New Economics Papers
on Business, Economic and Financial History
Issue of 2009‒04‒25
fourteen papers chosen by

  1. Remain Silent and Ye Shall Suffer: Seller Exploitation of Reticent Buyers in an Experimental Reputation System By Steven Nafziger
  2. 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.
  3. Testing the General Validity of the Heckscher-Ohlin Theorem: The Natural Experiment of Japan By Daniel M. Bernhofen; John C. Brown
  4. Warfare, Liquidity Crises, and Coinage Debasements in Burgundian Flanders, 1384 - 1482: Monetary or Fiscal Remedies? By John H. Munro
  5. The Three Horsemen of Growth: Plague, War and Urbanization in Early Modern Europe By Voigtländer, Nico; Voth, Hans-Joachim
  6. Lending to the Borrower from Hell: Debt and Default in the Age of Philip II, 1556-1598 By Drelichman, Mauricio; Voth, Hans-Joachim
  7. Listen Up Economists,Why Might History Matter for Development Policy? By Ravi Kanbur
  8. A Fragile Prosperity: Government Policy and the Management of Hong Kong's Economic and Social Development By Leo F. Goodstadt
  9. François Perroux, a precursor of the current analyses of power By René Sandretto
  10. Americanización y consumo de masas, la distribución alimentaria en España, 1947-2007 By Maixe-Altes, J. Carles
  11. The Evolution of the Hong Kong Currency Board During Global Exchange Rate Instability: Evidence from the Exchange Fund Advisory Committee 1967-1973 By Catherine R. Schenk
  12. Oil in Colombia: History, Regulation and Macroeconomic Impact By Juan Carlos Echeverry; Jaime Navas; Verónica Navas; María Paula Gómez
  13. Federalism and Inter-Regional Redistribution By Jonathan Rodden
  14. Was the Korean slave market efficient? By Brezis, Elise S.; Kim, Heeho

  1. By: Steven Nafziger (Williams College)
    Abstract: The emancipation of the serfs is often viewed as watershed moment in 19th-century Russian history. However, this reform was accompanied by numerous others measures aimed at modernizing the Tsarist economy and society. Among these “Great Reforms” was the creation of a new institution of local government - the zemstvo – which has received comparatively little attention from economic historians. This quasi-democratic form of local government played a large role in expanding the provision of public goods and services in the half century leading up to the Russian Revolution. In this paper, I draw on newly collected data from several years of spending and revenue decisions by district zemstva. These data are matched to information on local socio-economic conditions to produce one of the first (panel) datasets with broad geographic coverage on any topic in Russian economic history. I use this dataset to investigate how population characteristics, local economic conditions, and mandated peasant representation in the zemstva influenced funding decisions over public goods. Through their representation in this local political institution, were peasants able to voice their preferences over spending levels and funding for specific initiatives? I find that district zemstvo with greater political representation from the peasantry spent more per capita, especially on education. This study initiates a broader research agenda into the zemstvo’s place in Russian economic history and contributes to the literature on the political economy of public good provision in developing societies.
    Keywords: Russia, economic history, political economy, local government
    JEL: D7 H1 H4 H7 N4 O23
    Date: 2008–11
  2. By: Hart, Robert A.
    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: regression discontinuity design; long-term real earnings; WWII conscription; National Service
    Date: 2009–04
  3. By: Daniel M. Bernhofen; John C. Brown
    Abstract: We exploit Japan's 19th century opening up to trade to test a general formulation of the Heckscher-Ohlin theorem. This formulation is based on Ohlin's measure of factor scarcity where autarky factor prices impose a refutable prediction on the economy's factor content of trade. Our test combines factor price data in Japan's autarky period with commodity trade data and a technology matrix in Japan's early free trade period. Our technology matrix is derived from a major Japanese survey of agricultural techniques during the early Meiji period, accounts by European visitors and numerous studies by Japanese and western scholars that draw on village records, business accounts and other historical sources. Evaluating Japan's factor content of trade during 1868-1875 at the corresponding autarky factor prices, we fail to reject the Heckscher-Ohlin prediction in each sample year.
    Date: 2009–04
  4. By: John H. Munro
    Abstract: Coinage debasements were a prevalent and generally very harmful feature of most economies in late-medieval western Europe, and most certainly in Burgundian Flanders (1384-1482). Flanders also experienced several economic recessions or contractions from three related sources: warfare; the so-called ‘bullion famines’, with liquidity crises; and the irredeemable decline of its former mainstay, the woollen textile industries. Since many of my previous publications dealt with the Flemish cloth industry, this paper focuses on the other two major economic problems, of which warfare was the most important factor. The question posed therefore is simply this: did the Burgundian dukes undertake coinage debasements principally as a monetary or as a fiscal policy? In a recent and highly praised monograph, Sargent and Velde (The Big Problem of Small Change, 2002) have contended that almost all late-medieval and early-modern coinage debasements were undertaken to remedy not just coin shortages, but especially shortages of petty or billon coins. For the Burgundian era, one may make a strong prima facie case that Flanders (and all the Burgundian Low Countries) suffered from two major ‘bullion famines’, or certainly from severe coinage scarcities, including very severe scarcities of petty coins: from the 1390s to about 1415, and from the early 1440s to the early 1470s. In both periods, moreover, Flanders suffered from very severe deflations. In this paper, I contend that warfare was indeed, directly and indirectly, a primary cause of those monetary scarcities, especially in reducing the income velocity of money and thus in increasing hoarding – in my view, far more important than any supposed balance of payments deficits and ‘bullion outflows to the East’. Nevertheless, I can find no convincing evidence that the Burgundian rulers ever undertook coinage debasements to remedy these coinage scarcities and to combat deflation (with one minor exception, in 1457, for petty coins). Instead, the thesis of this paper is that the Burgundian rulers undertook coinage debasements primarily as aggressive fiscal policies, and primarily to finance warfare. Almost all medieval princes exacted a seigniorage tax on bullion minted. They sought to maximize these revenues both by increasing this tax rate and by enticing much larger quantities of bullion into their mints: by both the techniques of debasement and by auxiliary bullionist policies. The paper seeks to show that the Flemish coinage debasements were generally successful, by satisfying three conditions: (1) that merchants delivering bullion to the mints received in return a greater number and greater face value of coins than before (and a greater value than from any competing mints); (2) that the public continued to accept debased, or more debased, coins at nominal face value, receiving them by ‘tale’ rather than by weight and intrinsic value; and (3) that such merchants, also benefitting from asymmetric information, were able to spend their new coins before their gains were eroded by inflation. This paper demonstrates that the inflationary consequences from Flemish coinage debasements were always less than would be predicted from strictly mathematical formula for price changes – perhaps because the debasements did not counteract the prevailing forces of monetary contraction and deflation. At the same time, however, because so many principalities then pursued coinage debasements as veritable guerres monétaires, many princes undertook coinage debasements for purely defensive reasons: to protect their domestic mints from foreign competition and their realms from influxes of foreign debased and especially counterfeit imitations: i.e., to counteract Gresham’s Law. This study concludes with a striking anomaly in Spanish monetary history: Spanish monarchs, having agreed to abjure and forgo seigniorage taxes on coinage, did not engage in any debasements, of either the gold or silver coinages, from 1497 to 1686. But they had the luxury of alternative revenues from taxes on imports of vast quantities of silver from the Spanish Americas during most of this era. The Burgundian dukes had no such alternative sources of revenue to finance their wars.
    Keywords: debasements, gold, silver, billon, bullion, bullionist policies, mints, seigniorage, inflation, deflation, liquidity
    JEL: E E41 E42 E51 E52 E62 F33 H11 H27 N13 N23 N43
    Date: 2009–04–07
  5. By: Voigtländer, Nico; Voth, Hans-Joachim
    Abstract: How did Europe overtake China? We construct a simple Malthusian model with two sectors, and use it to explain how European per capita incomes and urbanization rates surged ahead of Chinese ones. Productivity growth can only explain a small fraction of rising living standards. Population dynamics - changes of the birth and death schedules - were far more important drivers of the long-run Malthusian equilibrium. The Black Death raised wages substantially, creating important knock-on effects. Because of Engel’s Law, demand for urban products increased, raising urban wages and attracting migrants from rural areas. European cities were unhealthy, especially compared to Far Eastern ones. Urbanization pushed up aggregate death rates. This effect was reinforced by more frequent wars (fed by city wealth) and disease spread by trade. Thus, higher wages themselves reduced population pressure. We show in a calibration exercise that our model can account for the sharp rise in European urbanization as well as permanently higher per capita incomes in 1700, without technological change. Wars contributed importantly to the rise of Europe, even if they had negative short-run effects. We also examine intra-European growth, using a panel of European states in the period 1300-1700. Estimation results suggest that war frequency can explain a good share of divergent fortunes within Europe as well.
    Keywords: Demographic Regime; Epidemics; Great Divergence; Long-run Growth; Malthus to Solow
    JEL: E27 N13 N33 O14 O41
    Date: 2009–04
  6. By: Drelichman, Mauricio; Voth, Hans-Joachim
    Abstract: Philip II of Spain accumulated debts equivalent to 60% of GDP. He also failed to honor them four times. We ask what allowed the sovereign to borrow much while defaulting often. Earlier work emphasized either banker irrationality or the importance of sanctions. Using new archival data, we show that neither interpretation is supported by the evidence. What sustained lending was the ability of bankers to cut off Philip II’s access to smoothing services. We analyze the incentive structure that supported the cohesion of this bankers' coalition. Lending moratoria were sustained through a "cheat the cheater" mechanism (Kletzer and Wright, 2000).
    Keywords: early modern state finances; incentive compatability; Philip II; serial default; sovereign debt; state capacity
    JEL: F21 F34 N23
    Date: 2009–04
  7. By: Ravi Kanbur
    Abstract: History matters, and it matters in important and interesting ways for policy today. But it is not just actual events in the past. It is how they are recorded, interpreted, and the interpretation transmitted, that matters. This is what determines the mental makeup, the preferences in economists’ terminology, of agents in the economy. That is the causal mechanism. It is the embedding of the past in the present’s perception of policy that is the transmission mechanism linking history to today’s development policy.
    Keywords: History, Economics, development policy, historical events, economic agents,
    Date: 2009
  8. By: Leo F. Goodstadt (School of Business Studies, Trinity College, University of Dublin)
    Abstract: This paper examines the impact of 'ideological' preconceptions on Hong Kong policy-making both during and after the colonial era. An abiding commitment to laisser faire reflected demographic anxieties that were not dispelled by sustained, high-speed economic growth. Economic pessimism was encouraged by the influence of Malthus and John Stuart Mill and the rejection of Keynesianism although the economy was never as vulnerable as officials claimed. The analysis identifies the continuing costs, particularly for social policy, of official misconceptions about Hong Kong fundamentals.
    Keywords: Hong Kong, Colonialism, Non-Interventionism, Welfarism, Population, Malthus
    Date: 2009–01
  9. By: René Sandretto (University of Lyon, Lyon, F-69003, France; CNRS, UMR 5824, GATE, Ecully, F-69130, France; ENS LSH, Lyon, F-69007, France)
    Abstract: Despite its important contributions to economic thought, namely in the field of spatial economics and economics of development, François Perroux, one of the most important French economists of the 20st century, remains today poorly appreciated and frequently unrecognized. This paper tends to show how unfair is this deficit of recognition. We underline Perroux’s illuminating views on asymmetry, domination and power which can be considered as a prefiguration and – to some extent – as a generalization of works made in this field half a century later, for example the American realist and neo-realist approaches of power (namely the concepts of hard and soft power) or by Susan Strange (with his concept of structural power).
    Keywords: Asymmetry, power, domination, influence, coercion
    JEL: B19 B4 B5
    Date: 2009
  10. By: Maixe-Altes, J. Carles
    Abstract: The main objective of this article is to provide a robust analysis, in conceptual, historical and chronological terms, of the modern food distribution systems in Spain, a relatively recent area of research. To this end, different previously unused business sources are used, including professional reviews and journals, material which has been largely neglected. These sources shed light on the history food distribution in Spain. Special emphasis is placed upon the initial phase of the modern era of distribution and the role of some of the pioneers in the field. The revolution in retailing, which began in the 1970’s, is also placed under the spotlight, illuminating the structural changes that have lead to an intense process of concentration in the sector.
    Keywords: Food distribution; Americanization; mass consumption; retailing revolution; business strategies.
    JEL: N74 N84
    Date: 2008–12
  11. By: Catherine R. Schenk (University of Glasgow)
    Abstract: Hong Kong is one of a few economies that operate a variation of a currency board as the basis of their monetary system. This system has persisted despite dramatic changes in the way that the international monetary system operates and despite changes in Hong Kong's political status. The currency board now faces new challenges with the greater flexibility in the RMB exchange rate and the recent depreciation of the USD that has been dramatically reversed as part of the global financial crisis of 2008. This paper examines how the operations of the Exchange Fund were adapted to react to an earlier period of international monetary disorder when the pegged exchange rate system of the 1950s and 1960s collapsed. Based on archival evidence from the HSBC Group Archive, the HSBC Asia Pacific Archive, the Bank of England, UK Treasury and UK Foreign Office, this paper examines how the core rule of issuing currency only against foreign exchange assets was abandoned in 1972. It presents new data on the accounts of the Exchange Fund for this period and describes minutes of the meetings of the Exchange Fund Advisory Committee. The evidence explores the 1972 decision in its longer term policy context and argues that it was the culmination of a series of alterations to the operation of the Exchange Fund during the collapse of the pegged exchange rate system from 1967 onward. The main argument is that the Hong Kong government's response to the crumbling of the international monetary system was to make the Exchange Fund operate as much more than a currency board well before 1972. In particular, it was used to provide forward cover for commercial banks but this proved especially costly in the volatile environment of the end of the global pegged exchange rate system, so that in 1974 the assets of the Exchange Fund fell to 77% of the note issue.
    Date: 2009–01
  12. By: Juan Carlos Echeverry; Jaime Navas; Verónica Navas; María Paula Gómez
    Abstract: Colombia’s oil history began in 1918 and reached its golden era at the end of the 1980s. Regulation in the oil industry changed several times since 1974, mainly responding to the discoveries made. Although agreed contract terms have been honored for oil fields allocated in the past, regulation instability has affected long term the relationships with private investors, since new conditions were imposed for future contracts. Once too onerous conditions, too low prices and international competition drove investors away from the country, regulation was softened. Recently, the Colombian government has improved contractual terms and made tributary and royalty conditions more attractive to private investors. The important discoveries made in the last two decades led Colombia to an expenditure spiral, paired with a huge fiscal deficit and a high public debt, drastically changing a seven decade long record of fiscal stability. The cycle of cheap-expensive oil has exhibited a full swing, and although exploration contracts and investment have increased, no important discoveries have been made, revealing a complicated geology that might pose a challenge to the country’s hydrocarbons’ self-sufficiency.
    Date: 2009–03–12
  13. By: Jonathan Rodden (Stanford University)
    Abstract: Why do some federations implement highly progressive intergovernmental transfer schemes while others do not? First, this essay establishes some stylized facts, using provincial-level data from nine federations to measure the extent of inter-regional redistribution achieved through intergovernmental transfers in each country. Second, it explores sources of institutional variation that might help account for these persistent cross-country differences, focusing on theories of legislative bargaining, representation, and the distribution of income across regions. Third, it examines the historical conditions under which the basic institutions of federalism were selected.
    Keywords: Federalism, redistribution, inter-governmental transfers, representation.
    JEL: D72 H77 H73
    Date: 2009
  14. By: Brezis, Elise S.; Kim, Heeho
    Abstract: Over the decades, the traditional condemnation of slavery has been based not only on philosophical argumentation and moral values, but also on the conjecture that slavery was inefficient. This position led to one of the most passionate debates in economic history on the efficiency of the US slave market. This question of efficiency has not been analyzed on the slave market in Korea. The aim of this paper is to analyze the efficiency of the Korean slave market by examining the behavior of slave prices during the period 1689-1893. In order to do so, we collected long-run series of slave prices from nationwide surveys of more than 25 public and private historical records. We then tested whether the slave market was efficient using the arbitrage asset equation. We found slavery to have been efficient most of the time.
    Keywords: arbitrage asset equation; efficient markets; Korea; slave
    JEL: N35 N00
    Date: 2009–03

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.