New Economics Papers
on Business, Economic and Financial History
Issue of 2009‒04‒13
twenty-one papers chosen by

  1. Organisational change and the computerisation of British and Spanish savings banks, circa 1965-1985 By Batiz-Lazo, Bernardo; Maixe-Altes, J. Carles
  2. Charles Feinstein (1932-2004), and British Historical National Accounts By Avner Offer
  3. The Building Society Promise: Building Societies and Home Ownership, C.1880–19131 By Luke Samy
  4. Sales and Advertising Rivalry in interwar US Department Stores By Peter Scott; James Walker
  5. To Take or to Make? Contracting for Legitimacy in the Emerging States of Twelfth-Century Britain By Leigh A. Gardner
  6. British Manual Workers: From Producers to Consumers, c. 1950–2000 By Avner Offer
  7. As the Microfinance Movement Grows It Encounters New Challenges and Opportunities By Richard Coleman
  8. Microfinance Mission Drift? By Beatriz Armendariz; Ariane Szafarz
  9. A historical reconstruction of the connections between the Viennese neopositivists and the American pragmatists: economic theory in the project for the International Encyclopaedia of Unified Science By Becchio Giandomenica
  10. A Dataset on Comparative Historical National Accounts, ca.1870-1950: A Time-Series Perspective By Smits, J.-P.; Woltjer, P.; Ma, D.
  11. The Rise and Fall of the "Normalarbeitsverhältnis" in Germany By Pierenkemper, Toni
  12. A Comparison of Real Output and Productivity for British and American Manufacturing in 1935 By Jong, H. de; Woltjer, P.
  13. An Input-Output Table for Germany and a New Benchmark for German Gross National Product in 1936 By Fremdling, R.; Staglin, R.
  14. The Finnish Great Depression: From Russia with Love By Yuriy Gorodnichenko; Enrique G. Mendoza; Linda L. Tesar
  15. Mr. Woodcroft and the Value of English Patents, 1617-1841 By Alessandro Nuvolari; Valentina Tartari
  16. The Really Good Buffalo Project: A ‘Values Added’ Product By Cumber, Carol J.; Nichols, Timothy; Rickerl, Diane
  17. Gender Roles and Medical Progress By Stefania Albanesi; Claudia Olivetti
  18. War Mobilization and the Great Compression By Carol S. Lehr
  19. Historical Calibration of a Water Account System By Timothy M Baynes; Graham M Turner; James West
  20. Business and Financial Method Patents, Innovation, and Policy By Bronwyn H. Hall
  21. The Riddle of the Great Pyramids By Randall Morck

  1. By: Batiz-Lazo, Bernardo; Maixe-Altes, J. Carles
    Abstract: In this article we explore organisational changes associated with the computarization of British savings banks while making a running comparison with developments in Spain. This international comparison addresses the evolution of the same organisational form in two distinct competitive environments in the late 20th century. Changes in regulation and technological developments (particularly applications of information technology) are said to be responsible for enhancing competitiveness of retail finance. Archival research on the evolution of savings banks helps to ascertain how, prior to competitive changes taking place, participants in bank markets had to develop capabilities to compete. Moreover, assess the response of collaborative agreements to opportunities opened by technological change (in particular resolve apparent scale disadvantages to contest bank markets). Of particular interest are choices made between applications of computer technology to redefine the relation between head office and retail branches as well as between staff at retail branches and customers.
    Keywords: comparative financial markets; United Kingdom; Spain; market structure; technological change; regulatory change; savings banks; banks; TSB; cajas de ahorro.
    JEL: N20 O33 N84
    Date: 2008–04–04
  2. By: Avner Offer (All Souls College, Oxford University)
    Abstract: The Meade and Stone approach to national accounting (first published for the UK in 1941) eventually provided the template for the United Nations System of National Accounts. Feinstein’s historical national accounts for the UK developed out of this project and built on its earlier contributions. He was the foremost constructor of historical accounts in the UK, and shared with other national accounting pioneers a pragmatic approach and a bias against neo-classical general equilibrium. He made important contributions to growth accounting and the measurement of standards of living, and also left his mark as a teacher and as an academic leader. His commitment to racial equality in South Africa preceded his academic career, and continued after his formal retirement.
    Date: 2008–06–02
  3. By: Luke Samy (Nuffield College University of Oxford)
    Abstract: Formed in the mid-nineteenth century, the building societies grew rapidly from their humble beginnings as localised ‘self-help’ organisations to become the dominant player in the house mortgage market by the inter-war period. Throughout the nineteenth and early twentieth centuries, the movement presented itself as a true champion of home ownership and thrift among the working classes, but historians of housing have generally downplayed the role that building societies played, or could have played, in furthering these aims. This paper examines the archival records of two London-based building societies to investigate empirically the extent to which these institutions helped to overcome financial exclusion and to foster home ownership before the First World War, a time when rental tenure was the norm. The results show that the case studies examined were not exclusively middle-class in their membership, with one of them in particular showing a genuine commitment to working-class owner- occupation by providing loans to both skilled and unskilled workers on easy repayment terms. Its success in doing so was based on its innovative agency network which it used to control the adverse selection and moral hazard problems involved in lending to lower-income groups.
    Date: 2008–10–02
  4. By: Peter Scott (Centre for International Business History Henley Business School at the University of Reading); James Walker (Centre for International Business History Henley Business School at the University of Reading)
    Abstract: Department stores represented one of the most advertising-intensive sectors of American inter-war retailing. Yet it has been argued that a competitive spiral of high advertising spending, to match the challenge of other local department stores, contributed to a damaging inflation of costs that eroded long-term competitiveness. We test these claims, using both qualitative archival data and establishment-level national data sets. Returns to stores’ advertising are shown to have fallen over the period, while own advertising led to retaliatory advertising by rival department stores, which substantially lowered returns on advertising dollars in the 1930s (but not the 1920s).
    Keywords: Department stores, Interwar U.S. economic history, Advertising, Marketing
    JEL: L81 M37 N82
    Date: 2009
  5. By: Leigh A. Gardner (Jesus College, University of Oxford)
    Abstract: The early twelfth century was notable for the centralization and consolidation of royal governance in the centre as well as the periphery of Europe. This paper presents a model of medieval kingship in which consent for the king’s rule is founded upon a network of bargains and agreements between the king and magnates who hold local power. The model is applied to the administration of Scotland under King David I (1124–1153). David I consolidated and expanded his authority by providing magnates who held local power with incentives to cooperate through the strategic distribution of revenue and provision of protection services, including the enforcement of property rights, dispute resolution and the facilitation of exchange. This theory is also used to explain Scotland’s appropriation of land in northern England following the death of Henry I of England in 1135, and its loss of the same territory after David I died in 1153.
    Date: 2008–11–02
  6. By: Avner Offer (All Souls College, Oxford)
    Abstract: A large majority of the labour force were manual workers in 1960. As voters, they had electoral power to pursue collective goods. As producers they were able to disrupt production. The majority left school with no qualifications. Their human capital consisted of skills specific to particular production processes. These became obsolete with de-industrialization, and with the large rise in secondary and higher education. Educated workers relied more on individual bargaining power, and less on collective goods. Casting workers as consumers rather than citizens or producers punished those with low purchasing power, it de-legitimized producer collective action and justified low wages. Poverty increased and relative wages fell. Rising productivity was partly offset by rising house prices and longer household working hours. Council-house sales enfranchised a minority and penalized the rest. The majority continued to identify as working class, but their culture was discredited by market liberalism and consumerism.
    Keywords: manual labour, human capital, skills, consumerism, housing, market liberalism
    Date: 2008–12–02
  7. By: Richard Coleman (Texas A&M University Kingsville's System Center San Antonio)
    Abstract: In the last few years, the microfinance movement has been widely recognized as a major weapon in the global fight against poverty. It has come to be seen as the means by which millions of the very poor have broken the cycle of poverty. By providing an alternative to a dependence on the local money-lender for capital, microfinance institutions have provided loans, mostly to women, to start new entrepreneurial ventures.This paper will examine the history of the microfinance movement, from its beginnings, to its current global popularity. In addition, the issues and problems caused by the very success in greater access to capital that the industry has long sought will also be examined. The not-for-profit business model traditionally employed by microfinance institutions is examined in comparison to the newer for-profit model favored by many. The advent of some microfinance institutions which charge what many view as exorbitant interest rates is also considered. Finally, the paper will attempt to answer the question of whether or not these changes represent a positive move or simply mission drift from the original concept.This paper was presented May 23, 2008 at the 18th International Conference of the International Trade & Finance Association at Universidade Nova de Lisboa in Lisbon, Portugal.
    Date: 2008–08–31
  8. By: Beatriz Armendariz (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and DULBEA, Université Libre de Bruxelles, Brussels.); Ariane Szafarz (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels, Harvard University and University College London.)
    Abstract: This paper sheds light on a poorly understood phenomenon in microfinance which is often referred to as a “mission drift”: A tendency reviewed by numerous microfinance institutions to extend larger average loan sizes in the process of scaling – up. We argue that this phenomenon is not driven by transaction cost minimization alone. Instead, poverty – oriented microfinance institutions could potentially deviate from their mission by extending larger loan sizes neither because of “progressive lending” nor because of “cross – subsidization” but because of the interplay between their own mission, the cost differentials between poor and unbanked wealthier clients, and region-specific characteristics pertaining the heterogeneity of their clientele. In a simple one-period framework we pin-down the conditions under which mission drift can emerge. Our framework shows that there is a thin line between mission drift and cross-subsidization, which in turn makes it difficult for empirical researchers to establish whether a microfinance institution has deviated from its poverty-reduction mission. This paper also suggests that institutions operating in regions which host a relatively small number of very poor individuals might be misleadingly perceived as deviating from their mission. Because existing empirical studies cannot tear apart between mission drift and cross-subsidization, these studies should not guide donors and socially responsible investors pertaining resource allocation across institutions offering financial services to the poor. The difficulty in tearing apart cross-subsidization and mission drift is discussed in light of the contrasting experiences between microfinance institutions operating in Latin America and South Asia.
    Keywords: microfinance, mission drift, poverty reduction, cross-subsidization
    JEL: F35 G21 G28 O54 O57
    Date: 2009–04
  9. By: Becchio Giandomenica (University of Turin)
    Abstract: Persuaded by the fact that the philosophical debate in Vienna during the 1930s deeply influenced the subsequent American developments of economic theory, my purpose is to reconstruct, from a historical and theoretical point of view, how Austrian interests in economics (which spread in the interwar period) moved to the USA, and what the subsequent developments were. From a historical point of view, I shall focus on the genesis of the International Encyclopaedia of Unified Science promoted by philosophers belonging to the Vienna Circle (Otto Neurath, Rudolph Carnap and Philipp Frank) and American pragmatists (John Dewey and, above all, Charles Morris) between 1938 and 1969. From a theoretical point of view, I shall focus on the development of economic theory within this project, which was regarded as the most important outcome of logical positivism or new empiricism, this being the common philosophical outlook that they shared. The aim of this paper is to show how the original meaning of economics (as formulated by Neurath) within the Vienna Circle was changed in its transition from Vienna to the USA (when the International Encyclopaedia was organized) and was finally radically transformed in the American context during the following decades.
    Date: 2009–04
  10. By: Smits, J.-P.; Woltjer, P.; Ma, D. (Groningen University)
    Abstract: This paper accompanies the Historical National Accounts datahub which presents an overview of the currently available studies on long-term economic growth across countries. Now that more and more detailed historical national accounts have become available, the Groningen Growth and Development Centre (GGDC) in collaboration with the Department of Economic History of the London School of Economics (LSE) has initiated a new research project aiming to enhance our knowledge on comparative economic performance. The basic idea of this datahub is to bring together the available, but fragmented, data on GDP at the industry level for all major economies and to standardise these series to make a consistent long run international comparison of output and productivity feasible. GDP data and their components are presented in local currencies, both at current as well as constant prices.
    Date: 2009
  11. By: Pierenkemper, Toni (University of Cologne)
    Abstract: The following paper attempts to trace the construction of the standard employment contract in Germany from the beginning of the 19th century onwards. It was from this point in time that wage labour slowly came into being and later on developed more broadly. At first, state regulations were implemented to protect the workforce against exploitation by industrial entrepreneurs (laws on working hours, trading regulations etc.). Later on, as the state grew wealthier, the opportunity arose to create a social insurance system, to protect working people against basic risks. Finally, workers' and entrepreneurs' organisations participated in the market and collectively agreed on regulations of employment relationships. Alongside the consolidation of the welfare state, this type of employment was reinforced in Germany in the 20th century and finally developed into the modern concept of the standard employment contract. However, due to the forces of globalization and the dynamics of capitalist market economies, it seems that the standard employment contract has turned into an obstacle in the way of modern economy’s progress. Its achievements are threatened in many ways: the future will seemingly be determined by increasing work flexibility, rising working hours, falling income and increasing unemployment rates, rendering the standard employment contract anachronistic and obsolete.
    Keywords: economic history, standard employment, Germany
    JEL: N33 N34
    Date: 2009–03
  12. By: Jong, H. de; Woltjer, P. (Groningen University)
    Abstract: The manufacturing productivity gap between the U.S. and the U.K. became much larger during the interwar period than existing estimates suggest. This paper presents a new estimate based on real value added and hours worked. First, a detailed benchmark comparison for 1935 is constructed using official industrial census reports. Second, structural shift methodology is applied to analyse productivity movements for industrial branches in the period 1900-1957. U.S. manufacturing shows high comparative levels and growth rates for chemicals and engineering. These results support revisionist accounts of Robert Gordon and Alexander Field on the Depression?s strengthening of American productivity leadership.
    Date: 2009
  13. By: Fremdling, R.; Staglin, R. (Groningen University)
    Abstract: This paper is based on the archival sources of the German industrial census of 1936. Originally, this census and its forerunner of 1933 had actually been designed by the German Imperial Statistical Office (StRA) to compile an input-output-table for Germany as a basis for managing the business cycle. In connection with rearmament, however, this endeavour was given up and instead, these data were used for constructing detailed material balance sheets, which served as a statistical basis for preparing the war. Based on these hitherto secret records and additional statistical information we have been busy to fulfil the original plan of the StRA of constructing the desired input-output table. Here we present an interim result covering the entire manufacturing sector in detail, agriculture and aggregate figures. The new benchmark for gross national product (GNP) with its components for the production and expenditure side deviates significantly from Hoffmann´s et al. well-known figures.
    Date: 2009
  14. By: Yuriy Gorodnichenko; Enrique G. Mendoza; Linda L. Tesar
    Abstract: During the period 1991-93, Finland experienced the deepest economic downturn in an industrialized country since the 1930s. We argue that the culprit behind this Great Depression was the collapse of Finnish trade with the Soviet Union, because it induced a costly restructuring of the manufacturing sector and a sudden, large increase in the cost of energy. We develop and calibrate a multi-sector dynamic general equilibrium model with labor market frictions, and show that the collapse of Soviet-Finnish trade can explain key features of Finland’s Great Depression. We also show that Finland’s Great Depression mirrors the macroeconomic dynamics of the transition economies of Eastern Europe. These economies experienced a similar trade collapse. However, as a western democracy with developed capital markets and institutions, Finland faced none of the large institutional adjustments that other transition economies experienced. Thus, by studying the Finnish experience we isolate the adjustment costs due solely to the collapse of Soviet trade.
    JEL: E32 F41 P2
    Date: 2009–04
  15. By: Alessandro Nuvolari; Valentina Tartari
    Abstract: We examine the potentialities of a new indicator for measuring the value of English patents in the period 1617-1841. The indicator is based on the relative visibility of each individual patent in the contemporary technical and legal literature as summarized in Bennet Woodcroft's Reference Index of Patents of Invention. We conclude that the indicator provides a reasonable proxy for the value of patents and that it can be usefully employed to shed light on the timing and nature of innovation during the Industrial Revolution. In particular, our indicator offers a suitable reconciliation between the patent records evidence and the Crafts-Harley view of the Industrial Revolution.
    JEL: N73 O34
    Date: 2009–03–30
  16. By: Cumber, Carol J. (Department of Economics, South Dakota State University); Nichols, Timothy (South Dakota State University); Rickerl, Diane (South Dakota State Univeristy)
    Abstract: For several years, an effort to ‘bring back the buffalo’ has been of key interest in many American Indian communities across the country, and particularly in the Northern Plains of the United States. Tribal college faculty approached colleagues at South Dakota State University during a meeting of the American Indian Higher Education Consortium (AIHEC) with the desire to develop a niche market for Native American-raised bison. The Lakota words for the concept underlying the effort are Tatanka Waste (pronounced Ta-TONK-a Wash-TAY), roughly translated as ‘Really Good Buffalo’. A pivotal factor that influenced the development of the Really Good Buffalo project was the unique historical, cultural, and spiritual relationship between American Indians and bison. These issues and the diverse consortium of partners involved made it critically important that the project deliberately address values as part of the niche market analysis. As one tribal partner stated, “Great care must be taken when we are working with our brothers, the buffalo.” This case emphasizes the process of concept-testing, pre-feasibility analysis, and branding of an agriculturally based niche product within a broader cultural context.(Contact author for a copy of the complete report.)
    Keywords: Bison Production, Cultural Values
    JEL: Q1
    Date: 2009–01
  17. By: Stefania Albanesi; Claudia Olivetti
    Abstract: The entry of married women into the labor force is one of the most notable economic phenomena of the twentieth century. We argue that medical progress played a critical role in this process. Improved maternal health alleviated the adverse effects of pregnancy and childbirth on women's ability to work, while the introduction of infant formula reduced mothers' comparative advantage in infant feeding. We construct economic measures of these two dimensions of medical progress and develop a quantitative model that aims to capture their impact. Our results suggests that these advances, by enabling women to reconcile work and motherhood, were essential for the rise in married women's participation and the evolution of their economic role.
    JEL: E24 J16 J21 J22 N3
    Date: 2009–04
  18. By: Carol S. Lehr (Department of Economics, VCU School of Business)
    Abstract: During the 1940s wages compressed dramatically and the dispersion of returns to education and experience declined. This paper shows that the change in the 1940s wage structure arises from a compression in the distribution of mean wages between occupations. The compression results from labor market shortages caused both by economic mobilization and the selective nature of the draft. The war increased demand for relatively low skilled labor and induction policies protected many highly skilled occupations while inducting most heavily from lower-skilled occupations. These factors help to explain compression in both the upper and the lower portions of the male wage distribution and provide the mechanism linking war-time labor market shocks to the decline in the return to education.
    Keywords: wage inequality, war mobilization, occupation skill
    JEL: E24 J21 J31
    Date: 2009–02
  19. By: Timothy M Baynes; Graham M Turner; James West (CSIRO Sustainable Ecosystems, Australia)
    Abstract: Models that are used for future based scenarios should be calibrated with historical water supply and use data. Historical water records in Australia are discontinuous, incomplete and often incongruently disaggregated. We present a systematic method to produce a coherent reconstruction of the historical provision and consumption of water in Victorian catchments. This is demonstrated using WAS: an accounting and simulation tool that tracks the stocks and flows of physical quantities relating to the water system. The WAS is also part of, and informed by, an integrated framework of stocks and flows calculators for simulating long-term interactions between other sectors of the physical economy. Both the WAS and related frameworks consider a wide scope of inputs regarding population, land use, energy and water. The physical history of the water sector is reconstructed by integrating water data with these information sources using a data modelling process that resolves conflicts and deduces missing information. The WAS allows strategic exploration of water and energy implications of scenarios of water sourcing, treatment, delivery and end use cognisant of historical records.
    Keywords: water accounting, stocks and flows, historical time series, data modelling, calibration
    JEL: C88 Q25
    Date: 2009–01
  20. By: Bronwyn H. Hall
    Abstract: Two court decisions in the 1990s are widely viewed as having opened the door to a flood of business method and financial patents at the US Patent and Trademark Office, and to have also impacted other patent offices around the world. A number of scholars, both legal and economic, have critiqued both the quality of these patents and the decisions themselves. This paper reviews the history of business method and financial patents briefly and then explores what economists know about the relationship between the patent system and innovation, in order to draw some tentative conclusions about their likely impact. It concludes by finding some consensus in the literature about the problems associated with this particular expansion of patentable subject matter, highlighting the remaining areas of disagreement, and reviewing the various policy recommendations.
    JEL: G28 K2 L86 O34
    Date: 2009–04
  21. By: Randall Morck
    Abstract: Large pyramidal family controlled business groups are the predominant form of business organization outside America, Britain, Germany, and Japan. Large pyramidal groups comprising dozens, even hundreds, or listed and unlisted firms place the governance of large swathes of many countries’ big business sectors in the hands of a few of their wealthiest families. These structures plausibly substitute for weak market institutions in economies undergoing rapid early-stage industrialization. They may also substitute for weak governments in coordinating Big Push growth programs to establish numerous interdependent simultaneously. However, no such role is evident in developed or in slowly growing developing economies, where such structures appear prone to agency problems and political rent-seeking. If sufficiently large, they may also add to economy volatility by rendering the risk of misgovernance systematic, rather than firm-specific.
    JEL: G3 P1 P5 Z13
    Date: 2009–04

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