New Economics Papers
on Business, Economic and Financial History
Issue of 2008‒03‒25
fifteen papers chosen by

  1. The Industrial Revolution in Miniature: The Spinning Jenny in Britain, France, and India By Robert C. Allen
  2. Pushing Wheat: Why Supply Mattered for the American Grain Invasion of Britain in the Nineteenth Century By Paul Sharp
  3. Financial Dependence and Firm Survival in Interwar Britain By David Chambers
  4. War and Endogenous Democracy By Ticchi, Davide; Vindigni, Andrea
  5. The historical foundations of the narcotic drug control regime By Buxton, Julia
  6. Coercion, Culture and Debt Contracts: The Henequen Industry in Yucatan, Mexico, 1870-1915 By Lee Alston; Shannan Mattiace; Tomas Nonnenmacher
  7. Adam Smith's stages of history By Anthony Brewer
  8. Agricultural policies in Bulgaria in post Second World War years By Bachev, Hrabrin
  9. This Time is Different: A Panoramic View of Eight Centuries of Financial Crises By Carmen M. Reinhart; Kenneth S. Rogoff
  10. Lost in Translation: Interpreting the Brazilian Electric Power Privatisation Failure. By Sunil Tankha
  11. A interação entre universidades e empresas em perspectiva histórica no Brasil By Wilson Suzigan; Eduardo da Motta e Albuquerque
  12. Concentration in the Belgian brewing industry and the Breakthrough of Lager in the interwar years By Peter Van Der Hallen
  13. Governing the Governors: A Clinical Study of Central Banks By Frisell, Lars; Roszbach, Kasper; spagnolo, giancarlo
  14. The Mutation Of The British Credit Union Movement: A Critical Approach To Its Bankalisation Process By Michael Handrinos; Konstantinos Nikolopoulos
  15. Qualifying Religion: The Role of Plural Identities for Educational Production By Timo Boppart; Josef Falkinger; Volker Grossmann; Ulrich Woitek; Gabriela Wüthrich

  1. By: Robert C. Allen
    Abstract: This paper uses the adoption and invention of the spinning jenny as a test case to understand why the industrial revolution occurred in Britain in the eighteenth century rather than in France or India. It is shown that wages were much higher relative to capital prices in Britain than in other countries. Calculation of the profitability of adopting the spinning jenny shows that it was profitable in Britain but not in France or in India. Since the jenny was profitable to use only in Britain, it was only in Britain that it was worth incurring the costs necessary to develop it. That is why the jenny was invented in Britain but not elsewhere. Irrespective of the quality of their institutions or the progressiveness of their cultures, neither the French nor the Indians would have found it profitable to mechanize cotton production in the eighteenth century.
    Keywords: Industrial Revolution, Invention, Technological Change, Great Divergence
    JEL: N63 N65 N73 N75 O14 O31 O33
    Date: 2007
  2. By: Paul Sharp (Department of Economics, University of Copenhagen)
    Abstract: This paper documents the evolution of variables central to understanding the creation of an Atlantic Economy in wheat between the US and the UK in the nineteenth century. The cointegrated VAR model is then applied to the period 1838-1913 in order to find long-run relationships between these variables. The main result is that explanations for the expansion of trade based on falling barriers to trade need to be augmented by another factor: the expansion of US supply. This implies that the growth of the Atlantic Economy cannot wholly be attributed to the decline in transportation costs, as is usually considered to be the case.
    Keywords: grain invasion; wheat; globalization
    JEL: C5 F1 N7
    Date: 2008–03
  3. By: David Chambers
    Abstract: Was the London Stock Exchange (LSE) little more than a Dickensian den of speculation, or did it make a contribution to industrial development in Interwar Britain? The interwar stock market laboured under problems of weak disclosure, inadequate investor protection and ineffective underwriting. New manufacturing industries were the most vulnerable to resulting asymmetric information problems. Drawing on a new database of IPOs on the London Stock Exchange between 1919 and 1938, I conclude that new manufacturing firms were finance-constrained. Consistent with the Rajan-Zingales financial dependence hypothesis, this result reflects the weak interwar institutional environment. The disastrous IPO survival rates of the late 1920s provide further evidence of this weak environment. Yet, when issue activity rebounded strongly in the following decade, a dramatic improvement in survival ensued, due, in part, to the efforts of the LSE. This was an early example of the "light touch" regulatory approach for which London has subsequently become renowned.
    Keywords: IPOs, Survival, Regulation, Investment
    JEL: G3 G24 N2 L26
    Date: 2007
  4. By: Ticchi, Davide (University of Urbino); Vindigni, Andrea (Princeton University)
    Abstract: Many episodes of extension of franchise in the 19th and especially in the 20th century occurred during or in the aftermath of major wars. Motivated by this fact, we offer a theory of political transitions which focuses on the impact of international conflicts on domestic political institutions. We argue that mass-armies, which appeared in Europe after the French Revolution, are an effective military organization only if the conscripted citizens are willing to put effort in fighting wars, which in turn depends on the economic incentives that are provided to them. The need to provide such incentives implies that an oligarchy adopting a mass-army may voluntarily decide to promise some amount of income redistribution to its citizens, conditionally on satisfactory performance as soldiers. When the elite cannot credibly commit to provide an incentive-compatible redistribution, they may cope with the moral hazard problem of the citizens-soldiers only by relinquishing political power to them through the extension of franchise. This is because democracy always implements a highly redistributive fiscal policy, which makes fighting hard incentive-compatible for the citizens-soldiers. We show that a transition to democracy is more likely to occur when the external threat faced by an incumbent oligarchy is in some sense intermediate. A very high external threat allows the elite to make credible commitments of future income redistribution in favor of the citizens, while a limited external threat makes optimal for the elite not making any (economic or political) concession to the masses. Some historical evidence consistent with our theory is also provided.
    Keywords: autocracy, democracy, wars, redistribution
    JEL: P16 H11
    Date: 2008–03
  5. By: Buxton, Julia
    Abstract: This paper outlines the institutional history of the international narcotic drug control regime. It details the evolution of the control system, from its foundations at the beginning of the twentieth century - a period of mass, unregulated narcotic drug use - to the current period. The paper argues that the contemporary control model is ill-positioned to address the dynamic and rapidly changing nature of the global narcotics trade. The persistence of anachronistic guiding first principles, specifically the utopian idea of pr ohibition, is identified as the key impediment to the adoption of a more humane and effective policy approach. But while there is growing pressure for a revision of founding ideas, this is not supported by a host of powerful actors that includes the United States.
    Keywords: Crime and Society,Post Conflict Reconstruction,Alcohol and Substance Abuse,Pharmaceuticals & Pharmacoeconomics,Pharmaceuticals Industry
    Date: 2008–03–01
  6. By: Lee Alston; Shannan Mattiace; Tomas Nonnenmacher
    Abstract: While most contemporary historians agree that the use of debt peonage as a coercive labor contract in Mexico was not widespread, scholars still concur that it was important and pervasive in Yucatan state during the henequen boom of the late 19th and early 20th centuries. The henequen boom concurred with the long rule of Porfirio Díaz (1876-1910), under whose watch property rights were reallocated through land laws, and Mexico’s economy became much more closely tied to the United States. In the Yucatan, the accumulation of debts by peons rose as hacendados sought to attract and bond workers to match the rising U.S. demand for twine. We examine the institutional setting in which debt operated and analyze the specific functions of debt: who got it, what form it took, and why it varied across workers. We stress the formal and informal institutional contexts within which hacendados and workers negotiated contracts.
    JEL: J33 N16 N36 N56 O54 Q15
    Date: 2008–03
  7. By: Anthony Brewer
    Abstract: The purpose of this paper is to examine Smith's four stages theory of history as an account of economic and social development, with an emphasis on the arguments and evidence he used to support it. In his biographical account of Smith's life, his friend Dugald Stewart described Smith’s method as 'conjectural history', initiating a debate which has continued ever since. Stewart meant that Smith used (informed) conjecture to fill the unavoidable gaps in the historical evidence, though hostile commentators have interpreted it as saying that Smith simply ignored the facts. This paper sets Smith's account alongside the evidence available to him to try to establish how much of it is pure speculation, unconstrained by historical evidence, and how much is rather a matter of interpreting evidence which can never be complete, as any historian is bound to do. It emerges that Smith did not (usually) neglect or ride roughshod over the evidence as it was available to him, but rather that evidence about some aspects and periods of history simply did not then exist, leaving much in his account that is indeed pure conjecture. The focus of the paper is on Smith, not on contemporaries or predecessors who argued a similar case. It deals with the substance of Smith's case, not with priority.
    Keywords: Adam Smith, history, four stages, conjectural history
    JEL: B12
    Date: 2007–10
  8. By: Bachev, Hrabrin
    Abstract: This paper analyzes evolution, implementation and impacts of state agricultural policies in Bulgaria during post Second World War years now. Firstly, it presents agricultural policies development during 1950s and 1960s (post war nationalization, cooperation of peasants, central planning and price control, support to agriculture) and its impacts on farming modernization and improvement of peasants welfare. Second, it analyzes reforms in 1970s and 1980s (concentration of farming in large agro-industrial complexes, experimentations with “economic” mechanisms of governance) and their effects on agriculture. Third, it evaluates policies during post-communist transition and EU integration, and their consequences for agricultural development.
    Keywords: State agricultural policies; impacts on agriculture; Post Second World War; Communist system; post-communist transition; Bulgaria
    JEL: N54 Q18
    Date: 2008–03
  9. By: Carmen M. Reinhart; Kenneth S. Rogoff
    Abstract: This paper offers a “panoramic†analysis of the history of financial crises dating from England's fourteenth-century default to the current United States sub-prime financial crisis. Our study is based on a new dataset that spans all regions. It incorporates a number of important credit episodes seldom covered in the literature, including for example, defaults in India and China. As the first paper employing this data, our aim is to illustrate some of the broad insights that can be gleaned from such a sweeping historical database. We find that serial default is a nearly universal phenomenon as countries struggle to transform themselves from emerging markets to advanced economies. Major default episodes are typically spaced some years (or decades) apart, creating an illusion that "this time is different" among policymakers and investors. A recent example of the "this time is different" syndrome is the false belief that domestic debt is a novel feature of the modern financial landscape. We also confirm that crises frequently emanate from the financial centers with transmission through interest rate shocks and commodity price collapses. Thus, the recent US sub-prime financial crisis is hardly unique. Our data also documents other crises that often accompany default: including inflation, exchange rate crashes, banking crises, and currency debasements.
    JEL: E6 F3 N0
    Date: 2008–03
  10. By: Sunil Tankha
    Abstract: Did Latin American privatisation polices fail because of flawed implementation of fundamentally sound policies or because privatisation policies were themselves seriously flawed? Using the Brazilian electric power reforms as a narrative tool, this paper examines the causal chain assumed by large-scale privatisation policies implemented as part of structural reform and adjustment programmes. The paper concludes that many privatisation policies and the economic stabilisation programmes within which they were embedded were not mutually reinforcing as policymakers had expected and that in their application, much of what privatisation theories claimed was lost in translation.
    Keywords: Brazil, privatisation, electric power, infrastructure
    Date: 2008–02
  11. By: Wilson Suzigan (Unicamp); Eduardo da Motta e Albuquerque (Cedeplar-UFMG)
    Abstract: The interaction between firms and universities in Brazil is very weak. The successful “points of interaction” between science and technology are scarce and localized. This paper investigates the historical roots of this pattern of interaction. The hypothesis of this paper suggests this pattern of interaction could be explained by the combination between, first, the late beginning of the formation of universities and research institutes (circa 1808) and, second, the late industrialization. Furthermore, the successful points of interaction are products of long term processes of institutional building and systematic and persistent long term investments.
    Keywords: interaction between universities and firms, historical roots, science, technology
    JEL: N O3
    Date: 2008–03
  12. By: Peter Van Der Hallen
    Date: 2008–03
  13. By: Frisell, Lars (Financial Stability Department, Central Bank of Sweden); Roszbach, Kasper (Research Department, Central Bank of Sweden); spagnolo, giancarlo (University of Rome)
    Abstract: We study the specific corporate governance problems of central banks in their complex role of inflation guardians, bankers’ banks, financial industry regulators/supervisors and, in some cases, competition authorities and deposit insurance agencies. We review the current institutional arrangements of a number of central banks, e.g. formal objectives, ownership, board and governor appointment rules, term limits and compensation, using both existing surveys and newly collected information. Research on central bank governance appears to have focused almost only on their monetary policy task. As shown by the sub-prime loan market turmoil, central banks play a crucial role in financial markets not only in setting monetary policy, but also in ensuring their stability. In this paper, we contrast the current governance practices at central banks with the structures suggested in the corporate governance literature. Our analysis highlights a number of specific issues that appear to have been unsatisfactorily addressed by existing research, such as the incentive structure for governors and board members, the balance between central banks’ multiple objectives and the need for term limits.
    Keywords: accountability; bank regulation; board structure; central banks; corporate governance; central bank independence; governor remuneration; term limits
    JEL: E58 G18 G34 G38
    Date: 2008–03–01
  14. By: Michael Handrinos; Konstantinos Nikolopoulos
    Abstract: Credit Unions in the United Kingdom had their custody transferred in 2002 from the Registry of Friendly Societies under the Financial Services Authority. This paper examines the reasons why such a move may eventually lead to the mutation of the British Credit Union movement from small co-operative financial organisations to medium-sized banks (the “bankalisation” process) in order to cover the de-mutualisation gap that was left in the financial market in the 1980s when most of the Building Societies became Public Limited Companies.
    Keywords: Bankalisation, Credit Unions, Financial Services Authority, Organisational change and transformation.
    Date: 2008
  15. By: Timo Boppart; Josef Falkinger; Volker Grossmann; Ulrich Woitek; Gabriela Wüthrich
    Abstract: This paper examines the role of religious denomination for human capital formation. We employ a unique data set which covers, inter alia, information on numerous measures of school inputs in 169 Swiss districts for the years 1871/72, 1881/82 and 1894/95, marks from pedagogical examinations of conscripts (1875-1903), and results from political referenda to capture conservative or progressive values in addition to the cultural characteristics language and religion. Catholic districts show on average significantly lower educational performance than Protestant districts. However, accounting for other sociocultural characteristics qualifies the role of religion for educational production. The evidence suggests that Catholicism is harmful only in a conservative milieu. We also exploit information on absenteeism of pupils from school to separate provision of schooling from use of schooling.
    Keywords: Culture; Educational production, Plural identity, Religious denomination, School inputs
    JEL: I20 H52 O10 N33
    Date: 2008–03

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