New Economics Papers
on Business, Economic and Financial History
Issue of 2007‒02‒17
fifteen papers chosen by

  1. Rising Wage Dispersion, After All ! The German Wage Structure at the Turn of the Century By Kohn, Karsten
  2. The McKenna rule and U.K. World War I finance By James M. Nason; Shaun P. Vahey
  3. The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective By Graziella Bertocchi
  4. Appraising Schumpeter's 'Essence' after 100 Years: From Walrasian Economics to Evolutionary Economics By Esben Sloth Andersen
  5. Blanqueo de capitales y lavado de dinero: su concepto, historia y aspectos operativos By Bruno Tondini
  6. Intellectual evolution of strategic management and its relationship with ethics and social responsibility By Melé, Domenec; Guillen, Manuel
  7. Stunting and Selection Effects of Famine: A Case Study of the Great Chinese Famine By Tue Gørgens; Xin Meng; Rhema Vaithianathan
  8. Testing the purchasing power parity in China By Olivier Darné; Jean-François Hoarau
  9. Problemas teóricos y prácticos en torno al desarrollo regional en México (de la posguerra a la posmodernidad) By Jorge Isauro Rionda Ramírez
  10. Exploring the Impact of Interrupted Education on Earnings: The Educational Cost of the Chinese Cultural Revolution By Xin Meng; Robert Gregory
  11. Impacto Internacional de la Crisis de Asia - Un antes y un después By Emilia Zabaleta
  12. Equity premium: Historical, expected, required and implied By Fernandez, Pablo
  13. The Economics of Fair Trade: For Whose Benefit? An Investigation into the Limits of Fair Trade as a Development Tool and the Risk of Clean-Washing. By Pierre Kohler
  14. International Effects of the Andersen Accounting and Auditing Scandals: Some Evidence from the US, UK and Australian Stock Markets By Morrison Handley-Schachler; Steven Li
  15. Economic Development Strategies: Examples from Europe and Australia By Petra Behrens

  1. By: Kohn, Karsten
    Abstract: Using register data from the IAB employment sample, this paper studies the wage structure in the German labor market throughout the years 1992{2001. Wage dispersion has generally been rising. The increase was more pronounced in East Germany and occurred predominantly in the lower part of the wage distribution for women and in the upper part for men. Censored quantile wage regressions reveal diverse age and skill patterns. Applying Machado/Mata (2005)-type decompositions I conclude that differences in the composition of the work force only had a small impact on the observed wage differentials between East and West Germany, but changes in the characteristics captured better parts of the observed wage changes over time.
    Keywords: Wage inequality, censored quantile regression, Machado/Mata decomposition, IABS, East Germany, West Germany
    JEL: C24 J31
    Date: 2006
  2. By: James M. Nason; Shaun P. Vahey
    Abstract: The United Kingdom employed the McKenna rule to conduct fiscal policy during World War I (WWI) and the interwar period. Named for Reginald McKenna, Chancellor of the Exchequer (1915–16), the McKenna rule committed the United Kingdom to a path of debt retirement, which we show was forward-looking and smoothed in response to shocks to the real economy and tax rates. The McKenna rule was in the tradition of the “English method” of war finance because the United Kingdom taxed capital to finance WWI. Higher rates of capital taxation also paid for debt retirement during and subsequent to WWI. The United Kingdom was motivated to implement the McKenna rule because of a desire to achieve a balance between fairness and equity. However, the McKenna rule adversely affected the real economy, according to a permanent income model. WWI and interwar U.K. data support the prediction that real activity is lower in response to higher past debt retirement rates.
    Date: 2007
  3. By: Graziella Bertocchi (Università di Modena e Reggio Emilia, CEPR, CHILD and IZA)
    Abstract: Several countries have recently abolished or significantly reduced their taxes on bequests. Bequest taxes, on the other hand, were among the first to be introduced when modern systems of taxation were developed at the end of the nineteenth century. We propose an explanation for these facts which is based on a dynamic political economy model where redistribution is determined not only by wealth inequality but also by sectoral reallocation from agriculture to manufacturing. The model shows that the dynamics of capital accumulation induce a reduction of wealth inequality, which is further accelerated by the redistributive impact of the bequest tax. Through a standard politico-economic mechanism, wealth equalization pushes toward a reduced role of the bequest tax. At the same time, however, a second mechanism is at work, with structural reallocation from agriculture to manufacturing shifting the tax base from hard-to-avoid taxes on land toward easy-to-avoid taxes on capital. The differential treatment of land and capital introduces a source of asymmetry in the tax system which interferes with the determination of the dynamic political equilibrium of the model. Its effect is to compress bequest taxation but also to delay its gradual reduction due to declining wealth inequality. A number of extensions to the basic model allow to match our theory with the long-term evolution of bequest taxation in modern democracies and with the drastic discrepancies currently observed between tax systems in developed and underdeveloped countries.
    Keywords: bequest tax, inequality, structural reallocation, redistribution, voting
    JEL: H20 P16 N40 O40
    Date: 2007–01
  4. By: Esben Sloth Andersen
    Abstract: Schumpeter’s unique type of evolutionary analysis can hardly be understood unless we recognise that he developed it in relation to a study of the strength and weaknesses of the Walrasian form of Neoclassical Economics. This development was largely performed in his first book Wesen und Hauptinhalt der theoretischen Nationalökonomie. This German-language book - which in English might be called ‘Essence and Scope of Theoretical Economics’ - was published a century ago (in 1908). Different readings of Wesen provide many clues about the emergence and structure of Schumpeter’s programme for teaching and research. This programme included a modernisation of static economic analysis but he concentrated on the difficult extension of economic analysis to cover economic evolution. Schumpeter thought that this extension required a break with basic neoclassical assumptions, but he tried to avoid controversy by presenting it as only requiring the introduction of innovative entrepreneurs into the set-up of the Walrasian System. Actually, he could easily define the function of his type of entrepreneurs in this manner, but the analysis of the overall process of evolution required a radical reinterpretation of the system of general economic equilibrium. He thus made clear that he could not accept the standard interpretation of the quick Walrasian process of adaptation (tâtonnement). Instead, he saw the innovative transformation of routine behaviour as a relatively slow and conflict-ridden process. This reinterpretation helped him to sketch out his theory of economic business cycles as reflecting the waveform process of economic evolution under capitalism.
    Keywords: Economic statics; evolutionary dynamics; business cycles; Joseph A. Schumpeter; Léon Walras
    JEL: B31 E30 O31
    Date: 2006
  5. By: Bruno Tondini
    Abstract: Hoy en día el lavado o reciclaje de dinero es percibido por la comunidad internacional como uno de los principales problemas, frente al cual la actividad criminal ocupa la atención de todas las autoridades relacionadas con el tema. Los países son conscientes de la difícil situación de establecer un criterio uniforme precisamente porque las realidades de cada nación son diversas así como los distintos modos que tienen de realizar el delito. Dentro de éste contexto puede hacerse algunas precisiones conceptuales del delito que estudiamos. Sin embargo coincidimos con Meincke, en que desde los orígenes del derecho penal se sabe que la criminalidad trae aparejada beneficios económicos y en la actualidad observamos que la criminalidad es fuente de ingentes cantidades de dinero. En otras palabras, la acción de blanquear dinero no es novedosa ya que el beneficio económico de los delitos demanda ser utilizado en los mercados legales; lo que sí resulta novedoso es la conceptualización del lavado de dinero, que nace cuando los analistas detectan que se trata de un problema en sí mismo y comienzan a separarlo y distinguirlo de los delitos que le dan origen, dándole un tratamiento independiente. La mayoría de los delitos económicos nacionales o globales existen desde los orígenes mismos del capitalismo y, en algunos casos, de la sociedad misma. Pero quizá nunca como ahora han dejado de ser excrecencias o vicios perifericos del sistema para convertirse en piezas constitutivas y básicas del funcionamiento de lo que puede denominarse, sin temor a la exageración, el capitalismo criminal.
    Keywords: money laundering, capital, history, Meincke
  6. By: Melé, Domenec (IESE Business School); Guillen, Manuel (University of Valencia)
    Abstract: The main purpose here is to present an overview of the historical development of strategic management, through a critical review of the most relevant theoretical proposals, and to consider its links to ethics and corporate social responsibilities. From the very beginning of strategic management thought attempts have been made to fuse ethical aspects such as values of senior management or social values or social expectations to strategic management. More recently the stakeholder view of the firm has permitted the introduction of ethical theories into strategic management, and the resources-based view of the firm has lead to the consideration of competences, including moral virtues. Here it is argued that in spite of some advances, the integration of ethics into strategic management is not yet entirely satisfactory. Thus, it is suggested that new directions to focus the integration of ethics and strategic management are necessary.
    Keywords: Strategic management; Integrating ethics in management; Business ethics; Corporate social responsibility;
    Date: 2006–10–15
  7. By: Tue Gørgens (Australian National University); Xin Meng (Australian National University and IZA); Rhema Vaithianathan (Rhema Vaithianathan)
    Abstract: The Great Chinese Famine of 1959-1961 is puzzling, since despite the high death rates, there is no discernable diminution in height amongst the majority of cohorts who were exposed to the famine in crucial growth years. An explanation is that shorter children experienced greater mortality and that this selection offset stunting. We disentangle stunting and selection effects of the Chinese famine, using the height of the children of the famine cohort. We find significant stunting of about 2cm for rural females and slightly less for rural males who experienced the famine in the first five years of life. Our results suggest that mortality bias implies that raw height is not always a good measure of economic conditions during childhood.
    Keywords: famine, height, China, panel data, GMM
    JEL: C33 I12 N95 O15
    Date: 2007–01
  8. By: Olivier Darné; Jean-François Hoarau
    Abstract: In this paper we examine whether purchasing power parity holds in the long run in China for the period 1970:1 to 2006:5 from an alternative method relative to the previous studies. We underlined the effects of large, but infrequent shocks due to changes of Chinese exchange policy (undertaken since the China's foreign exchange reform) on the real exchange rate, using outlier methodology. We also show that there is no endency to the purchasing power parity in China to hold in the long run during this period.
    Keywords: Purchasing power parity; real exchange rate; unit root tests; outliers; renminbi.
    JEL: C22 F31
    Date: 2006
  9. By: Jorge Isauro Rionda Ramírez
    Abstract: Se trata por un lado de comprender las distintas connotaciones del concepto de desarrollo regional y el desarrollo local, como un predicado del desarrollo económico capitalista. Se plantean las distintas apreciaciones que para el caso de México se deben tomar en cuenta para de inicio adentrarse en los problemas reales, como de investigación que se enfrenta la disciplina científica del desarrollo regional y local, así como se expresa la conexión existente del desarrollo desde la macroeconomía, la microeconomía, la metaeconomía y la mesoeconomía.
    Keywords: Desarrollo, Crecimiento, Crecimiento económico, Desarrollo regional, Desarrollo local, Desarrollo capitalista, Estado, Regímenes de producción, Regímenes de regulación, Política económica, Pequeña y micro empresa.
  10. By: Xin Meng (Australian National University and IZA); Robert Gregory (Australian National University and IZA)
    Abstract: During the Chinese Cultural Revolution many schools stopped normal operation for a long time, senior high schools stopped student recruitment for up to 6 years, and universities stopped recruitment for an even longer period. Such large scale school interruptions significantly reduced the opportunity for a large cohort of individuals to obtain university degrees and senior high school qualifications. More than half of this cohort who would normally attain a university degree were unable to do so. We estimate that those who did not obtain a university degree, because of the Cultural Revolution, lost an average of more than 50 percent of potential earnings. Both genders suffered reduced attainment of senior high school certificates and more than 20 per cent prematurely stopped their education process at junior high school level. However, these education responses do not appear to have translated into lower earnings. In addition, at each level of education attainment most of the cohort experienced missed or interrupted schooling. We show, however, that given the education certificate attained, the impact on earnings of these missed years of schooling or lack of normal curricula was small.
    Keywords: education, earnings, Cultural Revolution, China
    JEL: I21 J31
    Date: 2007–01
  11. By: Emilia Zabaleta
    Abstract: Este ensayo presenta una evaluación macroeconómica cuantitativa del impacto de esta crisis sobre la economía mundial y su extensión a los países emergentes. Se ilustraran ciertas incertitudes relativas concernientes al contexto internacional del momento, como el impacto de la baja del dólar, y las reacciones de la política monetaria, entre otras.
    Keywords: rice crisis, asia, dolar, monetary policy
  12. By: Fernandez, Pablo (IESE Business School)
    Abstract: Equity premium designates four different concepts: Historical Equity Premium (HEP); Expected Equity Premium (EEP);Required Equity Premium (REP); and Implied Equity Premium (IEP). We highlight the confusing message conveyed in the literature regarding equity premium and its evolution. The confusion arises from not distinguishing among the four concepts and from not recognizing that although the HEP is equal for all investors, the REP, the EEP and the IEP differ for different investors. A unique IEP requires assuming homogeneous expectations for expected growth (g), but we show that there are several pairs (IEP, g) that satisfy current prices. We claim that different investors have different REPs and that it is impossible to determine the REP for the market as a whole, because it does not exist. We also investigate the relationship between (IEP - g) and the risk-free rate. There is a kind of schizophrenic approach to valuation: while all authors admit different expectations of equity cash flows, most authors look for a single discount rate. It seems as if the expectations of equity cash flows are formed in a democratic regime, while the discount rate is determined in a dictatorship.
    Keywords: equity premium; equity premium puzzle; required market risk premium; historical market risk premium; expected market risk premium; risk premium; market risk premium; market premium;
    Date: 2006–12–13
  13. By: Pierre Kohler (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: This paper considers the system of fair trade coffee. It first gives a short description of the coffee market and some of its major trends. The origin of the fair trade movement is then explained. The structure of FLO is examined and its pricing scheme compared to those of other private labeling initiatives. Benefits generated for participants on the supply and the demand side then come under scrutiny. To gauge its potential as a development tool, revenues to coffee producers are estimated on the basis of available information. Revenues to fair trade organizations in the Western world are also examined. Finally, two hypotheses are tested on data from 13 European countries to get a better picture of what is happening on the demand side. First, an OLS regression is tested to see if consumer awareness does Òmake a differenceÓ. Secondly, a treatment regression is used to correct for a sample self-selection bias and to check if there is some support for the claim that supermarkets that have started to sell fair trade coffee are clean-washing their reputation in the fair trade business.
    Keywords: Coffee, Fair Trade, Development, Clean-Washing, Treatment Regression
    JEL: C31 D83 H23 M39
    Date: 2006–08
  14. By: Morrison Handley-Schachler; Steven Li (School of Economics and Finance, Queensland University of Technology)
    Abstract: In this paper, we use event study methodology to examine the effect of two highly publicized accounting failures, at Enron and WorldCom both audited by Arthur Andersen, on the total stock returns of some companies in the UK also audited by Arthur Andersen. The results vary substantially between countries. We find no evidence of a significant impact in the UK or US. There is some evidence of negative abnormal returns at the time of the Enron scandal in Australia. However, this reaction was very short-lived and the negative abnormal returns on the stocks of Andersen-audited companies had been fully recovered within a week. Our results suggest that sharing an auditor with a firm that has issued corrections to accounts which have previously received an unqualified audit opinion does not significantly affect market perceptions of firms’ value, which suggests that the choice of auditor has little, if any, impact on market perceptions of the reliability of published financial information. Key words: Accounting scandals, Enron, WorldCom, Event study, International Stock Markets.
  15. By: Petra Behrens (School of Economics and Finance, Queensland University of Technology)
    Abstract: By looking at very different aspects of regional economic development theory and policy as well as geographical areas, this paper provides a foundation of economic strategies applicable to many regions. The focus is set on a flexible and holistic approach to be able to include a wide range of economic development and wellbeing indictor and to offer an alternative to the neoclassical development framework. The European regional policy is used as an example to analyse policy in a theoretical economic development framework. The Australian example is a practical case study of a small rural shire showing the issues individual regions are facing when they are dealing with regional development on a local level.

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