nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2009‒04‒18
fifteen papers chosen by
Bernardo Batiz-Lazo
University of Leicester

  1. Adoption and diffusion of double entry book-keeping in Mexico and Spain: A related but under-investigated development By Batiz-Lazo, Bernardo; Hernandez-Borreguero, Julian; Maixe-Altes, J. Carles; NuÑez-Torrado, Miriam
  2. Is Cartelisation Profitable? A Case Study of the Rhenish Westphalian Coal Syndicate, 1893-1913 By Thorsten Lübbers
  3. Above and Beyond the Call: Long-Term Real Earnings Effects of British Male Military Conscription during WWII and the Post-War Years By Hart, Robert A.
  4. Technology, National Identity and the State By Stenlås, Niklas
  5. Wall Street's First Corporate Governance Crisis: The Panic of 1826 By Eric Hilt
  6. Men, Women, and the Ballot Woman Suffrage in the United States By Sebastian Braun; Michael Kvasnicka
  7. The Finnish Great Depression: From Russia with Love By Gorodnichenko, Yuriy; Mendoza, Enrique G.; Tesar, Linda L.
  8. The Importance of History for Economic Development By Nathan Nunn
  9. Cultures, Clashes and Peace By Fletcher, Erin; Iyigun, Murat
  10. How the Subprime Crisis Went Global: Evidence from Bank Credit Default Swap Spreads By Barry Eichengreen; Ashoka Mody; Milan Nedeljkovic; Lucio Sarno
  11. The great inflation in the United States and the United Kingdom: reconciling policy decisions and data outcomes By Riccardo DiCecio; Edward Nelson
  12. Sixty Years after the Magic Carpet Ride: The Long-Run Effect of the Early Childhood Environment on Social and Economic Outcomes By Eric D. Gould; Victor Lavy; M. Daniele Paserman
  13. Milton Friedman and U.K. economic policy: 1938-1979 By Edward Nelson
  14. Putting the "New" into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics By Peter Neary
  15. The Rise in Female Employment and the Role of Tax Incentive. An Empirical Analysis of the Swedish Individual Tax Reform of 1971 By Selin, Håkan

  1. By: Batiz-Lazo, Bernardo; Hernandez-Borreguero, Julian; Maixe-Altes, J. Carles; NuÑez-Torrado, Miriam
    Abstract: There is a consensus within Mexican accounting historiography regarding widespread use of double entry bookkeeping by the end of the 19th Century in the realm of both private and public enterprise. However, there is conflicting and even contradictory claims as to when exactly this technique arrived to the viceroyalty of New Spain (present day Mexico) as well as its diffusion during the colonial era. In this article we address this conflict while putting forward the idea that the history of ‘modern’ accounting practice in Latin America should be framed by developments in its former colonial power. We offer the analysis of primary and secondary source material to support the view that there was continuity in the use of double entry in Spain and therefore, the so called ‘period of silence and apparent oblivion’ seems limited to the production of indigenous accounting thought (as expressed in the production of bibliographic material such as manuals and textbooks). We conclude that the history of Latin America accounting should be wary of extrapolating everyday practice by interpreting bibliographic material and proceed by examining surviving company documents as well as informal educational practices amongst organisations based in the metropolis and its then colonies.
    Keywords: double entry; diffusion of accounting systems; knowledge transfer; Mexico (New Spain); Spain
    JEL: N8 M41 N46 N44
    Date: 2009–04–14
  2. By: Thorsten Lübbers (Max Planck Institute for Research on Collective Goods)
    Abstract: We examine the effect of one of the presumably most powerful cartels ever on the profitability of its members. More precisely, we consider the Rhenish-Westphalian Coal Syndicate, a coal cartel that operated in Imperial Germany in the late 19th and early 20th century, using a newly constructed dataset and two different methodological approaches. At first, we employ event study methodology to asses the reaction of the stock market to the foundation of the cartel and two major revisions of its original contract. Furthermore, we look at different performance measures calculated from accounting and financial data in a dynamic panel data framework. Overall, our results suggest that the investigated cartel had no significant effect on the profitabil-ity of its members. However, we also find that it was able to stabilise coal prices and powerful enough to ensure that on average, prices were set high enough to avert negative repercussions on company performance.
    Keywords: Cartel, Economic history, Event study, Germany pre-1913
    JEL: L41 L71 N53
    Date: 2009–03
  3. By: Hart, Robert A. (University of Stirling)
    Abstract: This paper adds to the literature on the relationship between military service and long-term real earnings. Based on a regression discontinuity design it compares the earnings of age cohorts containing British men who were required to undertake post-war National Service with later cohorts who were exempt. It also compares age cohorts containing men who were conscripted into military service during the first half of WWII and those with later spells of conscription. It argues that, in general, we should not expect large long-term real earnings differences between conscript and non-conscript cohorts since important elements of the former received military training and experience of direct value in the civilian jobs market. In the case of call-up during WWII there is even more reason to expect that there was no major disadvantages to those conscripted. This occurred largely because their pre-military job status was preserved due to the employment of substitute women workers who acted as a temporary employment buffer thereby protecting serving men's positions on the jobs hierarchy.
    Keywords: National Service, WWII conscription, long-term real earnings, regression discontinuity design
    JEL: J24 J31 N44
    Date: 2009–04
  4. By: Stenlås, Niklas (Institute for Futures Studies)
    Abstract: The following paper traces the emergence of a Swedish military-industrial complex, through its heydays and to its eventual decline. The notion of a military-industrial complex is heavily based on American research and it is the American politico-industrial system which has been the model for the ‘theory’ of a military-industrial complex. The object of the paper is to identify those factors which distinguishes the Swedish case and which have made possible the growth of an exceptionally strong alliance between military, political and industrial forces around the ideal of a strong defence almost exclusively based on a domestic arms industry. <p> The paper argues that three factors have been particularly important to the emergence of Sweden’s military-industrial complex. First, the Cold War shaped the identity of the Swedes. Sweden was neutral, free from the superpower alliances and this provided a need for neutral technology, visibly free from superpower allegiances. Second, the corporative political culture of Sweden provided possibilities for an interest alliance between the government, the military, the industry and the unions around the defence issue. Third, the corporative interest alliance succeeded, at an early stage, to elevate the defence issue over the political agenda, to a level where it was up to military and scientific experts to determine the level of the country’s military needs. Not until the 1970’s was the defence issue politicized again.
    Keywords: military-industrial complex; national identity
    JEL: L00
    Date: 2008–06
  5. By: Eric Hilt
    Abstract: In July of 1826, several prominent Wall Street firms abruptly went bankrupt, amid scandalous revelations of fraudulent financial practices by their management. Although mostly forgotten today, these events represented a watershed in the early development of the corporation laws and investor protections governing Wall Street: in the aftermath of the scandals, New York State enacted an extensive package of legislation designed to protect the interests of investors. These statutes were some of the the very first of their kind, and had a lasting influence. This paper analyzes the causes of the failures, and the evolution of the law in response. The analysis highlights the critical role played by scandal-driven legislation in the evolution of investor protections and financial regulations.
    JEL: G18 G3 K22 N21 N81
    Date: 2009–04
  6. By: Sebastian Braun; Michael Kvasnicka
    Abstract: Woman suffrage led to the greatest enfranchisement in the history of the United States. Before World War I, however, suffrage states remained almost exclusively confined to the American West. The reasons for this pioneering role of the West are still unclear. Studying the timing of woman suffrage adoption at state level, we find that states in which women were scarce (the West) enfranchised their women much earlier than states in which the sex ratio was more balanced (the rest of the country). High sex ratios in the West, that is high ratios of grantors to grantees, reduced the political costs and risks to male electorates and legislators of extending the franchise. They are also likely to have enhanced female bargaining power and may have made woman suffrage more attractive in the eyes of western legislators that sought to attract more women to their states. Our finding of a reduced-form inverse relationship between the relative size of a group and its success in securing the ballot may be of use also for the study of other franchise extensions and for inquieries into the dynamics of political power sharing more generally.
    Keywords: Woman Suffrage, Democratization, Political Economy, Sex Ratio
    JEL: D72 J16 K10 N41 N42
    Date: 2009–03
  7. By: Gorodnichenko, Yuriy (University of California, Berkeley); Mendoza, Enrique G. (University of Maryland); Tesar, Linda L. (University of Michigan)
    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.
    Keywords: business cycles, depression, trade, Soviet, reallocation, multi-sector model
    JEL: E32 F41 P2
    Date: 2009–04
  8. By: Nathan Nunn
    Abstract: This article provides a survey of a growing body of empirical evidence that points towards the important long-term effects that historic events can have on current economic development. The most recent studies, using micro-level data and more sophisticated identification techniques, have moved beyond testing whether history matters, and attempt to identify exactly why history matters. The most commonly examined channels include: institutions, culture, knowledge and technology, and movements between multiple equilibria. The article concludes with a discussion of the questions that remain and the direct of current research in the literature.
    JEL: N0 O0
    Date: 2009–04
  9. By: Fletcher, Erin (University of Colorado, Boulder); Iyigun, Murat (University of Colorado, Boulder)
    Abstract: Ethnic and religious fractionalization have important effects on economic growth and development, but their role in internal violent conflicts has been found to be negligible and statistically insignificant. These findings have been invoked in refutation of the Huntington hypothesis, according to which differences of ethnic, religious and cultural identities are the ultimate determinants of conflict. However, fractionalization in all its demographic forms is endogenous in the long run. In this paper, we empirically investigate the impact of violent conflicts on ethno-religious fractionalization. The data involve 953 conflicts that took place in 52 countries in Europe, Africa and the Middle East between 1400 CE and 1900 CE. Besides a variety of violent confrontations ranging from riots, revolts and power wars between secular sovereigns, the data cover religiously motivated confrontations. We document that countries in which Muslim on Christian wars unfolded more frequently are significantly more religiously homogenous today. In contrast, those places where Protestant versus Catholic confrontations occurred or Jewish pogroms took place are more fractionalized, both ethnically and religiously. And the longer were the duration of all such conflicts and violence, the less fractionalized countries are today. These results reveal that the demographic structure of countries in Europe, the Middle East and North Africa still bear the traces of a multitude of ecclesiastical and cultural clashes that occurred throughout the course of history. They also suggest that endogeneity could render the relationship between fractionalization and the propensity of internal conflict statistically insignificant. Finally, instrumenting for conflicts with some geographic attributes and accounting for the endogeneity of fractionalization with respect to ecclesiastical conflicts shows that religous fractionalization likely has negative effects on economic growth.
    Keywords: conflict, religion, institutions, economic development
    JEL: C72 D74 N33 N43 O10
    Date: 2009–04
  10. By: Barry Eichengreen; Ashoka Mody; Milan Nedeljkovic; Lucio Sarno
    Abstract: How did the Subprime Crisis, a problem in a small corner of U.S. financial markets, affect the entire global banking system? To shed light on this question we use principal components analysis to identify common factors in the movement of banks' credit default swap spreads. We find that fortunes of international banks rise and fall together even in normal times along with short-term global economic prospects. But the importance of common factors rose steadily to exceptional levels from the outbreak of the Subprime Crisis to past the rescue of Bear Stearns, reflecting a diffuse sense that funding and credit risk was increasing. Following the failure of Lehman Brothers, the interdependencies briefly increased to a new high, before they fell back to the pre-Lehman elevated levels – but now they more clearly reflected heightened funding and counterparty risk. After Lehman's failure, the prospect of global recession became imminent, auguring the further deterioration of banks' loan portfolios. At this point the entire global financial system had become infected.
    JEL: F36 G15 G18
    Date: 2009–04
  11. By: Riccardo DiCecio; Edward Nelson
    Abstract: We argue that the Great Inflation experienced by both the United Kingdom and the United States in the 1970s has an explanation valid for both countries. The explanation does not appeal to common shocks or to exchange rate linkages, but to the common doctrine underlying the systematic monetary policy choices in each country. The nonmonetary approach to inflation control that was already influential in the United Kingdom came to be adopted by the United States during the 1970s. We document our position by examining official policymaking doctrine in the United Kingdom and the United States in the 1970s, and by considering results from a structural macroeconomic model estimated using U.K. data.
    Keywords: Inflation (Finance) ; Great Britain
    Date: 2009
  12. By: Eric D. Gould; Victor Lavy; M. Daniele Paserman
    Abstract: This paper estimates the effect of the childhood environment on a large array of social and economic outcomes lasting almost 60 years, for both the affected cohorts and for their children. To do this, we exploit a natural experiment provided by the 1949 Magic Carpet operation, where over 50,000 Yemenite immigrants were airlifted to Israel. The Yemenites, who lacked any formal schooling or knowledge of a western-style culture or bureaucracy, believed that they were being "redeemed," and put their trust in the Israeli authorities to make decisions about where they should go and what they should do. As a result, they were scattered across the country in essentially a random fashion, and as we show, the environmental conditions faced by immigrant children were not correlated with other factors that affected the long-term outcomes of individuals. We construct three summary measures of the childhood environment: 1) whether the home had running water, sanitation and electricity; 2) whether the locality of residence was in an urban environment with a good economic infrastructure; and 3) whether the locality of residence was a Yemenite enclave. We find that children who were placed in a good environment (a home with good sanitary conditions, in a city, and outside of an ethnic enclave) were more likely to achieve positive long-term outcomes. They were more likely to obtain higher education, marry at an older age, have fewer children, work at age 55, be more assimilated into Israeli society, be less religious, and have more worldly tastes in music and food. These effects are much more pronounced for women than for men. We find weaker and somewhat mixed effects on health outcomes, and no effect on political views. We do find an effect on the next generation – children who lived in a better environment grew up to have children who achieved higher educational attainment.
    JEL: F22 J13 J24
    Date: 2009–04
  13. By: Edward Nelson
    Abstract: This paper analyzes the interaction of Milton Friedman and U.K. economic policy from 1938 to 1979. The period under study is separated into 1938-1946, 1946-1959, 1959-1970, and 1970-1979. For each of these subperiods, I consider Friedman's observations on and dealings with key events, issues, and personalities in U.K. monetary policy and in general U.K. economic policy.
    Keywords: Friedman, Milton ; Economic policy - Great Britain
    Date: 2009
  14. By: Peter Neary
    Abstract: This paper reviews the scientific contributions of Paul Krugman to the study of international trade, on the occasion of his receipt of the 2008 Nobel Memorial Prize in Economics. A simplified exposition is presented of some of his principal findings, including: the effects of trade on firm scale and product diversity in a general model of monopolistic competition; the integration of monopolistic competition with factor endowments theory; the implications of transport costs, including home-market effects and the possibility of agglomeration in models of economic geography; and the positive and normative consequences of oligopolistic trade.
    Keywords: Economic geography, Imperfect competition, Intra-industry trade, Monopolistic competition, Oligopoly and trade, Product differentiation
    JEL: F12
    Date: 2009
  15. By: Selin, Håkan (Uppsala Center for Fiscal Studies)
    Abstract: Sweden reached the 2007 OECD average level of female labor force participation already in 1974. Before, but not after, 1971 the average tax rate facing the housewife was a function of the income of her husband. By exploiting a rich register based data source I utilize the exogenous variation provided by the individual tax reform to analyze the evolution of female employment in Sweden in the beginning of the 1970’s. Simulations suggest that employment among married women would have been 10 percentage points lower in 1975 if the 1969 statutory income tax system still had been in place in 1975.
    Keywords: Female labor supply; income tax reforms
    JEL: H24 J21
    Date: 2009–04–08

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