New Economics Papers
on Business, Economic and Financial History
Issue of 2008‒02‒09
sixteen papers chosen by

  2. On state autonomy : pressure groups and public policy in Britain and Spain in a comparative perspective, 1830s-1930s By Juan Carlos Rojo Cagigal
  3. Traditional financing and distant trades during modernization process of financial industry: a case of Yamaguchi prefecture in the 1870s By Yasuo Takatsuki
  4. Did Nordic Countries Recognize the Gathering Storm of World War II? Evidence from the Bond Markets By Daniel Waldenström; Bruno S. Frey
  5. Using Financial Markets to Analyze History: The Case of the Second World War By Bruno S. Frey; Daniel Waldenström
  6. Weather forecast or rain-dance? On inter-war business barometers By Giovanni Favero
  7. The Continental Dollar: What Happened to It after 1779? By Farley Grubb
  8. Why Kill Politicians? A Rational Choice Analysis of Political Assassinations By Bruno S. Frey
  9. Firm Entry and Institutional Lock-in: An Organizational Ecology Analysis of the Global Fashion Design Industry By Rik Wenting; Koen Frenken
  10. Government debts and credit markets in Renaissance Italy By Luciano Pezzolo
  11. ”Economic Possibilities for Our Grandchildren” 75 Years after: A Global Perspective By Fabrizio Zilibotti
  12. The Baby Boom and World War II: A Macroeconomic Analysis By Matthias Doepke; Moshe Hazan; Yishay D. Maoz
  13. Banking Crises By Gerard Caprio, Jr. and Patrick Honohan
  14. Productivity and environmental regulations - A long run analysis of the Swedish industry By Brännlund, Runar
  15. A history of child labour in Portugal By P. Goulart; A.S. Bedi
  16. Evaluating the Costs and Benefits of the US War on Terror By Gold, David

  1. By: Pierre van der Eng
    Abstract: This article surveys the growth of consumer credit in Australia during the 20th century, particularly after World War II. Until the 1970s, the regulation of Australia’s financial market caused formal consumer credit to be provided mainly by finance companies under hire-purchase contracts, largely for the purchase of cars and household durables. Deregulation of the financial market since the 1960s allowed banks to gain a dominant share in the market for personal loans. Quantification of long-term trends is difficult, but broad estimates suggest sustained growth in per capita indebtedness during 1945-2007.
    JEL: D14 E21 E51 G23 N27
    Date: 2008–01
  2. By: Juan Carlos Rojo Cagigal
    Abstract: The paper looks into the relationship between industrial pressure groups and the state, comparing the experiences of Britain and Spain during the 19th and the first third of the 20th century. By analysing the decision-making processes, the collective action of economic groups and the adoption of public policy, I argue that they shared a common pattern: both states were basically autonomous facing the pressure of organized economic interests. I explore some of the causes that could explain such a similar pattern in countries with a very different model of development and also examine the tensions provoked by the strong autonomy of the state, mainly in the Spanish case. From this work it follows that the role of the state should be re-considered and reevaluated in explaining institutional change in western countries during the nineteenth and twentieth centuries.
    Keywords: Pressure groups, Economic elites, Public policy, Big business and government, State, Political economy, Britain, Spain
    JEL: N40 N43
    Date: 2008–01
  3. By: Yasuo Takatsuki (Graduate School of Economics, Tokyo University)
    Abstract: This paper examines the efficiency of the Dojima Rice Market established in 1730 in Osaka, and closed in 1869 due to the collapse of Tokugawa Shogunate. It had already been shown that there existed the price mechanism in Dojima. However, the most significant question: Whether the world first commodity futures market was efficient or not, remains to be unanswered. Before applying the empirical analyses, this paper first introduces the daily price index constructed from the original historical document, "Yorozu Souba Nikki (Daily memorandum of commodity price indices)," written by the contemporary rice merchant who dealt in the rice. From this memorandum, we can construct the daily price index both in the futures and the spot market during the period from 1798 to 1856. Based on this price index, the test of unbiasedness hypothesis and the classic measure of market efficiency; "weak-form efficiency" were applied to Dojima Rice Market, and it is shown that there existed these types of efficiency.
    Keywords: Japanese Economic History, The Dojima Rice Exchange Market, The Informational Efficiency.
    JEL: G14 L11 N25
    Date: 2007–06
  4. By: Daniel Waldenström; 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
  5. By: Bruno S. Frey; Daniel Waldenström
    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
  6. By: Giovanni Favero (Department of Economics, University Of Venice Cà Foscari)
    Abstract: In this paper, I use the materials of the debate on the reliability and the utility of “business barometers” of the Twenties in order to show that the theoretical reflexions of the time could be used by economic historians as a working hypothesis to analyze the influence exerted by circulating statistical data on the decisions of economic operators and institutions. I offer a short illustration of the origins and circulation of economic trends forecasting in the first decades of 20th century, paying particular attention to the critical attitude shown by Corrado Gini and Oskar Morgenstern and to the debate arisen inside the Harvard Committee for Economic Research on the inefficiency of its “index of economic conditions” during the 1929 crisis. I finally suggest that thorough research on the circulation and the influence exerted by the Harvard index on the business world, still after the slump in prices of New York Stock Exchange, could contribute to explain the behaviour of American businessmen and investors during the first Thirties, and the deepening of the crisis.
    Keywords: Economic forecasts, 1930s crisis, US
    JEL: N22 N42 N82 B23
    Date: 2007
  7. By: Farley Grubb
    Abstract: Congress financed the American Revolution by issuing paper Continental Dollars. The story of the Continental Dollar is familiar to all -- a lot were issued and hyper-inflation ensued. Emissions were permanently discontinued in 1779. Thereafter, they became worthless and were forgotten. They had no impact on subsequent public finance. The veracity of the last part of this story is challenged here. Evidence is presented to establish that the disposition of the Continental Dollar remained an open question well into the 1790s. Evidence is also presented to establish the exact time path of the retirement of Continental Dollars between 1779 and 1790.
    JEL: N1 N11 N2 N21
    Date: 2008–02
  8. By: Bruno S. Frey
    Abstract: In the course of history a large number of politicians has been assassinated. A rational choice analysis is used to distinguish the expected marginal benefits of killing, and the marginal cost of attacking a politician. The comparative analysis of various equilibria helps us to gain insights into specific historical events. The analysis suggests that – in addition to well-known security measures – an extension of democracy, a rule by a committee of several politicians, more decentralization via the division of power and federalism, and a strengthening of civil society significantly reduce politicians’ probability of being attacked and killed.
    Keywords: Rational choice, democracy, dictatorship, assassination, deterrence
    JEL: D01 D70 K14 K42 Z10
    Date: 2007–05
  9. By: Rik Wenting; Koen Frenken
    Abstract: Few industries are more concentrated than the global fashion industry. We analyse the geography and evolution of the ready-to-wear fashion design industry by looking at the yearly entry rates following an organizational ecology approach. In contrast to earlier studies on manufacturing industries, we find that legitimation effects are local and competition effects are global. This result points to the rapid turnover of ideas in fashion on the one hand and the global demand for fashion apparel on the other hand. We attribute the decline of Paris in the post-war period to 'institutional lock-in', which prevented a ready-to-wear cluster to emerge as vested interested of haute couture designers were threatened. An extended organizational ecology model provides empirical support for this claim.
    Keywords: Organizational ecology, fashion industry, creative industries, clusters, institutional lock-in
    Date: 2008–01
  10. By: Luciano Pezzolo (Department of Economics, University Of Venice Ca’ Foscari)
    Abstract: At first sight a marked difference turns out among the Italian governments of early Renaissance: the means of financing their deficit. There are, on the one hand, communal cities and republics, raising money from citizens through the system of forced or voluntary loans; there are, on the other, princes and lords who exploit services of bankers and merchants. These two different systems of borrowing bring about significant financial and political aspects. In this paper I will examine the main features characterizing the two mechanisms of indebtedness and the implications concerning the emergence of a true financial market connected with state bonds.
    Keywords: Public debts; Renaissance Italy; financial markets; financial institutions
    JEL: N2 N23
    Date: 2007
  11. By: Fabrizio Zilibotti
    Abstract: In the heart of the Great Crisis, amidst great uncertainty and concerns surrounding the future of capitalism, John Maynard Keynes launched his optimistic prophecy that growth and technological change would allow mankind to solve its economic problem within a century. He envisioned a world where people would work much less and be less oppressed by the satisfaction of material needs. To what extent have his predictions turned out to be accurate? This essays attempts to provide some answers.
    Keywords: Capitalism, Consumption, Environmental Sustainability, Growth, Keynes, Leisure.
    JEL: B31 E12 E66 I31 J22
    Date: 2007–12
  12. By: Matthias Doepke; Moshe Hazan; Yishay D. Maoz
    Abstract: We argue that one major cause of the U.S. postwar baby boom was the increased demand for female labor during World War II. We develop a quantitative dynamic general equilibrium model with endogenous fertility and female labor-force participation decisions. We use the model to assess the long-term implications of a one-time demand shock for female labor, such as the one experienced by American women during wartime mobilization. For the war generation, the shock leads to a persistent increase in female labor supply due to the accumulation of work experience. In contrast, younger women who turn adult after the war face increased labor-market competition, which impels them to exit the labor market and start having children earlier. In our calibrated model, this general-equilibrium effect generates a substantial baby boom followed by a baby bust, as well as patterns for age-specific labor-force participation and fertility rates that are consistent with U.S data.
    Keywords: Fertility, Baby Boom, World War II
    JEL: D58 E24 J13 J20
    Date: 2008–01
  13. By: Gerard Caprio, Jr. and Patrick Honohan
    Abstract: The history of banking around the world has been punctuated by frequent systemic crises. Not all crises are the same with distinct roles being played at different times by mismanagement, government interference and macroeconomic shocks. This review draws on experience from developing countries as well as advanced economies. It identifies common features of crises in recent decades, describes how costly they have been (especially in developing countries) in terms of fiscal burden and impact on macroeconomic growth. It proceeds to outline the conceptual issues identified by theoreticians and considers appropriate policy responses. A lull in the new millennium led to optimism that banking crises might be a thing of the past, but the events of recent months have shown such optimism to be unwarranted.
    Date: 2008–01–31
  14. By: Brännlund, Runar (Department of Economics, Umeå University)
    Abstract: The aim with this study is to evaluate the potential effects on productivity development in the Swedish manufacturing industry due to changes in environmental regulations over a long time period. The issue is closely related to the so called Porter hypothesis, i.e. whether environmental regulations (the right kind) that usually is associated with costs triggers mechanisms that enhances efficiency and productivity that finally outweighs the initial cost increase. To test our hypothesis we use historical data spanning over the period 1913-1999 for the Swedish manufacturing sector. The model used is a two stage model were the total factor productivity is calculated in the first stage, and is then used in a second stage as the dependent variable in a regression analysis where one of the independent variables is a measure of regulatory intensity. The results show that the productivity growth has varied considerably over time. The least productive period was the second world war period, whereas the period with the highest productivity growth was the period after the second world war until 1970. Development of emissions follows essentially the same path as productivity growth until 1970. After 1970, however, there is a decoupling in the sense that emissions are decreasing, both in absolute level and as emissions per unit of value added. A rather robust conclusion is that there is no evident relationship between environmental regulations and productivity growth. One explanation is that regulations and productivity actually is unrelated. Another potential explanation is that the regulatory measure used does not capture perceived regulations in a correct way.
    Keywords: Environmental regulations; productivity; Porter hypothesis
    JEL: Q52 Q55 Q56
    Date: 2008–02–01
  15. By: P. Goulart; A.S. Bedi
    Abstract: This paper uses historical and current data covering the period 1850 to 2001 to provide a history of child labour in Portugal. The Portuguese experience is set against the backdrop of the country�s changing economic structure, changes in education and minimum working age policies and the changing norms espoused by its people. The paper highlights the rapid post-1986 decline in child labour which is interpreted in terms of the cascading effect of policies that operated synchronously. Our assessment of the Portuguese experience suggests that while legal measures such as minimum working age requirements and compulsory schooling laws do help reduce child labour, no single legislation or policy is likely to be effective unless the various pieces come together. The use of children in the labour market appears to be driven mainly by the needs of the economic structure of the country, which in turn may be reflected in the norms and values espoused by its political leaders and their willingness to pass and implement legal measures.
    Keywords: child labour, history, Portugal
    Date: 2007
  16. By: Gold, David
    Abstract: In October of 2003, then Defense Secretary Donald Rumsfeld wrote a memo to his top advisers asking how we would know whether the US was winning the Global War on Terror. This question may have been mis-timed but it was perfectly appropriate. In this paper, I use the framework of cost-benefit analysis to identify some of the issues that would need to be addressed in order to answer Rumsfeld’s question. The most difficult issue is that there is no accepted definition as to what constitutes victory, or success, so there is no way to identify the ultimate benefits. Available evidence does suggest that while there are numerous identifiable sources of costs, it is far less clear where the benefits are located. The conclusion, necessarily qualitative in nature, is that the costs have been many and the benefits few.
    JEL: H56
    Date: 2007–04

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.