycle turning point chronology respectively. On the one hand, the results obtained point to a great similarity in the duration phases of the two kinds of cycles. On the other hand, the emerging cycles allow us to observe the influence of the negative shock of the 1985-86 years on the evolution of the Cameroonian GDP cycle.
    Keywords: macroeconomic fluctuations; business cycles; growth cycles
    JEL: E65 E37 N1 E32
    Date: 2006–10–21

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