New Economics Papers
on Business, Economic and Financial History
Issue of 2009‒01‒17
seventeen papers chosen by

  1. Revisiting the psychic distance paradox: international retailing in China in the long run (1840-2005 By Andrew Godley; Haiming Hang
  2. Branding, Marketing and Product Innovation: The attempts of British Banks to Reach Consumers in the Interwar Period By Lucy Newton
  3. Physical stature and its interpretation in nineteenth century New Zealand By Kris Inwood; Les Oxley; Evan Roberts
  4. Did Railroads Induce or Follow Economic Growth? Urbanization and Population Growth in the American Midwest, 1850-60 By Jeremy Atack; Fred Bateman; Michael Haines; Robert A. Margo
  5. Did Improvements in Household Technology Cause the Baby Boom? Evidence from Electrification, Appliance Diffusion, and the Amish By Martha J. Bailey; William J. Collins
  6. When a good science base is not enough to create competitive industries: Lockin and inertia in Russian systems of innovation By Irina Jormanainen; Rajneesh Narula
  7. Advertising, promotion, and the competitive advantage of interwar UK department stores By Peter Scott; James Walker
  8. Wages and Human Capital in the U.S. Financial Industry: 1909-2006 By Thomas Philippon; Ariell Reshef
  9. Growth and Inequality: The Case of Indonesia, 1960-1997 By van der Eng, Pierre
  10. Italian Public debt since national unification. A reconstruction of the time series By Maura Francese; Angelo Pace
  11. Sterling in crisis: 1964–1967 By Michael D. Bordo; Ronald MacDonald; Michael J. Oliver
  12. The Aftermath of Financial Crises By Carmen M. Reinhart; Kenneth S. Rogoff
  13. On the Role of Policy Interventions in Structural Change and Economic Development: The Case of Postwar Japan By Julen ESTEBAN-PRETEL; SAWADA Yasuyuki
  14. The structure of recent first-union formation in Romania By Jan M. Hoem; Dora Kostova; Aiva Jasilioniene; Cornelia Muresan
  15. National Income in Domesday England By James Walker
  16. The Boone-indicator: Identifying different regimes of competition for the American Sugar Refining Company 1890-1914 By Michiel van Leuvensteijn
  17. A major controversy: globalization or not? By Duduiala-Popescu, Lorena

  1. By: Andrew Godley (School of Management, University of Reading); Haiming Hang (School of Management, University of Reading)
    Abstract: This paper uses original research on the roles played by two sets of foreign entrants into Chinese retailing since the 1850s - the overseas Chinese entrants and western entrants - to explore the psychic distance paradox over the long run. It explains how the advantages of psychic closeness in Chinese retailing have always been important in reducing entry barriers, but that the increasing costs of technology have increased the significance of firm proprietary strengths in some formats, notably supermarkets, so reducing the relative importance of psychic closeness. The paper therefore illustrates how taking the long-term perspective enables more sophisticated conclusions to emerge. A cross sectional analysis of one sector – Chinese supermarkets – would confirm the psychic distance paradox; overseas Chinese have been unable to translate psychic closeness into superior performance. By contrast their historic performance in department stores and more recently in fashion chains has been superior to the format leaders. This long term perspective therefore suggests that the understanding of the psychic distance paradox needs to be moderated by additional conceptualisation.
    Keywords: Psychic Distance, China, International Retailing, Internationalisation Process
    Date: 2008
  2. By: Lucy Newton (Department of Management, University of Reading)
    Abstract: This paper considers the relationships of the ‘Big Five’ British clearing banks with their personal customers in the interwar period. British banks formed a cartel and dominated the market for domestic financial services from the early twentieth century onwards. This cartel, combined with government imposed restrictions upon lending, meant that banks were severely restrained in their ability to offer new products and consequently to distinguish themselves from their competitors. It also meant that consumers had limited choices in terms of financial service providers. In this environment, bank managements had to rely heavily upon building brand image and utilising marketing techniques in order to differentiate themselves and to attract customers. For many bankers such techniques were new and unpopular – they were not used to communicating with their customers. From the perspective of the consumer, the paper aims to examine if the adoption of such marketing, brand building and public relations efforts were successful or not. It draws upon sources from bank archives but also from newspapers and public inquiries in an attempt to gather both the perceptive of banks and of their customers. The paper presents an analysis of personal customers and their relationships with, and views of, British banks in order to build upon the growing literature concerned with corporations and their consumers.
    Date: 2008
  3. By: Kris Inwood; Les Oxley (University of Canterbury); Evan Roberts
    Abstract: During the late nineteenth century the physical stature of New Zealandborn men stagnated, despite an apparently beneficial public health environment and growth in per-capita incomes. Stature varied by social class, with professionals and men in rural occupations substantially taller than their peers. There is not enough evidence to show that the indigenous Maori population differed in height from men of European descent.
    Keywords: Physical stature; Height; Well-being; New Zealand Anthropometric history; Biological standard of living
    JEL: O56 I10 N37
    Date: 2008–12–24
  4. By: Jeremy Atack; Fred Bateman; Michael Haines; Robert A. Margo
    Abstract: For generations of scholars and observers, the "transportation revolution," especially the railroad, has loomed large as a dominant factor in the settlement and development of the United States in the nineteenth century. There has, however, been considerable debate as to whether transportation improvements led economic development or simply followed. Using a newly developed GIS transportation database we examine this issue in the context of the American Midwest, focusing on two indicators of broader economic change, population density and the fraction of population living in urban areas. Our difference in differences estimates (supported by IV robustness checks) strongly suggest that the coming of the railroad had little or no impact upon population densities just as Albert Fishlow concluded some 40 years ago. BUT, our results also imply that the railroad was the "cause" of midwestern urbanization, accounting for more than half of the increase in the fraction of population living in urban areas during the 1850s.
    JEL: N12 N71 O14 O18
    Date: 2009–01
  5. By: Martha J. Bailey; William J. Collins
    Abstract: More than a half century after its peak, the baby boom's causes remain a puzzle. A novel argument posits that rapid changes in household technology from 1940 to 1960 account for this large increase in fertility. We present new empirical evidence that is inconsistent with this claim. Rapid advances in household technology began long before 1940 while fertility declined, and differences and changes in appliance ownership and electrification in U.S. counties are negatively correlated with fertility rates from 1940 to 1960. Finally, the Amish, a group strictly limiting the use of modern technologies, experienced a coincident and sizable baby boom.
    JEL: E0 J1 N3
    Date: 2009–01
  6. By: Irina Jormanainen (Department of International Business, Helsinki School of Economics.); Rajneesh Narula (School of Management, University of Reading)
    Abstract: Despite a well-developed science and technology base and considerable industrial capacity during the soviet era, Russia has largely failed to create a competitive industrial sector despite two decades of transition. This paper seeks to understand why Russia has not succeeded despite having relatively favourable initial conditions. We develop an understanding of its innovation system and the interplay between the firm and the nonfirm sector. We argue that – in any economy - when political and economic regimes were rapidly reformed, there is considerable structural inertia associated with complex interdependencies between the state, domestic firms and the formal and informal institutions that bind them together. In the case of Russia, this inertia has resulted in a system-wide lock-in, and industrial enterprises continued to engage in routines that generated a suboptimal outcome. Market forces did not result in the western-style innovation system, but a hybrid one, with numerous features of the soviet system. A significant segment of industry maintains a Soviet-style dependence on ‘top-down’ supply-driven allocation of resources and a reliance on external (but domestic) network of sources for innovation and capital. At the same time, ‘new’ firms and industries have also evolved which undertake their own R&D, and utilise foreign sources of capital and technology, and at least partly determine their production and innovative activities on the basis on market forces.
    Keywords: innovation systems, R&D, Russia, inertia, institutions, lock-in, transition, competitiveness
    Date: 2008
  7. By: Peter Scott (Department of Management, University of Reading); James Walker (Department of Management, University of Reading)
    Abstract: Promotional activity proved key to the success of department stores in fending off competition from the expanding chain stores by drawing in customers to their large, central, premises. This paper uses a combination of quantitative and qualitative archival data to examine the promotional methods of interwar British department stores, variations in the promotional mix between types of store, and returns to promotional activities. A number of distinct regional promotional strategies are identified, shaped by variations in the types of consumer markets served. Meanwhile there was considerable policy convergence among stores towards using promotional activity primarily as a means of imprinting a strong institutionalrand image in the minds of the consuming public.
    Keywords: advertising, promotion, mail order, retailing, department stores
    Date: 2008
  8. By: Thomas Philippon; Ariell Reshef
    Abstract: We use detailed information about wages, education and occupations to shed light on the evolution of the U.S. financial sector over the past century. We uncover a set of new, interrelated stylized facts: financial jobs were relatively skill intensive, complex, and highly paid until the 1930s and after the 1980s, but not in the interim period. We investigate the determinants of this evolution and find that financial deregulation and corporate activities linked to IPOs and credit risk increase the demand for skills in financial jobs. Computers and information technology play a more limited role. Our analysis also shows that wages in finance were excessively high around 1930 and from the mid 1990s until 2006. For the recent period we estimate that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.
    JEL: G2 J2 J24 J3 O3 O32 O33 O51
    Date: 2009–01
  9. By: van der Eng, Pierre
    Abstract: This paper investigates whether the ‘Kuznets hypothesis’, that economic growth from low levels of GDP per capita is initially associated with an increase in income inequality and later followed by a decline in inequality, is supported by evidence for a less-developed country, Indonesia. The paper outlines the relevant features of the process of rapid growth and structural change, in particular industrialisation since the 1960s. It notes the possible consequences of this process for changes in income distribution, and draws on disparate sets of statistical data to trace trends in income inequality in Indonesia. The paper concludes that the evidence for Indonesia suggests an increase in inequality during the 1970s and a subsequent decrease of inequality until 1997. A comparison of the evidence with historical data for the UK and Japan suggests that income inequality in Indonesia was relatively low.
    Keywords: income inequality; Kuznets hypothesis; Indonesia; economic development
    JEL: D31 N35 O15 R12
    Date: 2009–01–14
  10. By: Maura Francese (Banca d'Italia); Angelo Pace (Banca d'Italia)
    Abstract: The paper presents the results of a reconstruction of the Italian public debt series since national unification. Computations use today’s statistical methodology to obtain a database consistent with the national accounts. The reference sector is general government, not the state sector, as in many previous studies; the definition refers to consolidated gross debt (within and across subsectors). The database includes monthly times series for overall debt and its breakdowns by instrument and subsector. Given their frequency and length, the new data might be a useful tool for economic historians and students of public economics. The work briefly presents the methodology and describes public debt developments over the last 150 years. Compared with previous data, the new series show higher debt average. The project is completed by a methodological annex in which sources and methods are described in more detail and by a database with monthly time series for the debt, its breakdown by instrument and subsector, and the consolidating items. All three components are available on the Bank of Italy website; in the future the series will be updated monthly and will remain available on the statistical section of the website.
    Keywords: public debt, economic history
    JEL: H63 N4
    Date: 2008–10
  11. By: Michael D. Bordo; Ronald MacDonald; Michael J. Oliver
    Abstract: We provide the first econometric study of foreign exchange market intervention for the UK during the sterling crises from 1964–1967. We use daily data on spot and forward dollar/sterling exchange rates and reserve movements which allows a more precise description of the loss of credibility during four currency crises. Reserve losses are consistent with exchange rate crises. External assistance given to sterling throughout this period shored up the reserves and allowed the sterling peg to be maintained.
    JEL: N1 N14 N2
    Date: 2009–01
  12. By: Carmen M. Reinhart; Kenneth S. Rogoff
    Abstract: This paper examines the depth and duration of the slump that invariably follows severe financial crises, which tend to be protracted affairs. We find that asset market collapses are deep and prolonged. On a peak-to-trough basis, real housing price declines average 35 percent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years. Not surprisingly, banking crises are associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls an average of over 9 percent, although the duration of the downturn is considerably shorter than for unemployment. The real value of government debt tends to explode, rising an average of 86 percent in the major post–World War II episodes. The main cause of debt explosions is usually not the widely cited costs of bailing out and recapitalizing the banking system. The collapse in tax revenues in the wake of deep and prolonged economic contractions is a critical factor in explaining the large budget deficits and increases in debt that follow the crisis. Our estimates of the rise in government debt are likely to be conservative, as these do not include increases in government guarantees, which also expand briskly during these episodes.
    JEL: E32 E44 F3 N20
    Date: 2009–01
  13. By: Julen ESTEBAN-PRETEL; SAWADA Yasuyuki
    Abstract: In this paper, we study the structural change occurring in Japan's post-World War II era of rapid economic growth. We use a two-sector neoclassical growth model with government policies to analyze the evolution of the Japanese economy in this period and to assess the role of such policies. Our model is able to replicate the empirical behavior of the main macroeconomic variables. Three findings emerge from our policy analysis. First, neither price and investment subsidies to the agricultural sector, nor industrial policy play a crucial role in the rapid postwar growth. Second, while a government subsidy for families in urban areas could have facilitated migration from the agricultural to the non-agricultural sector, such a policy would not have improved the overall performance of the Japanese economy. Finally, had there existed a labor migration barrier, the negative long-run level effect on output would have been substantial.
    Date: 2009–01
  14. By: Jan M. Hoem (Max Planck Institute for Demographic Research, Rostock, Germany); Dora Kostova (Max Planck Institute for Demographic Research, Rostock, Germany); Aiva Jasilioniene (Max Planck Institute for Demographic Research, Rostock, Germany); Cornelia Muresan (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: By European standards, consensual first unions have been rare in Romania, and they remain so even though their incidence has increased by a factor of almost five since the early 1960s. Rates of conversion of consensual unions into marriages have been cut in half over the same four decades or so, and marriage rates have declined by a similar factor since the fall of state socialism, which is more dramatic because this period is so much shorter. There have been strong ethnic differentials in union-entry rates in the country.
    Keywords: Romania
    JEL: J1 Z0
    Date: 2009–01
  15. By: James Walker (School of Management, University of Reading)
    Abstract: The Domesday Survey provides the first comprehensive national survey of any economy. The availability of two complementary data sources allows a direct estimate of Tenant-in-Chief’s lands from the Survey. By providing a means to identifying the extent of arable activity outside the demesne, as well as the extent that ploughs working on the lords estates were active in the peasant economy, we provide a transparent method of estimating the extent of non-seigniorial production. After incorporating a series of other elements valued in the Survey, and adding these to the seigniorial and non-seigniorial agricultural production estimates, we derive an estimate for the income of Domesday England in 1086. The findings are consistent with an important interpretation of the Domesday text proposed by Bridbury that is further developed conceptually. Furthermore, a ‘full capacity’ 1086 estimate, determined under differing assumptions concerning population, price, and climatic conditions, is compared against recent estimates for the earliest benchmark period circa 1300.
    Keywords: Domesday England, income, long-run economic change.
    Date: 2008
  16. By: Michiel van Leuvensteijn
    Abstract: Boone (2008) introduces a new theory based measure of competition, the so-called Boone-indicator. The indicator is based on the relationship between performance, in terms of profits, and efficiency, measured as marginal costs. Whether the indicator is able to correctly measure competition in practice is an unanswered question yet. In this paper, I provide empirical evidence that the Boone-indicator appropriately is measuring levels of competition. To this purpose, I follow a seminal paper by Genesove and Mullin (1998) where they show that the elasticity-adjusted Lerner index is able to identify regimes of price wars from nonprice wars by comparing the outcomes of this index with independent reports on the regimes of competition for the American sugar industry for the period 1890-1914. Using their data, I construct a proxy for profits. I calculate both the elasticity-adjusted Lerner index as the Boone-indicator for a single firm, the American Sugar Refining Company. Using the same data, I am able to demonstrate empirically that the Boone-indicator is better able to identify the different regimes of competition than the elasticity-adjusted Lerner index. The Boone-indicator, therefore, adds value to the insights provided by the elasticity-adjusted Lerner index. Several robustness checks are performed that show that the results are insensitive for alterations in the profit proxy.
    Keywords: competition, measures of competition, sugar industry
    JEL: D43 L13
    Date: 2008–12
  17. By: Duduiala-Popescu, Lorena
    Abstract: Globalization is today one of the phenomena discussed and contested at the same time, beach and speeches in terms of globalization are spread from the ordinary man in the street, and to speeches by political and academic level. It is surprising how a term that recently entered the vocabulary enjoys a popularity so great! And yet how much ambiguity in its use, sometimes attached sense of this term, how much emotional load associated with it! Globalization is an ambiguous phenomenon. Having to source and technological development, seeking efficiency in opening markets and interdependences economic globalization presents no danger negligible, relating in particular to undermine the sovereignty and national cohesion. Globalization is often presented as a peaceful revolution that leads to improved living standards and near religions and cultures, however, a number of voices shout its deep inegalitarian, especially from the perspective of developing countries, small businesses and normal individuals. So here's what variety of approaches, disputes, controversies, which contained many diverse and contradictory approaches are associated with this reality, which we feel and we are talking about and talking to hear every day: globalization.
    Keywords: globalization; hiperglobalization; skeptics and processors;the national economies
    JEL: F15 F50 F02 F01 F41 O52 P16
    Date: 2008–11–26

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