New Economics Papers
on Business, Economic and Financial History
Issue of 2007‒04‒28
twenty papers chosen by

  1. Globalization, Growth and Distribution in Spain 1500-1913 By Joan R. Rosés; Kevin H. O'Rourke; Jeffrey G. Williamson
  2. Trade, Knowledge, and the Industrial Revolution By Kevin H. O'Rourke; Ahmed S. Rahman; Alan M. Taylor
  3. Civilizações da cana-de-açúcar : dois paradigmas de atividades agroaçucareiras no novo mundo, séculos XVI a XIX By Marcelo Magalhães Godoy
  4. The Continental Dollar: How Much was Issued and What Happened to It? By Farley Grubb
  5. Foreign banks’ attraction to the financial centre Frankfurt – a ‘u’-shaped relationship By Michael H. Grote
  6. Does regulation reduce productivity? evidence from regulation of the U.S. beet-sugar manufacturing industry during the Sugar Acts, 1934-74 By Benjamin Bridgman; Shi Qi; James A. Schmitz, Jr.
  7. Loan and bond finance in Argentina, 1985-2005 By Roque B. Fernández; Celeste González; Sergio Pernice; Jorge M. Streb
  8. Vertical Integration and Dis-integration of Computer Firms: A History Friendly Model of the Co-evolution of the Computer and Semiconductor Industries. By Franco Malerba; Richard Nelson; Luigi Orsenigo; Sidney Winter
  9. Globalization and the Rise of the Entrepreneurial Economy By Audretsch, David B; Sanders, Mark
  10. Assessing a decade of interstate bank branching By Christian A. Johnson; Tara Rice
  11. Restructuring an Empire. A narrative study of the turnaround of the telecom company Ericsson. By Beckerman, Carina
  12. Uncertainty and exploitation in history By Engelbert Stockhammer; Paul Ramskogler
  13. The Returns to Pencil Use Revisited By Spitz-Oener, Alexandra
  14. Can migration reduce educational attainments? Depressing evidence from Mexico By David McKenzie; Hillel Rapoport
  15. Capital flight and war By Davies, Victor A. B.
  16. Stakeholders, transactional algebras and conflict systems (mapping on why the founding charter compact becomes the mainstay of corporate governance) By Rodolfo Apreda
  17. The Resurrection of the Italian Wage Curve By Francesco Devicienti; Agata Maida; Lia Pacelli
  18. Concentración y Competencia en el Sistema Financiero Crediticio Colombiano en la Última Década By Ricardo Bernal Fandiño
  19. Cultural Assimilation, Cultural Diffusion and the Origin of the Wealth of Nations By Oded Galor; Quamrul Ashraf
  20. The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control? By Oilver Budzinski; Katharina Wacker

  1. By: Joan R. Rosés; Kevin H. O'Rourke; Jeffrey G. Williamson
    Abstract: The endogenous growth literature has explored the transition from a Malthusian world where real wages, living standards and labor productivity are all linked to factor endowments, to one where (endogenous) productivity change embedded in modern industrial growth breaks that link. Recently, economic historians have presented evidence from England showing that the dramatic reversal in distributional trends -- from a steep secular fall in wage-land rent ratios before 1800 to a steep secular rise thereafter -- must be explained both by industrial revolutionary growth forces and by global forces that opened up the English economy to international trade. This paper explores whether and how the relationship was different for Spain, a country which had relatively poor productivity growth in agriculture and low living standards prior to 1800, was a late-comer to industrialization afterwards, and adopted very restrictive policies towards imports for much of the 19th century. The failure of Spanish wage-rental ratios to undergo a sustained rise after 1840 can be attributed to the delayed fall in relative agricultural prices (due to those protective policies) and to the decline in Spanish manufacturing productivity after 1898.
    JEL: F1 N7 O4
    Date: 2007–04
  2. By: Kevin H. O'Rourke; Ahmed S. Rahman; Alan M. Taylor
    Abstract: Technological change was unskilled-labor-biased during the early Industrial Revolution of the late eighteenth and early nineteenth centuries, but is skill-biased today. This fact is not embedded in extant unified growth models. We develop a model of the transition to sustained economic growth which can endogenously account for both these facts, by allowing the factor bias of technological innovations to reflect the profit-maximising decisions of innovators. Endowments dictated that the initial stages of the Industrial Revolution be unskilled-labor biased. The transition to skill-biased technological change was due to a growth in "Baconian knowledge" and international trade. Simulations show that the model does a good job of tracking reality, at least until the mass education reforms of the late nineteenth century.
    JEL: F15 J13 J24 N10 O31 O33
    Date: 2007–04
  3. By: Marcelo Magalhães Godoy (Cedeplar-UFMG)
    Abstract: From the Brazilian coast to its inland, sugarcane molded economic, social and cultural landscapes with distinctive identities. The monotony of extensive sugarcane plantations was transformed as this culture started to grow along with other cultivations, with livestock, with several rural industries and with mineral extraction as well. The monopoly of engenho açucareiro was transformed into both, engenhos rapadureiros and engenhos aguardenteiros. These engenhos were immersed in consortiums grounded in the complementarity and interdependence of several actitivies. The fundamental characteristics dictated from the outside of the Colony unfolded into the autonomy and plasticity conformed by both, geographical isolation and decentralization of domestic markets. Distinct sugarcane plantation trajectories forged distinctive historical paradigms and later defined multiple rythms in the moving from the traditional to the modern. The civilization of sugar along the coast, with monolithic and compact inheritance, expanded into the plurality of inland sugarcane civilizations, with fragmentary and diffuse legacies.
    Keywords: sugar plantation activities; historical paradigms; Brazil – Americas; 16th to 19th centuries
    JEL: N01 N36 N56 N96
    Date: 2007–04
  4. By: Farley Grubb
    Abstract: The U.S. Congress issued paper money called Continental Dollars to finance the American Revolution. The story of the Continental Dollar is familiar to all -- excessive amounts were issued causing hyper-inflation. It became worthless and was forgotten. However, the details of this story, including its veracity, are less well known. Scholars even disagree over how much was issued. Evidence is gathered to establish the exact amount and time path of Continental Dollars emitted and then remitted to the U.S. Treasury and burned. Why some Dollars were hoarded rather than trashed between 1779 and 1790 is also documented.
    JEL: N1 N11 N2 N21
    Date: 2007–04
  5. By: Michael H. Grote
    Abstract: This paper traces the location of foreign banks in Germany from 1949 to 2006. As suggested by new economic geography models we find a ‘u’-shaped concentration of foreign banks in Germany. Only after a competition between several cities, Frankfurt has emerged as the pre-eminent financial centre, triggered by the ‘historical event’ of setting up the German central bank in Frankfurt. After a strong increase, Frankfurt’s share in the location of foreign banks in Germany decreases slowly but significantly since the mid 1980’s. We conclude that there will be a lesser role in Europe for secondtier financial centres in the future.
    JEL: R11 N94
    Date: 2007–04
  6. By: Benjamin Bridgman; Shi Qi; James A. Schmitz, Jr.
    Abstract: We study the impact of regulation on productivity and welfare in the U.S. sugar manufacturing industry. While this U.S. industry has been protected from foreign competition for nearly 150 years, it was regulated only during the Sugar Act period, 1934–74. We show that regulation significantly reduced productivity, with these productivity losses leading to large welfare losses. Our initial results indicate that the welfare losses are many times larger than those typically studied—those arising from higher prices. We also argue that the channels through which regulation led to large productivity and welfare declines in this industry were also present in many other regulated industries, like banking and trucking.
    Keywords: Sugar
    Date: 2007
  7. By: Roque B. Fernández; Celeste González; Sergio Pernice; Jorge M. Streb
    Abstract: Loan and bond finance during 1985-2005 can be divided into three sub-periods. After the 1982 debt crisis, which mainly involved domestic and foreign bank loans to both the corporate and government sectors, there was practically no credit. This situation of lack of credit persisted until the domestic economy was stabilized in 1991 with the Convertibility Plan, and foreign debt renegotiation was completed in 1993 with the Brady Plan. Loan finance recovered to unprecedented levels since the 1950s, and bond finance became for the first time an important financing vehicle for both the national government and large firms in the corporate sector. Credit came to a sudden stop in 2001, with widespread default on both corporate and government bonds. The 2001 debt crisis was not followed by runaway domestic inflation, and by 2005 Argentina was able to return to foreign capital markets.
    Keywords: bank loans, sovereign bonds, provincial bonds, central bank bonds, corporate bonds, pension funds, yields, liquidity
    JEL: G1 H6
    Date: 2007–04
  8. By: Franco Malerba (Cespri, Bocconi University, Milano, Italy.); Richard Nelson (Columbia University, New York, USA.); Luigi Orsenigo (University of Brescia and CESPRI, Bocconi University, Milan, Italy.); Sidney Winter (Wharton School, University of Pennsylvania, Philadelphia, USA.)
    Abstract: In this paper we present a history-friendly model of the changing vertical scope of computer firms during the evolution of the computer and semiconductor industries. The model is “history friendly”, in that it attempts at replicating some basic, stylized qualitative features of the evolution of vertical integration on the basis of the causal mechanisms and processes which we believe can explain the history. The specific question addressed in the model is set in the context of dynamic and uncertain technological and market environments, characterized by periods of technological revolutions punctuating periods of relative technological stability and smooth technical progress. The model illustrates how the patterns of vertical integration and specialization in the computer industry change as a function of the evolving levels and distribution of firms’ capabilities over time and how they depend on the co-evolution of the upstream and downstream sectors. Specific conditions in each of these markets – the size of the external market, the magnitude of the technological discontinuities, the lock-in effects in demand – exert critical effects and feedbacks on market structure and on the vertical scope of firms as time goes by.
    Keywords: Industrial Dynamics, Vertical Integration, Specialization, Technology.
    JEL: O30 L10 L60
    Date: 2006–12
  9. By: Audretsch, David B; Sanders, Mark
    Abstract: This paper argues that globalization has led to a shift in developed countries from an industrial to an entrepreneurial model of production. Globalization is interpreted as a level shock in the supply of unskilled labor to the world economy, a decrease in the level of political risk associated with outward foreign direct investment (offshoring), and the widespread diffusion of a general purpose technology such as ICT. The impact of these exogenous shocks is then analyzed in a variety expansion model that distinguishes among three types of varieties. Following the life cycle we distinguish among new, mature and offshore production. The above shocks all result in a shift in comparative advantage in developed countries towards new varieties which correspond to the early stage of the product life cycle. Moreover, because entrepreneurs serve as agents that move varieties between life cycle stages, their importance increases due to globalization. The many new opportunities for profit benefit entrepreneurs and skilled labour. By contrast, factors of production employed in the mature stages of the life cycle become less important. Thus, the model explains the emergence of what we label an entrepreneurial economy.
    Keywords: entrepreneurship; globalization
    JEL: F01 J31 O1 P0
    Date: 2007–04
  10. By: Christian A. Johnson; Tara Rice
    Abstract: U.S. banking regulation has historically prohibited the ability of a bank to open or own a branch located outside of its home state, commonly referred to as interstate branching. Only since the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) in 1994 have banks have been able to engage in interstate branching, though subject to state restrictions. Despite IBBEA’s removal of branching barriers, it still allowed the states to impose restrictions on the entry of out-of-state branch offices. This article describes the changes in Federal and state interstate branching law since passage of IBBEA and reviews how initial (1994-1997) and evolving (1998-2004) interstate branching laws affect out-of-state branch growth. It concludes that anticompetitive state provisions restricted out-of- state growth when those provisions were more restrictive than the provisions set by IBBEA or by neighboring states.
    Date: 2007
  11. By: Beckerman, Carina (Dept. of Business Administration, Stockholm School of Economics)
    Abstract: The turnaround of the telecom company Ericsson is considered a unique chapter in Swedish business life in terms of complexity, size and speed. This paper focuses on how some of the interpretative schemes of the employees were transformed during the turnaround and the organizational setting restructured. Instead of making a conventional study of a change process this study uses narrative method and explores the transformation through the eyes of four people. In this way this study hopes to be able to present a broader picture of some of the organizational learning that takes place during events like this, since storytelling is crucial when people make sense of their everyday life. A narrative analysis approach will not result in the one “true” account of a phenomenon. However, narrative analysis can provide detailed insights into individual informants understanding of events and highlight similarities and differences in interpretations that are interesting also for outsiders to take part of. The findings indicate that not only the interpretative schemes for how to run the company were transformed but also how the employees view the world.
    Keywords: interpretative schemes; management; narrative method; structuration theory; turnaround; telecom; Ericsson.
    Date: 2007–04–20
  12. By: Engelbert Stockhammer (Department of Economics, Vienna University of Economics & B.A.); Paul Ramskogler (Department of Economics, Vienna University of Economics & B.A.)
    Abstract: The paper builds on the Marxist concept of exploitation to explore the meaning of the Post Keynesian notion of uncertainty. Uncertainty is mediated by institutions and is distributed unevenly among different social groups. As different historical social formations entail different institutional structures, the distribution and nature of uncertainty also differ. The configurations between class relations and uncertainty are analyzed for the capitalist, feudal and slave modes of production. It is demonstrated that modes of production do not only imply specific exploitative relations but also different relative distributions of uncertainty amongst classes. Joining Marxian and Post Keynesian approaches allows a richer understanding of exploitive relations and illuminates the full societal impact of uncertainty. It is shown that only in capitalism is the exploited class exposed to a substantial degree of economic uncertainty.
    JEL: B50 B51 N33 N34
    Date: 2007–04
  13. By: Spitz-Oener, Alexandra
    Abstract: The increased diffusion of computers is one of the fundamental changes at workplaces in recent decades. While the majority of workers now spend a substantial fraction of their working day with a computer, research on the wage effect of computer use effectively came to a halt after DiNardo and Pischke [1997] found that wages were also positively associated with pencil use, calling into question the ability to distinguish the effect of computers from other confounding factors. Using the same data set as DiNardo and Pischke, but a more recent wave, this paper revitalizes the discussion by showing that the pencil effect disappeared in 1998/99, whereas the computer effect is still present. Computer users - but not pencil users - have experienced a pronounced shift towards analytical and interactive tasks, for which they are rewarded in the workplace.
    Keywords: Computer wage differential, pencil wage differentials, changing skill requirements
    JEL: C13 J31
    Date: 2007
  14. By: David McKenzie (Development Research Group, World Bank); Hillel Rapoport (Department of Economics, Bar-Ilan University, CADRE, University of Lille II, and Stanford Center for International Development)
    Abstract: This paper examines the impact of migration on educational attainments in rural Mexico. Using historical migration rates by state to instrument for current migration, we find evidence of a significant negative effect of migration on schooling attendance and attainments of 12 to 18 year-old boys and of 16 to 18 year-old girls. IV-Censored Ordered Probit results show that living in a migrant household lowers the chances of boys completing junior high-school and of boys and girls completing high-school. The negative effect of migration on schooling is somewhat mitigated for younger girls with low educated mothers, which is consistent with remittances relaxing credit constraints on education investment for the very poor. However, for the majority of rural Mexican children, family migration depresses educational attainment. Comparison of the marginal effects of migration on school attendance and on participation to other activities shows that the observed decrease in schooling of 16 to 18 year olds is accounted for by current migration of boys and increases in housework for girls.
    Keywords: Migration, migrant networks, education attainments, Mexico
    JEL: O15 J61 D31
    Date: 2006–03
  15. By: Davies, Victor A. B.
    Abstract: The author provides empirical evidence on the effects of inflation on post-war capital flight flows. He tests the hypothesis that inflation has a positive additional impact on capital flight flows after war. He uses a new panel dataset of 77 developing countries, of which 35 experienced at least one episode of war between 1971 and 2000. The author uses a range of estimation methods and four capital flight measures-Cline, World Bank Residual, Morgan Guarantee, and Dooley. The results consistently support the research hypothesis: Post-war inflation increases annual capital flight flows by about 0.005 to 0.01 percentage points of GDP. This ef fect is substantial in total at high inflation rates. The implication is that low inflation helps to curb capital flight in post-conflict economies.
    Keywords: Economic Theory & Research,Banks & Banking Reform,Investment and Investment Climate,Settlement of Investment Disputes,Pro-Poor Growth and Inequality
    Date: 2007–04–01
  16. By: Rodolfo Apreda
    Abstract: In this paper we put forward an alternative approach to dealing with the Charter of any organization, that essential document which ought to be regarded as the mainstay of governance. In the first place, we show that an organization carries out its tasks by becoming a responsive mechanism to fulfill stakeholders’ demands as well as costly restraints stemming from transactional environments. In the second place, organizations behave like conflict-systems within which political issues are of the essence when coping with power, influence, control and authority; on these grounds, we give heed to agenda building and the problem of factions. We argue that such three-tiered structure stands for the preconditions of any Charter. Lastly, we set up the Charter as a compact of regulatory and discretionary governance, comprised not only by the articles and certificate of incorporation, but also internal bylaws of the organization, the Statute of Governance, the Code of Good Practices, and provisions for upgrading, overhauling, and even changing the architecture of governance in its entirety.
    Keywords: charter, corporate governance, stakeholders, transactional environments, conflict-systems, regulatory governance.
    JEL: G30 G34 G20
    Date: 2007–04
  17. By: Francesco Devicienti; Agata Maida; Lia Pacelli
    Abstract: We show that the Italian wage curve, inexistent in the eighties and early nineties, has re-emerged after the 1993 Income Policy Agreements, owing to the greater role granted to flexible and locally bargained top-up wage components.
    Keywords: wage curve, top-up components, panel data, institutional reforms, Italy.
    JEL: J30 J60
    Date: 2006
  18. By: Ricardo Bernal Fandiño
    Abstract: Este trabajo estudia la relación entre los aumentos en la concentración y las dinámicas de competencia del sector financiero crediticio de los últimos años en la economía colombiana. Se encuentra que a pesar de los incrementos en la concentración que reflejan diversos indicadores analizados, el nivel de poder de mercado -medido como el estadístico H de Panzar y Rose (1987) por medio de un análisis de panel de datos- no se ha deteriorado en el periodo 1995-2005. Más aún, existen indicios por los cuales este nivel de competencia se ha incrementado en el periodo, una vez se ha controlado por variables específicas a la entidad así como por variables exógenas macroeconómicas.
    Keywords: Concentración; Consolidación; Competencia; Contestabilidad Classification JEL:D4; G21; L13; R12
  19. By: Oded Galor; Quamrul Ashraf
    Date: 2007
  20. By: Oilver Budzinski (Faculty of Business Administration and Economics, Philipps Universitaet Marburg); Katharina Wacker
    Abstract: We review the Bundeskartellamt (Federal Cartel Office Germany) decision on the proposed merger between Springer and ProSiebenSat.1 from an economic point of view. In doing so, it is not our goal to analyse whether the controversial decision by the Bundeskartellamt has been correct or flawed from a legal point of view. Instead, we analyse whether the economic reasoning in the decision document reflects state-of-the-art economic theory on conglomerate mergers. Regarding such types of mergers, anticompetitive effects either do not occur regularly or are more often than not overcompensated by efficiency gains, so that a standard welfare perspective demands reluctance concerning antitrust interventions. This is particularly true if two-sided markets, like media markets, are involved. However, anticompetitive conglomerate mergers are not impossible, in particular in neighbouring markets where there is some relationship between the products of the merging companies. In line with the more-economic approach in European merger control, a particular thorough line of argumentation, backed with particularly convincing economic evidence, is necessary to justify a prohibition of a conglomerate merger from an economic point of view. Against this background, we do not find the reasoning of the Bundeskartellamt entirely convincing and sufficiently strong to justify a prohibition of the proposed combination from an economic perspective. The reasons are that (i) the Bundeskartellamt fails to continuously consider consumer and customer welfare as the relevant standards, (ii) positive efficiency and welfare effects of cross-media strategies are neglected, (iii) in contrast, the competition agency sometimes appears to view profitability of post-merger strategy options to be per se anticompetitive (efficiency offence), (iv) the incontestability of the relevant markets is not sufficiently substantiated, (v) inconsistencies occur regarding the symmetry of the TV advertising market duopoly versus the unique role of the BILD-Zeitung and (vi) the employment of modern economic instruments appears to be underdeveloped. Thus, we conclude that the Bundeskartellamt has not embraced the European more-economic approach in the analysed decision. However, one can discuss whether economic effects are overcompensated in this case by concerns about a reduction in diversity of opinion and threats to free speech. Similar to the Bundeskartellamt, we do not consider these concerns in our analysis.
    Keywords: merger control, media markets, more-economic approach, conglomerate mergers, cross-promotion
    JEL: L82 L40 K21
    Date: 2007

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