nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2007‒10‒20
fifteen papers chosen by
Bernardo Batiz-Lazo
University of Leicester

  1. Did Nordic Countries Recognize the Gathering Storm of World War II? Evidence from the Bond Markets By Daniel Waldenstrom; Bruno S. Frey
  2. Arbitrage and Simple Financial Market Efficiency during the South Sea Bubble: A Comparative Study of the Royal African and South Sea Companies Subscription Share Issues By Gary S. Shea
  3. Using Financial Markets to Analyze History: The Case of the Second World War By Bruno S. Frey; Daniel Waldenstrom
  4. Bankruptcy: from moral order to economic efficiency. By Nadine Levratto
  5. No Place like Home? Location choice and firm survival after forced relocation in the German machine tool industry By Guido Buenstorf; Christina Guenther
  6. Conflictos de tierras, derechos de propiedad y el surgimiento de la economía exportadora en el siglo XIX en Colombia By Fabio Sánchez Torres; Antonella Fazio Vargas; María del Pilar López Uribe
  7. Migration Creation, Diversion, and Retention: New Deal Grants and Migration: 1935-1940 By Todd Sorensen; Price V. Fishback; Samuel Allen; Shawn E. Kantor
  8. Growth, Democracy, and Civil War By Antonio Ciccone; Markus Brückner
  9. Sudden Stops: Determinants and Output Effects in the First Era of Globalization, 1880-1913 By Michael D. Bordo; Alberto F. Cavallo; Christopher M. Meissner
  10. Do Universal Banks Create Value? Universal Bank Affiliation and Company Performance in Belgium, 1905-1909 By Van Overfelt W.; Annaert J.; De Ceuster M.; Deloof M.
  11. Why, how and when did GTAP happen? What has it achieved? Where is it heading? By Alan A. Powell
  12. A Chronology Of Postwar U.S. Federal Income Tax Policy By Shu-Chun Susan Yang
  13. Developments in the Taxation of Corporate Profit in the OECD since 1965: Rates, Bases and Revenues By Michael P Devereux
  14. Role of ‘corporate persistence’ and ‘environmental support’ in building breakthrough capability: Empirical investigation of Samsung’s initiatives in memory and microwave oven business By Dixit M.R.; Sharma Sunil; Karna Amit
  15. Political budget cycles and social security budget increases in the Republic of Ireland, 1923-2005 By Cousins, Mel

  1. By: Daniel Waldenstrom; Bruno S. Frey
    Abstract: This paper analyzes and compares different ways of assessing how people perceived impending threats of war in the past. Conventional Nordic historiography of World War II claims there were few, if any, people in the Nordic countries who perceived a significantly increased threat of war between 1938 and early 1940. At the same time, historical methods face problems when it comes to capturing the often tacitly held beliefs of a large number of people in the past. In this paper, we analyze these assessments by looking at sudden shifts in sovereign debt yields and spreads in the Nordic bond markets at that time. Our results suggest that Nordic contemporaries indeed perceived significant war risk increases around the time of major war-related geopolitical events. While these findings question some – but not all – of standard Nordic World War II historiography, they also demonstrate the value of analyzing historical market prices to reassess the often tacitly held views and opinions of large groups of people in the past.
    Keywords: Structural breaks; Sovereign debt; Capital markets; Historiography; Cliometrics; World War II
    JEL: C22 G14 N01 N44
    Date: 2007–10
  2. By: Gary S. Shea
    Abstract: Subscription shares of the early 18th century were early examples of what today would be called innovated securities. Either by intent or happenstance, they served to overcome imperfections in the capital markets of the day. Not all such securities were, however, alike. The prominent examples of the subscription shares of the South Sea Company and the Royal African Company in 1720 were quiet different in their design and the corporate financial policies they were intended to aid. The historical literature emphasises the importance of irrational pricing behaviour during the South Sea Bubble, yet it is remarkable that in the financial markets of 1720 the relative values of subscription shares are easily understandable using standard financial theory.
    Keywords: Royal African Company, South Sea Company, Financial Revolution, subscription shares, call options, derivatives, instalment receipts, innovated securities.
    JEL: G13 N23
    Date: 2007–10
  3. By: Bruno S. Frey; Daniel Waldenstrom
    Abstract: A central aspect of historical research is to provide explanations for the causes and effects of events that occurred in the past, in particular the Second World War. History can be analyzed and explained from different perspectives. Two such perspectives are considered, the first being the traditional historiographic approach, in which the main emphasis is on the qualitative analysis of various kinds of historical sources and documents, and the second being what we call the financial market approach, a recent methodology for linking significant changes in historical market prices to simultaneously occurring geopolitical events. The fundamental characteristics of the two approaches are identified and compared in answering some important historical questions concerning the Second World War. The financial market approach, as reflected in the secondary market for government bonds, is studied for various countries. Both approaches rely heavily on interpretation – but in different ways. They complement each other in a useful way.
    Keywords: Financial markets; government bonds; history; World War II
    JEL: Z0 D70 F3 G1
    Date: 2007–10
  4. By: Nadine Levratto (IDHE - Institutions et Dynamiques Historiques de l'Economie - [CNRS : UMR8533] - [Université Panthéon-Sorbonne - Paris I][Université Paris VIII Vincennes-Saint Denis][Université de Paris X - Nanterre] - [Ecole Normale Supérieure de Cachan], EUROMED MARSEILLE - Ecole de Management)
    Abstract: The evolutions of the bankruptcy law seek to reach many aims: economic safety, firms’ creation and expansion in a capitalist economy, protection of the interests of the agents involved in transactions that goes far beyond creditors and debtors, and prolongation of the activity of viable firms. This contribution examines the French insolvency law and its transformations since the 19th century from a historical and concrete point of view which makes it possible to put in perspective the modifications and the uses of the legal rules in an economic and institutional context. The underlying assumptions and the main results contradict the conclusions of the Law and Economics theory which insist on the weak economic efficiency and the low ability to protect creditors’ interest of the bankruptcy law. We show that far from being only one means of selection thanks to which the market could be cleared of its failing agents, the bankruptcy law opens a non commercial space of resolution of the failures of market which, by releasing the actors of their former constraints, authorizes them to reinstate the business world.
    Keywords: Bankruptcy, Law and economics, insolvency, Doing Business
    Date: 2007–05
  5. By: Guido Buenstorf; Christina Guenther
    Abstract: We study location choices and firm performance in the German machine tool industry, focusing on the forced migration of East German firms after World War II. Our analysis of location choices supports earlier findings that industry agglomerations attract further entrants. Relocating firms outperformed entrants that possessed no prior industry experience; apparently were able to build on their prewar capabilities. We find no evidence suggesting that firm performance benefited from agglomeration effects.
    Keywords: Capabilities; agglomeration economies; location choice; firm survival; machine tool industry
    JEL: L20 R20 R30
    Date: 2007
  6. By: Fabio Sánchez Torres; Antonella Fazio Vargas; María del Pilar López Uribe
    Abstract: Este estudio desarrolla la relación entre la expansión de la oferta de tierras y el desarrollo exportador a finales del siglo XIX e intenta explicar la lánguida inserción de la economía colombiana a la economía mundial durante la ola de globalización que se inició a mediados del siglo XIX. Con base en la información sobre producción de cultivos exportables a nivel municipal de 1892, adjudicación de baldíos y conflictos de tierra durante el siglo XIX se encuentra que el mayor obstáculo que enfrentó el desarrollo exportador fue la debilidad de los derechos de propiedad de los colonos en las tierras de frontera, resultante del riesgo de expropiación o usurpación por parte de terratenientes locales. A partir de los resultados cuantitativos se calcula que en ausencia de conflicto de tierras la probabilidad de que un municipio hubiese tenido producción de productos exportables habría sido 50% más alta mientras la producción de productos exportables habría sido por lo menos el doble de la observada. Para corregir por la posible endogeneidad entre el desarrollo exportador local (municipal) y los conflictos de tierra locales se utiliza como instrumento de estos últimos la cercanía geográfica a la presencia de instituciones coloniales (Encomienda en 1560 y Esclavitud –poblaciones con más de 20 esclavos en 1800).
    Date: 2007–09–13
  7. By: Todd Sorensen; Price V. Fishback; Samuel Allen; Shawn E. Kantor
    Abstract: During the 1930s the federal government embarked upon an ambitious series of grant programs designed to counteract the Great Depression. The amounts distributed varied widely across the country and potentially contributed to population shifts. We estimate an aggregate discrete choice model, in which household heads choose among 466 economic subregions. The structural model allows us to decompose the effects of program spending on migration into three categories: the effect of spending on keeping households in their origin (retention), the effect of pulling non-migrants out of their origin (creation), and the effect of causing migrants to substitute away from an alternative destination (diversion). An additional dollar of public works and relief spending increased net migration into an area primarily by retaining the existing population and creating new migration into the county. Only a small share of the increase in net migration rate was caused by diversion of people who had already chosen to migrate. AAA spending contributed to net out migration, primarily by creating new out migrants and repelling potential in migrants. A counterfactual analysis suggests that the uneven distribution of New Deal spending explains about twelve percent of the internal migration flows in the United States between 1935 and 1940.
    JEL: J61 N32
    Date: 2007–10
  8. By: Antonio Ciccone; Markus Brückner
    Abstract: Does economic growth affect the likelihood of civil war? Answering this question requires dealing with reverse causation. Our approach exploits that international commodity prices have a significant effect on the income growth of Sub-Saharan African countries. We show that lower income growth makes civil war more likely in non-democracies. This effect is significantly weaker in democracies; as a result, we find no link between growth and civil war in these countries. Our reducedform results also indicate that lower international commodity price growth has no effect on civil war in democracies, but raises the likelihood of civil war incidence and onset in nondemocracies.
    Keywords: Commodity prices, rainfall, income growth, civil war
    JEL: O0 P0 Q0
    Date: 2007–10
  9. By: Michael D. Bordo; Alberto F. Cavallo; Christopher M. Meissner
    Abstract: Using a sample of 20 emerging countries from 1880 to 1913, we study the determinants and output effects of sudden stops in capital inflows during an era of intensified globalization. We find that higher levels of original sin (hard currency debt to total debt) and large current account deficits associated with reliance on foreign capital greatly increased the likelihood of experiencing a sudden stop. Trade openness and stronger commitment to the gold standard had the opposite effect. These results are robust for many sudden stop definitions used in the literature. Finally, we use a treatment effects model to show that after controlling for endogeneity sudden stops have a strong negative association with growth in per capita output. We also show that banking, currency and debt crises that were preceded by a sudden stop have much greater negative relation with growth than in the absence of a sudden stop.
    JEL: F21 F32 N1 N10
    Date: 2007–10
  10. By: Van Overfelt W.; Annaert J.; De Ceuster M.; Deloof M.
    Abstract: We investigate the impact of universal banks on the performance and the risk of affiliated companies in an unregulated environment with booming financial markets. For a unique sample of 129 Belgian companies listed in the period 1905-1909, we find that universal bank affiliation had a positive impact on the market-to-book ratio and return-on-assets. The effect on performance was positively related to the degree of bank involvement. Universal banks significantly reduced the volatility of return-on-assets. Stock return performance, measured by the Sharpe ratio, was also significantly better for affiliated corporations.
    Date: 2007–01
  11. By: Alan A. Powell
    Abstract: Team research has been much more widespread in the natural sciences than in economics. Yet when it comes to modeling an economy (especially the global economy) in detail, the quantity and range of inputs necessary makes team work the only viable option. Drawing some inspiration from Australian experience, GTAP's founder, Tom Hertel, realized this from his Project's inception in 1993. The data base required to model international trade flows could not have been developed without the enthusiastic cooperation of many individuals and institutions around the world. Funding GTAP's central team at Purdue required external support. National agencies in Australia, Denmark, France, Germany, Holland, Japan, and the US are members of the supporting research consortium. The natural interest of international economic agencies led to GTAP having five such supporting agencies by 1997, which grew to ten by 2006. GTAP has striven to put the maximum feasible amount of its data, methodology and models into the public domain. It has run numerous residential intensive training courses in the use of the GTAP data and model: these have been held in the US, Europe, Africa, Asia and Latin America. The success of these courses reflects the modeling experience of the teams of course instructors and the availability of special-purpose software which allows simulations to be run without programming skill or previous knowledge of the software used. Researchers making use of GTAP have been prolific in number, and in their output. In mid April 2007, applications listed on the GTAP web site numbered 781. There were 366 subscribers to the GTAP data base at the end of April 2007, but the number of individuals making use of GTAP data exceeded 4,000. A web search using Google Scholar for the 1997 GTAP monograph records more than 1,150 citations, while versions 3 and 5 of GTAP's data base are cited 279 and 389 times respectively. It is clear that GTAP has engendered a community of quantitatively-oriented trade economists, and has integrated their efforts with those of other economists having an economy-wide perspective, especially those working on economic development. GTAP's success as a policy tool has led to an ever increasing demand for its extension to cover more commodities, regions, and economic issues: international migration of labor and climate change, for instance. With the current level of financial support, such expansions to GTAP's range are possible only on a limited scale.
    Keywords: History of Global Trade Analysis Project,
    JEL: F1 F2 F4 C6 C8 D5
    Date: 2007–09
  12. By: Shu-Chun Susan Yang (Institute of Economics, Academia Sinica)
    Abstract: This note provides a chronology of major tax events that involved changes in federal taxes on individual and corporate income from 1948 to 2006. For each event, the note provides background and policy motivation, major provisions, legislative timeline, and estimated revenue changes. As most tax changes were preceded by extensive legislative delays, this chronology suggests that people were likely to have foreknowledge about tax policy. It also finds that postwar income tax policy was typically motivated by one of three rationales: 1) balancing the budget or reducing deficits, 2) controlling inflation, and 3) stimulating economic activity or promoting growth.
    Keywords: Policy Foresight, Timeline of Tax Events, Tax Policy, Fiscal Policy
    JEL: E62 E61 N42
    Date: 2007–10
  13. By: Michael P Devereux (Oxford University Centre for Business Taxation, IFS, CEPR and CESifo)
    Abstract: This paper describes developments in corporation taxes in the OECD over the last 40 years. It pays particular attention to the apparent divergence in the trends of the average statutory corporation tax rate and the average ratio of corporation tax revenues to GDP: the former has declined over time, while the latter has risen. It develops a simple framework for assessing the expected effect of the tax rate on tax revenues, and estimates the relationship using a panel of aggregate data for 20 OECD countries from 1965 to 2004, controlling for a measure of the tax base and other factors. There is only weak evidence of any relationship between the two. Evidence which does support a relationship is consistent with the finding of Clausing (2006) that the relationship is nonlinear, and that the implied revenue-maximising tax rate is likely to be low.
    Date: 2007
  14. By: Dixit M.R.; Sharma Sunil; Karna Amit
    Abstract: It is now an incontrovertible fact that capabilities are the source of competitive advantage. However, the process through which firms build capabilities over a period of time is only partially understood. Concepts like learning, resource combination, and co-evolution can be categorized as enablers as they support capability formation. On the other hand, concepts like inertia and path dependence can be categorized as restrictors as they constrain the process of capability formation. Combined together, while these concepts hint in the right direction, there is a need to have concepts that explain the process of capability formation holistically. An endeavour towards this objective would require taking into account the role of internal and external events. This paper builds concepts of ‘corporate persistence’ and ‘environmental support’ to explain their role in building breakthrough capability by examining major events in the evolution of two mega high technology business belonging to the Samsung group.
    Keywords: Capability Building, Corporate Persistence, Environmental Support, Breakthrough.
    Date: 2007–10–11
  15. By: Cousins, Mel
    Abstract: This paper examines social security increases in Ireland as a case study of the existence of political budget cycles in European countries. Ireland is an appropriate country to examine, first because it has a system of proportional representation and some studies suggest that proportional electoral systems are associated with expansions of welfare spending both before and after elections. Second, it is generally recognised that Irish political parties occupy the middle ground in terms of political ideology. Again studies would suggest that an absence of a strong ideological commitment to particular policies may make political budget cycles more likely. Utilising the distinctive nature of the public expenditure process in relation to welfare budget increases, this article examines the issue of whether or not a political budget cycle can be seen in Ireland in relation to social security expenditure. It draws a number of conclusions as to the existence and incidence of political budget cycles in an Irish context and also looks at whether political budget cycles have succeeded in their apparent objective i.e. securing election for the relevant political party.
    Keywords: Political budget cycle; welfare state; social security; public expenditure; Ireland
    JEL: I38 H55 H53
    Date: 2007–06–26

This nep-his issue is ©2007 by Bernardo Batiz-Lazo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.