New Economics Papers
on Business, Economic and Financial History
Issue of 2009‒03‒07
fourteen papers chosen by

  1. History without Evidence: Latin American Inequality since 1491 By Jeffrey G. Williamson
  2. Commodity Market Disintegration in the Interwar Period By William Hynes, David S Jacks and Kevin H. O’Rourke
  3. A comparison of the processes of institutionalisation of political economy in Spain and Italy (1860-1900) By F. Javier San Julian Arrupe
  4. Old World versus New World: the origins of organizational diversity in the international wine industry, 1850-1914 By James Simpson
  5. Commodity Price Volatility and World Market Integration since 1700 By David S. Jacks, Kevin H. O'Rourke and Jeffrey G. Williamson
  6. The Myth of the Frontier By Camilo García-Jimeno; James A. Robinson
  7. Ottoman De-Industrialization 1800-1913: Assessing the Shock, Its Impact and the Response By Sevket Pamuk; Jeffrey G. Williamson
  8. The Past, Present and Future of Industrial Policy in India: Adapting to the Changing Domestic and International Environment By Ajit Singh
  9. Australian and American tariffs policies: do they rock or tango? By Cassette, Aurélie; Farvaque, Etienne
  10. Measuring Our Ignorance, One Book at a Time: New Indicators of Technological Change, 1909-1949 By Michelle Alexopoulos; Jon Cohen
  11. Cigarette Money and Black Market Prices around the 1948 German Miracle By Vincent Bignon
  12. The Media is the Measure: Technical change and employment, 1909-49 By Michelle Alexopoulos; Jon Cohen
  13. "Did US Safeguards Resuscitate Harley-Davidson in the 1980s?" By Taiju Kitano; Hiroshi Ohashi
  14. The first global financial crisis of the 21st century,Part II: Introduction By Reinhart, Carmen; Felton, Andrew

  1. By: Jeffrey G. Williamson
    Abstract: Most analysts of the modern Latin American economy hold to a pessimistic belief in historical persistence -- they believe that Latin America has always had very high levels of inequality, suggesting it will be hard for modern social policy to create a more egalitarian society. This paper argues that this conclusion is not supported by what little evidence we have. The persistence view is based on an historical literature which has made little or no effort to be comparative. Modern analysts see a more unequal Latin America compared with Asia and the rich post-industrial nations and then assume that this must always have been true. Indeed, some have argued that high inequality appeared very early in the post-conquest Americas, and that this fact supported rent-seeking and anti-growth institutions which help explain the disappointing growth performance we observe there even today. This paper argues to the contrary. Compared with the rest of the world, inequality was not high in pre-conquest 1491, nor was it high in the postconquest decades following 1492. Indeed, it was not even high in the mid-19th century just prior Latin America’s belle époque. It only became high thereafter. Historical persistence in Latin American inequality is a myth.
    JEL: D3 N16 N36 O15
    Date: 2009–03
  2. By: William Hynes, David S Jacks and Kevin H. O’Rourke
    Abstract: Using data collected by the International Institute of Agriculture, we document the disintegration of international commodity markets between 1913 and 1938. There was dramatic disintegration during World War I, gradual reintegration during the 1920s, and then a very substantial disintegration after 1929. The period saw the unravelling of a great many of the integration gains of the 1870-1913 period. While increased transport costs certainly help to explain the wartime disintegration, they cannot explain the post-1929 increase in trade costs. Protectionism seems the most likely alternative candidate.
    Date: 2009–02–26
  3. By: F. Javier San Julian Arrupe (Universitat de Barcelona)
    Abstract: The institutionalisation of political economy, this is, the processes through which political economy turned into a scholarly discipline, has become a field of increasing interest in the realm of the history of economic thought. The analysis of the evolution of these processes has been made through the study of the presence and significance of political economy in some key institutions, considered the pillars of the diffusion of economics in Western societies in the second half of the 19th century and first decades of the 20th: universities, economic associations, economic periodical publications and the national parliaments. This paper presents a comparison between the development of the process of institutionalisation of political economy in Spain and Italy, through the study of the presence of political economy in the aforementioned set of institutions in both countries in the period 1860-1900. Its aim is to assess the existence of a common path in the development of this process in both countries. This would be a starting point in order to test the existence of a model of institutionalisation of economics in this period.
    Keywords: parliament, italy, university, economic societies, institutionalisation, economic press, political economy, spain
    JEL: N23 N13 N01 B19
    Date: 2009
  4. By: James Simpson
    Abstract: Wine production in Europe today is dominated by small family vineyards and cooperative wineries, while in the New World viticulture and viniculture is highly concentrated and vertically integrated. This paper argues that these fundamental organizational differences appeared from the turmoil in wine markets at the turn of the twentieth century. As technological change endangered existing rents, growers, wine-makers, and merchants lobbied governments to introduce laws and create new institutions that regulated markets in their favor. The political voice and bargaining power of the economic agents varied greatly both within, and between, countries, leading to the introduction of very different policies.
    Keywords: Wine history, Farm organization, Vertical co-ordination, Agricultural commodity chains, Cooperatives, Appellations
    JEL: L14 N51 Q13
    Date: 2009–02
  5. By: David S. Jacks, Kevin H. O'Rourke and Jeffrey G. Williamson
    Abstract: Poor countries are more volatile than rich countries, and we know this volatility impedes their growth. We also know that commodity price volatility is a key source of those shocks. This paper explores commodity and manufactures price over the past three centuries to answer three questions: Has commodity price volatility increased over time? The answer is no: there is little evidence of trend since 1700. Have commodities always shown greater price volatility than manufactures? The answer is yes. Higher commodity price volatility is not the modern product of asymmetric industrial organizations – oligopolistic manufacturing versus competitive commodity markets – that only appeared with the industrial revolution. It was a fact of life deep into the 18th century. Does world market integration breed more or less commodity price volatility? The answer is less. Three centuries of history shows unambiguously that economic isolation caused by war or autarkic policy has been associated with much greater commodity price volatility, while world market integration associated with peace and pro-global policy has been associated with less commodity price volatility. Given specialization and comparative advantage, globalization has been good for growth in poor countries at least by diminishing price volatility. But comparative advantage has never been constant. Globalization increased poor country specialization in commodities when the world went open after the early 19th century; but it did not do so after the 1970s as the Third World shifted to labor-intensive manufactures. Whether price volatility or specialization dominates terms of trade and thus aggregate volatility in poor countries is thus conditional on the century.
    Date: 2009–02–26
  6. By: Camilo García-Jimeno; James A. Robinson
    Abstract: One of the most salient explanations for the distinctive path of economic and political development of the United States is captured by the 'Frontier (or Turner) thesis'. Turner argued that it was the presence of the open frontier which explained why the United States became democratic and, at least implicitly, prosperous. In this paper we provide a simple test of this idea. We begin with the contradictory observation that almost every Latin American country had a frontier in the 19th century as well. We show that while the data does not support the Frontier thesis, it is consistent with a more complex 'conditional Frontier thesis.' In this view, the effect of the frontier is conditional on the way that the frontier was allocated and this in turn depends on political institutions at the time of frontier expansion. We show that for countries with the worst political institutions, there is a negative correlation between the historical extent of the frontier and contemporary income per-capita. For countries with better political institutions this correlation is positive. Though the effect of the frontier on democracy is positive irrespective of initial political institutions, it is larger the better were these institutions. In essence, Turner saw the frontier as having positive effects on development because he already lived in a country with good institutions.
    JEL: N0
    Date: 2009–03
  7. By: Sevket Pamuk; Jeffrey G. Williamson
    Abstract: India and Britain were much bigger players in the 18th century world market for textiles than was Egypt, the Levant and the core of the Ottoman Empire, but these eastern Mediterranean regions did export carpets, silks and other textiles to Europe and the East. By the middle of the 19th century, they had lost most of their export market and much of their domestic market to globalization forces and rapid productivity growth in European manufacturing. Other local industries also suffered decline, and these regions underwent de-industrialization as a consequence. How different was Ottoman experience from the rest of the poor periphery? Was de-industrialization more or less pronounced? Was the terms of trade shock bigger or smaller? How much of Ottoman de-industrialization was due to falling world trade barriers -- ocean transport revolutions and European liberal trade policy, how much due to factory-based productivity advance in Europe, how much to declining Ottoman competitiveness in manufacturing, how much to Ottoman railroads penetrating the interior, and how much to Ottoman policy? The paper uses a price-dual approach to seek the answers. It documents trends in export and import prices, relative to each other and to non-tradables, as well as to the unskilled wage. The impact of globalization, European productivity advance, Ottoman wage costs and policy are assessed by using a simple neo-Ricardian three sector model, and by comparison with what was taking place in the rest of the poor periphery.
    JEL: F1 N7 O2
    Date: 2009–03
  8. By: Ajit Singh
    Abstract: In the post-World War II period India was probably the first non-communist developing country to have instituted a full-fledged industrial policy. The purpose of the policy was to co-ordinate investment decisions both in the public and the private sectors and to seize the 'commanding heights' of the economy by bringing certain strategic industries and firms under public ownership. This classical state-directed industrialisation model held sway for three decades, from 1950-1980. The model began to erode in the 1980s. Following a serious external liquidity crisis in 1991 the model was fundamentally changed. Indian industrial policy in the period 1950 to 1980, as embodied in its five-year plans, has long been the subject of intense criticism from the powerful neo-liberal critics of the country's development. In their view it was the change away from India's traditional industrial policy in 1991 towards liberalisation, de-regulation, and market orientation that ushered in a new era of faster economic growth. This paper takes a wide view of industrial policy, emphasising the government's continuing co-ordinating role in various spheres. It regards the institution of the Planning Commission as a major benefit for the country particularly as its role in formulating industrial policy in the narrow sense and in guiding India's ongoing industrial revolution in the broader sense is still widely accepted by the mainstream political parties of the left and the right (for example, Bhartiya Janata Party, Indian People's Party). The paper suggests that industrial policy and planned economic development did not come to an end with the deregulation of India's traditional investment regime in the 1980s and 1990s. Industrial policy has continued in a different form during the period, facing an agenda of new issues and an updating of older ones. The analysis of this paper suggests that today a central challenge for the Planning Commission is to exploit India's lead in ICT and its `institutional surplus' (democracy, common law legal heritage) to raise the current 8 per cent trend rate of growth to double-digit numbers while maintaining equitable distribution of the fruits of economic progress. To do so, India requires a somewhat different industrial policy than that pursued in the Nehru-Mahalanobis era, or that has been followed since then.
    Keywords: Indian Planning Commission and industrial policy, institutional surplus, ICT
    Date: 2008–12
  9. By: Cassette, Aurélie; Farvaque, Etienne
    Abstract: This paper disentangles between two hypotheses on the determinants of Australia's and the US' average tariffs levels. Relying on historical data that covers a century (1904 to 2005), it is first shown that a break in the series occurs in 1947, forcing to separate the data into two sub-periods (before and after the 1947 break). The results permit to distinguish a "rock" and a "tango" regime. The first designates the period where one country (the US) has a stronger influence on the other, while the second indicates that, after 1947, stronger reciprocal inter-relations have to be taken into account.
    Keywords: Australia; United States; Trade Policy; Tariffs
    JEL: C32 F13 F14 P16
    Date: 2009–02–19
  10. By: Michelle Alexopoulos; Jon Cohen
    Abstract: We present new indicators of U.S. technological change for the period 1909-49 based on information in the Library of Congress’ catalogue. We use these indicators to estimate the connections between technological change and economic activity, and to investigate the relationship between fluctuations in innovative activity and the Great Depression. Although we do find links between technological change, output and productivity, our results suggest that the slowdown in technological progress in the early 1930s did not contribute significantly to the Great Depression. On the other hand, the remarkable acceleration in innovations after 1934 did play a role in the recovery.
    Keywords: Technical Change, Productivity, the Great Depression
    JEL: E3 O3 O4 N1
    Date: 2009–02–23
  11. By: Vincent Bignon
    Abstract: This paper is an empirical study of the distribution of black prices among 120 Bavarian locations at two dates, the beginning of July, 1947 and the end of June, 1948. It shows huge differences in the liquidity of those goods either when measured with the coefficient of variation or the number of locations in which those goods were traded. The main finding is that liquidity of cigarette was very high either when measured by the coefficient of variation and or the number of counties that traded them. This made them special, even when compared with a pure fiat object such as the US dollar. Consistently with the insights of the modern theory of money, the high liquidity of cigarettes is indicative of its use as money.
    Date: 2009
  12. By: Michelle Alexopoulos; Jon Cohen
    Abstract: Difficulties in sorting out the empirical relationship between technical change and employment is attributable, at least in part, to the shortcomings associated with traditional measures of the former. In this paper, we use new indicators of technical change that we believe resolve many issues associated with other methods of identifying technology shocks, and use them to explore the impact of technical change on employment from 1909-49. The payoff to this effort is substantial for at least three reasons. First, it sheds light on the role of technology shocks in cyclical fluctuations during this period, second, it informs business cycle model selection (New Keynesian vs. Real Business Cycle), and, third, it contributes to our understanding of the part played by the New Deal Policies in the recovery from the Great Depression.
    Keywords: Business Cycles; Technical Change; Great Depression; Unemployment
    JEL: E2 E3 N1 O3
    Date: 2009–02–23
  13. By: Taiju Kitano (National Graduate Institute for Policy Studies); Hiroshi Ohashi (Faculty of Economics, University of Tokyo)
    Abstract: This paper examines US safeguards applied to the motorcycle market in the 1980s. After receiving temporary protection by means of a maximum tariff of over 45%, Harley-Davidson sales recovered dramatically. Simulations, based on structural demand and supply estimates, indicate that while safeguard tariffs did benefit Harley-Davidson, they only account for a fraction of its increased sales. This is primarily because consumers perceived that Harley-Davidson and Japanese large motorcycles were poorly matched substitutes for each other. Our results provide little evidence that safeguard provisions triggered restructuring in Harley-Davidson.
    Date: 2009–02
  14. By: Reinhart, Carmen; Felton, Andrew
    Abstract: Sadly, our previous compilation of VoxEU columns, ‘The First Global Financial Crisis of the 21st Century,’ was not the last word on the subject. Since the publication of that volume in June 2008, the global crisis has both deepened and widened. The industrial world has seen the largest bank failures in its history, and many governments have intervened in the financial system in a manner that would once have been unthinkable. Wall Street and the City of London, along with most other financial centers, have been changed forever. Many storied financial firms have failed or been merged away, and others are left with significant ownership positions of national governments. The economy of Iceland has suffered a collapse just as sizable as any of Latin America or East Asia during the last few decades. Vox authors have kept up their prolific pace of commenting on unfolding events. In keeping with the mission of Vox, columnists both applied existing economic research to understand events and pointed the way to new avenues for research. These articles, it has to be understood, were written ‘in the moment’ over the past six months and so incorporate to a varying extend the history we have lived through. To help place individual contributions within this historical sequence, an appendix updates the timeline of events from our June publication through December.
    Keywords: financial crisis monetary policy bank failures contagion
    JEL: F3 E5 E6
    Date: 2009–02–22

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