nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2007‒02‒10
23 papers chosen by
Bernardo Batiz-Lazo
University of Leicester

  1. Financial Revolution and Economic Modernization in Sweden By Ögren, Anders
  2. Milton Friedman and U.S. monetary history: 1961-2006 By Edward Nelson
  3. Words on the Web. Comparative analysis of telecommunication’s history in Italy and Spain. By Simone Fari
  4. "What did Morgan's Men really do?" By Leslie Hannah
  5. Real Origins of the Great Depression: Monopolistic Competition, Union Power, and the American Business Cycle in the 1920s By Monique Ebell; Albrecht Ritschl
  6. Milton Friedman - A Brief Obituary By David Laidler
  7. Argentine Command Structure and its Impact on Land Operations during the Falklands/Malvinas War (1982) By Alejandro Luis Corbacho
  8. The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century By Efraim Benmelech; Tobias J. Moskowitz
  9. On the divergence of research paths in evolutionary economics: a comprehensive bibliometric account By Sandra T. Silva; Aurora A.C. Teixeira
  10. Rules, Discretion or Reputation? Monetary Policies and the Efficiency of Financial Markets in Germany, 14th to 16th Centuries By Oliver Volckart
  11. National bank notes and silver certificates By Bruce Champ; James B. Thomson
  12. Law and State Power: The Institutional Roots of the Strong State in Islamic History By Metin Cosgel; Rasha Ahmed; Thomas Miceli
  13. "Portfolio Management and Profitability of Mitsubishi Zaibatsu during the War: 1935-1944"(in Japanese) By Tetsuji Okazaki
  14. The Mystery of Human Capital as Engine of Growth, or Why the US Became the Economic Superpower in the 20th Century By Isaac Ehrlich
  15. Structural Transformation and the Deterioration of European Labor Market Outcomes By Richard Rogerson
  16. Optimal Technology and Development By Moscoso Boedo, Hernan
  17. Early-Stage Globalization and Corporate Debt Maturity: The Case of South Korea, 1980-94 By Federico Guerrero
  18. The Farm, the City, and the Emergence of Social Security By Elizabeth M. Caucutt; Thomas F. Cooley; Nezih Guner
  19. Generational Effects on Adult Height in Contemporary Spain: Exploring Gender and Individual Heterogeneity By Joan Costa Font; Joan Gil Trasfi
  20. 10 Years after the Crisis: Thailand's Financial System Reform By Menkhoff, Lukas; Suwanaporn, Chodechai
  21. Electricity consumption and economic growth: evidence from Spain. By Aitor Ciarreta Antuñano; Ainhoa Zarraga Alonso
  22. The Demand for Endogenous Money: A Lesson in Institutional Change By Peter Howells
  23. Teaching Convergence: A Contribution By Federico Guerrero

  1. By: Ögren, Anders (EHF/SSE & EconomiX - UPX)
    Abstract: The development of a well adapted financial system was a main part of the successful Swedish economic modernization in the latter half of the nineteenth century. In this paper it is shown that this development followed the pattern of a financial revolution. Major institutional and organizational changes that took place roughly between the late 1850s and early 1870s led to a rapid increase in liquidity and financial services. This financial revolution preceded the acceleration in economic growth in general and in the modern, industrial sector in particular. Especially the monetization encouraged growth, both in the industrial sector and in GDP as a whole. The basis of the financial system, measured as commercial bank assets and equity capital, was on the other hand also a result of GDP growth.
    Keywords: Financial Development; Growth; Institutions; Liquidity; Monetization; Nineteenth Century; Silver and Gold Standards; Structural Change
    JEL: E44 N13 N23 O16
    Date: 2006–12–21
  2. By: Edward Nelson
    Abstract: This paper brings together, using extensive archival material from several countries, scattered information about Milton Friedman's views and predictions regarding U.S. monetary policy developments after 1960 (i.e., the period beyond that covered by his and Anna Schwartz's Monetary History of the United States). I evaluate these interpretations and predictions in light of subsequent events.
    Keywords: Friedman, Milton ; Economic history
    Date: 2007
  3. By: Simone Fari (University of Bari/University of Granada)
    Abstract: The history of telecommunications has a long tradition in the Anglo-Saxon Countries but in the Mediterranean ones, it has been studied only during the last few years. This paper considers the development of telecommunication’s history in Spain and Italy. First, it analyzes the contemporary literature on the evolution of the telecommunication sector. Subsequently, it describes the main national and international international historical sources. Finally, it shows the scientific context in which they appear.
    Keywords: Telepraphy-History – Telecommunications – Webs – Italy – Spain
    JEL: N70
    Date: 2007–02–01
  4. By: Leslie Hannah (Faculty of Economics, University of Tokyo)
    Abstract: Before 1914, London, the financial centre of a country half the USA's size, had a stock exchange that was larger and qualitatively more developed than New York for both domestic and overseas financing needs. J. P. Morgan's higher profits in New York arose partly from conflicted deals that would later be illegal, as they already were in London. His contributions to the rapid catch-up process by New York are more plausibly seen in terms of successful emulation of European precedents than the information signalling alleged in over-determined, "Whig" models of American financial innovation.
    Date: 2007–01
  5. By: Monique Ebell; Albrecht Ritschl
    Abstract: Most treatments of the Great Depression have focused on its onset and its aftermath. In contrast, we take a unified view of the interwar period. We look at the slide into and the emergence from the 1920-21 recession and the roaring 1920s boom, as well as the slide into the Great Depression after 1929, and attempt to explain these phenomena in a unified framework. The model framework combines monopolistic product market competition with search frictions and bargaining in the labor market, allowing for both individual and collective (unionized) wage bargaining. We attribute the extraordinary macroeconomic and financial volatility of this period to two factors: Shifts in the wage bargaining regime and in the degree of monopoly power in the economy. The pro-union provisions of the Clayton Act of 1914 contributed to the slide in asset prices and the depression of 1920-21, while a series of tough anti-union Supreme Court decisions in late 1921 and 1922 coupled with the lax anti-trust enforcement of the Coolidge and Hoover administrations enabled a major rise in corporate profits and stock market valuations throughout the 1920s. Landmark court decisions in favor of trade unions in the late 1920s, as well as political pressure on firms to adopt the welfare capitalism model of high wages, made the economy increasingly susceptible to collapsing profit expectations. We model the onset of the great depression as an equilibrium switch from individual wage bargaining to (actual or mimicked) collective wage bargaining. The general equilibrium effects of this regime change are consistent with large decreases in output, employment, and stock prices.
    Keywords: Trade unions, collective bargaining, Great Depression
    JEL: E24 E27 J51 J64 N12 N22
    Date: 2007–02
  6. By: David Laidler (University of Western Ontario)
    Abstract: Milton Friedman is rivaled only by John Maynard Keynes as the most influential political economists of the 20th Century. His approach was that of a classical liberal, rather than a conservative, though this put him on the political right in the United States. Friedman’s work demands to be evaluated all of a piece, but his outstandingly important technical contributions to economics influenced the development of the discipline in ways that extended far beyond the purview of any particular political agenda.
    Date: 2007
  7. By: Alejandro Luis Corbacho
    Abstract: This paper claims that besides training and equipment shortcomings, Argentine command structure was another source of problems that affected the military operations during the Falklands/Malvinas Campaign during April-June 1982. Consequently, the flawed command structure can be seen as a contributing factor in Argentina’s military defeat. Improvisation, confusion, lack of coordination, and desperation prevailed along the command structure throughout the conflict. Operational and tactical commands were seem to be pulling apart between the political imperatives of the High Command in Buenos Aires that transcended to the islands and the military imperatives of the front. This handicap was critical to conduct operations. By using official documents, reports and accounts and the own participants’ testimonies, this paper clarifies the issues connected with the structure of the Argentine High Command and it furthers our understanding of how the Argentine armed forces functioned.
    Date: 2006–12
  8. By: Efraim Benmelech; Tobias J. Moskowitz
    Abstract: We investigate the causes and consequences of financial regulation by studying the political economy of U.S. state usury laws in the 19th century. We find evidence that usury laws were binding and enforced and that lending activity was affected by rate ceilings. Exploiting the heterogeneity across states and time in regulation, enforcement, and market conditions, we find that regulation tightens when it is less costly and when it coexists with other economic and political restrictions that exclude certain groups. Furthermore, the same determinants of financial regulation that favor one group (and restrict others) are associated with higher (lower) future economic growth rates. The evidence suggests regulation is the outcome of private interests using the coercive power of the state to extract rents from other groups, highlighting the endogeneity of financial development and growth.
    JEL: G2 G38 N2 O16
    Date: 2007–01
  9. By: Sandra T. Silva; Aurora A.C. Teixeira
    Abstract: In the last two decades there has been a noticeable increase in published research in evolutionary economics. The idea that formal modelling is a sine qua non condition for establishing a rigours and coherence scientific frame, has led to an over concern with formalization issues among evolutionary researchers. The general perception is that formalization lags behind the appreciative work. Notwithstanding, this general reading has not yet been supported by real data analysis. This work presents a comprehensive survey on evolutionary economics, intending at exploring the main research paths and contributions of this theorizing framework using bibliometric methods. This documentation effort is based on an extensive review of the abstracts from articles published in all economic journals gathered from the Econlit database over the past fifty years. Evolutionary contributions apparently have not converged to an integrated approach. In the present paper, we document the more important paths emergent in this field. Before 1990, the importance of published evolutionary related research is almost negligible - more than 90% of total papers were published after that date. Our results further show two rather extreme main research strands: ‘History of Economic Thought and Methodology’ and ‘Games’. Moreover, formal approaches have a reasonable and increasing share of published papers between 1969 and 2005. In contrast, purely empirical-related works are relatively scarce, involving a meagre and stagnant percentage of published works. This recalls for a need to redirect the evolutionary research agenda.
    Keywords: evolutionary, methodology, bibliometry, Econlit Length 44 pages
    JEL: B41 B52 C89
    Date: 2007–01
  10. By: Oliver Volckart
    Abstract: This paper examines the questions of whether and how feudal rulers were able to credibly commit to preserving monetary stability, and of which consequences their decisions had for the efficiency of financial markets. The study reveals that princes were usually only able to commit to issuing a stable coinage in gold, but not in silver. As for silver currencies, the hypothesis is that transferring the right of coinage to an autonomous city was the functional equivalent to establishing an independent central bank. An analysis of market performance indicates that financial markets between cities that were autonomous with regard to their monetary policies were significantly better integrated and more efficient than markets between cities whose currencies were supplied by a feudal ruler.
    Keywords: Financial markets, integration, monetary policy, Middle Ages
    JEL: G15 N13 N23 N43
    Date: 2007–02
  11. By: Bruce Champ; James B. Thomson
    Abstract: From 1883 to 1892, the circulation of national bank notes in the United States fell nearly 50 percent. Previous studies have attributed this to supply-side factors that led to a decline in the profitability of note issue during this period. This paper provides an alternative explanation. The decline in note issue was, in large part, demand-driven. The presence of a competing currency with superior features caused the public to substitute away from national bank notes.
    Keywords: Paper money ; National bank notes ; Silver
    Date: 2006
  12. By: Metin Cosgel (University of Connecticut); Rasha Ahmed (University of Connecticut); Thomas Miceli (University of Connecticut)
    Abstract: The struggle for power has been a persistent phenomenon throughout history, involving the rulers, general public, and various other interest groups. As one of these groups, the legal community has been in a unique position to regulate the relationship between the ruler and the public because of its dual responsibilities to provide services to the public and to impose constraints on the rulers. Using a political economy model of state power and focusing on the power of the rulers to tax and spend, we study the role of the legal community in regulating the coercive powers of the rulers in Islamic history. We examine the power relationship between the rulers, the legal community, and the general public, explain long term trends in the development of the rulersÇ power, and identify the institutional roots of the strong state in the Ottoman Empire and other Islamic states.
    Keywords: state power, taxation, political economy, Islamic Law, legal community
    Date: 2007–01
  13. By: Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: This paper explores the change in the security portfolio of the holding company of Mitsubishi Zaibatsu (Mitsubishi Holdings) and its implication on the profitability of that company, during the wartime. In this period, while Mitsubishi Holdings rapidly expanded the total investment in securities, it substantially changed the portfolio, increasing investment in the companies in the munitions industry. This portfolio management policy was not successful in terms of profitability. We decomposed the profitability decline into that due to the declines in the returns on the individual securities which had existed in the portfolio and that due to the change in the portfolio. We found that whereas the former factor was larger, the portfolio factor was also substantial. This result suggests that the asset management system of Mitsubishi Holdings came not to work well, which in turn would be due to government intervention and deterioration of the governance within Mitsubishi Zaibatsu.
    Date: 2006–12
  14. By: Isaac Ehrlich
    Abstract: This paper offers a thesis as to why the US overtook the UK and other European countries in the 20th century in both aggregate and per-capita GDP, as a case study of recent models of endogenous growth where human capital is the "engine of growth". The conjecture is that the ascendancy of the US as an economic superpower owes in large measure to its relatively faster human capital formation. Whether the thesis has legs to stand on is assessed through stylized facts indicating that the US led other OECD countries in schooling attainments per adult population over the 20 century, especially at the secondary and tertiary levels. While human capital is viewed as the direct facilitator of growth, the underlying factors driving the US ascendancy are linked to the superior returns the political-economic system in the US has so far offered individual human capital attainments, both home-produced and imported.
    JEL: H1 I2 N1 N3 O0 O4
    Date: 2007–01
  15. By: Richard Rogerson
    Abstract: This paper examines the evolution of hours worked in France, Germany, Italy and the US from 1956-2003 and assesses the role of taxes and technology to account for the differences. The empirical work establishes three results. First, hours worked in Europe decline by almost 45% compared to the US over this period. This change is almost an order of magnitude larger than the effects associated with the increase in unemployment over this time period. Second, the decline occurs at a steady pace from 1956 until the mid 1990s, in contrast to the fact that the relative increase in unemployment occurs in the mid 1970s. Third, the decline in hours worked in Europe is almost entirely accounted for by the fact that Europe develops a much smaller service sector than the US. I build a simple model of time allocation to understand the evolution of total hours worked and their distribution across sectors, and calibrate it to match the US between 1956 and 2000. I find that relative increases in taxes and technological catch-up can account for most of the differences between the European and American time allocations over this period.
    JEL: E2 J2
    Date: 2007–02
  16. By: Moscoso Boedo, Hernan
    Abstract: Skill intensive technologies seem to be adopted by rich countries rather than poor ones. Related to that observation, the ratio of wages of skilled to unskilled workers - the skill premium - shows two important features over time and across countries. In the US the skill premium decreased during the first half of the 20th century and it increased after 1950, evolving according to a U shaped pattern. On the other hand, the same measure across countries around 1990 is hump shaped when countries are ordered by GDP per worker. By modeling the decisions for factor accumulation and technology adoption, this paper gives a systematic explanation as to why we see ever more skill intensive technologies being adopted both over time in the US and across countries. The model developed here endogenously generates predictions for the skill premium that are consistent with both the US and international observations under the same set of parameter values.
    Keywords: Technology adoption; growth
    JEL: O33
    Date: 2006–09
  17. By: Federico Guerrero (Department of Economics, University of Nevada, Reno)
    Abstract: Using data from publicly traded South Korean corporations for the period 1980-94, this paper finds evidence that increases in financial liberalization that accompanied the more general process of financial globalization have significantly reduced the maturity structure of corporate debt contracts, thus lending partial empirical support to the idea that financial liberalization can be well described as “short-term pain, long-term gain”. This effect of financial liberalization on corporate debt maturity is robust to changes in econometric specification, and does not seem to be counteracted by opposing forces that tended to lengthen the maturity of corporate debt during the same period.
    Keywords: Globalization, corporate debt maturity, South Korea
    JEL: G32 G15 D92 E65 F39
    Date: 2006–12
  18. By: Elizabeth M. Caucutt; Thomas F. Cooley; Nezih Guner
    Abstract: During the period from 1880 to 1950, publicly managed retirement security programs became an important part of the social fabric in most advanced economies. In this paper we study the social, demographic and economic origins of social security. We describe a model economy in which demographics, technology, and social security are linked together. We study an economy with two locations (sectors), the farm (agricultural) and the city (industrial). The decision to migrate from rural to urban locations is endogenous and linked to productivity differences between the two locations and survival probabilities. Furthermore, the level of social security is determined by majority voting. We show that a calibrated version of this economy is consistent with the historical transformation in the United States. Initially a majority of voters live on the farm and do not want to implement social security. Once a majority of the voters move to the city, the median voter prefers a positive social security tax, and social security emerges.
    JEL: E61 H2 H55
    Date: 2007–01
  19. By: Joan Costa Font; Joan Gil Trasfi (Universitat de Barcelona)
    Abstract: As adult height is a well-established retrospective measure of health and standard of living, it is important to understand the factors that determine it. Among them, the influence of socio-environmental factors has been subjected to empirical scrutiny. This paper explores the influence of generational (or environmental) effects and individual and gender-specific heterogeneity on adult height. Our data set is from contemporary Spain, a country governed by an authoritarian regime between 1939 and 1977. First, we use normal position and quantile regression analysis to identify the determinants of self-reported adult height and to measure the influence of individual heterogeneity. Second, we use a Blinder-Oaxaca decomposition approach to explain the gender height gap and its distribution, so as to measure the influence on this gap of individual heterogeneity. Our findings suggest a significant increase in adult height in the generations that benefited from the countrys economic liberalization in the 1950s, and especially those brought up after the transition to democracy in the 1970s. In contrast, distributional effects on height suggest that only in recent generations has height increased more among the tallest. Although the mean gender height gap is 11 cm, generational effects and other controls such as individual capabilities explain on average roughly 5% of this difference, a figure that rises to 10% in the lowest 10% quantile.
    Keywords: blinder-oaxaca decomposition, quantile regression, generational effects, adult height, gender gap, individual heterogeneity
    JEL: N84 I19 N44
    Date: 2007
  20. By: Menkhoff, Lukas; Suwanaporn, Chodechai
    Abstract: This paper uses the framework of long-term financial system development to describe and assess the reform process in Thailand after 1997. The present financial reforms are well in line with the pattern of financial development found in the academic literature. A detailed analysis of capital markets, specialized financial institutions and supervisory regulation shows recent advancements and open issues. The rapid rise of non-banks financial institutions can serve as a paradigmatic example of market driven dynamism requiring appropriate policy action. Overall, the building of modern and sophisticated financial institutions is an ongoing process which should consider human resource constraints.
    Keywords: Financial institutions, financial development, Thailand
    JEL: O1 G2
    Date: 2007–01
  21. By: Aitor Ciarreta Antuñano (UPV/EHU); Ainhoa Zarraga Alonso (UPV/EHU)
    Abstract: The paper investigates both linear and nonlinear causality between electricity consumption and economic growth in Spain for the period 1971-2005. We use the methodology of Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996). We also apply the standard Granger causality tests in a VAR for the series in first differences to achieve stationarity. The results are similar with both methodologies, which shows their robustness. We find unidirectional linear causality running from real GDP to electricity consumption. On the contrary, we find no evidence of nonlinear Granger causality between the series in either direction.
    Keywords: Electricity consumption, economic growth, causality
    JEL: C32 Q40
    Date: 2007–01–31
  22. By: Peter Howells (School of Economics, University of the West of England)
    Keywords: Monetary Policy;
    JEL: E58
    Date: 2007–01
  23. By: Federico Guerrero (Department of Economics, University of Nevada, Reno)
    Abstract: The issue of convergence has been hotly debated since the mid 1980s. Only recently certain consensus has arisen around some of the most fundamental issues. It seems hardly surprising, then, to find a large variation in how those issues are taught to undergraduates. This paper is an attempt at clarifying the different concepts of convergence, and their relation to both the neoclassical model of growth and available cross-country evidence. Evidence on some of the contradictory ways in which the issues are taught is provided, a simple way to teach the relevant concepts of convergence by means of numerical examples is presented, and relevant examples drawn from historical evidence are shown. Also, the implications of the neoclassical growth model are presented in a slightly different, but clearer way, and some of the difficulties to interpret the cross-country empirical evidence are reviewed.
    Keywords: International Convergence, Economic Growth, World income distribution
    JEL: O40 E10 O30 O50
    Date: 2006–12

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