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on Business, Economic and Financial History |
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Issue of 2009‒11‒27
nineteen papers chosen by |
| By: | Batiz-Lazo, Bernardo; Billings, Mark |
| Abstract: | This article explores the manipulation of published financial reports in order to counter the potentially unfavourable impact of newly introduced regulation. In this case the reported capital ratio of a major building society was enhanced using a sale and leaseback transaction with a related party and a change in depreciation policy, methods which reflected limited alternatives. Analysis of the case is set in the context of the mid-term performance of the building society sector and addresses the questions of whether the manipulations involved were within then-prevailing generally accepted accounting principles and why, despite disclosure in the society’s financial statements, these failed to attract public comment or concern, regulatory action or an audit qualification. In examining a major British mutual financial organisation we depart from traditional analyses of managerial discretion in accounting choices in manufacturing, mining and transport companies prior to the watershed Companies Act 1948. |
| Keywords: | Accounting manipulation; Creative accounting; Sale and leaseback; Depreciation; Building societies; United Kingdom |
| JEL: | N24 M42 D82 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18805&r=his |
| By: | Desmond McCabe (Office of Public Works, Dublin); Cormac Ó Gráda (University College Dublin) |
| Keywords: | Famine, Poor Relief, Welfare |
| Date: | 2009–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:200926&r=his |
| By: | Fafchamps, Marcel; Moradi, Alexander |
| Abstract: | As formalized by Montgomery (1991), referral by employees improves efficiency if the unobserved quality of a new worker is higher than that of unrefereed workers. Using data compiled from army archives, we test whether the referral system in use in the British colonial army in Ghana served to improve the unobserved quality of new recruits. We find that it did not: referred recruits were more likely than unreferred recruits to desert or be dismissed as 'inefficient' or 'unfit'. We find instead evidence of referee opportunism. The fact that referred recruits have better observed characteristics at the time of recruitment suggests that army recruiters may have been aware of this problem. |
| Keywords: | employee referral; hidden attributes; worker productivity |
| JEL: | J63 N47 O15 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7408&r=his |
| By: | Muge Adalet (Koc University) |
| Abstract: | This paper examines the link between banking structure and financial fragility across Europe during the 1920s and 1930s using a new database. Monthly and annual data are analyzed to show that countries with universal banking were more likely to experience crises. Furthermore, those countries with universal banking, which have a crisis, are shown to experience a slowdown in their economic growth. |
| Keywords: | Great Depression, Banking Crisis, Real Effects of Crises, Universal Banking |
| JEL: | N24 E44 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:0910&r=his |
| By: | Hersh, Jonathan; Voth, Hans-Joachim |
| Abstract: | Did living standards stagnate before the Industrial Revolution? Traditional real-wage indices typically show broadly constant living standards before 1800. In this paper, we show that living standards rose substantially, but surreptitiously because of the growing availability of new goods. Colonial luxuries such as tea, coffee, and sugar transformed European diets after the discovery of America and the rounding of the Cape of Good Hope. These goods became household items in many countries by the end of the 18th century. We use the Greenwood-Kopecky (2009) method to calculate welfare gains based on data about price changes and the rate of adoption of new colonial goods. Our results suggest that by 1850, the average Englishman would have been willing to forego 15% or more of his income in order to maintain access to sugar and tea alone. These findings are robust to a wide range of alternative assumptions, data series, and valuation methods. |
| Keywords: | Age of Discoveries; First divergence; new goods; standard of living indicators; unified growth |
| JEL: | D12 F19 N14 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7386&r=his |
| By: | Becker, Sascha O. (University of Stirling); Hornung, Erik (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research) |
| Abstract: | Existing evidence, mostly from British textile industries, rejects the importance of formal education for the Industrial Revolution. We provide new evidence from Prussia, a technological follower, where early-19th-century institutional reforms created the conditions to adopt the exogenously emerging new technologies. Our unique school-enrollment and factory-employment database links 334 counties from pre-industrial 1816 to two industrial phases in 1849 and 1882. Controlling extensively for pre-industrial development, we use pre-industrial education as an instrument to identify variation in later education that is exogenous to industrialization itself. We find that basic education significantly accelerated non-textile industrialization in both phases of the Industrial Revolution. |
| Keywords: | human capital, industrialization, Prussian economic history |
| JEL: | N13 N33 I20 O14 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4556&r=his |
| By: | Roy, Tirthankar |
| Abstract: | The paper contributes to the debate on relative levels of living in the early modern world by estimating the income of and probable range of income growth in Bengal before European colonization. The exercise yields two conclusions, (a) average income in Bengal was significantly smaller than that in contemporary Western Europe, and (b) there is insufficient basis to infer either growth or decline in average income in the 50 years before colonization and the century after. The former conclusion is relevant to the discussion on the origins of international economic inequality, or ‘divergence’, and the latter is relevant to the scholarship that considers the economic effects of colonialism. |
| Keywords: | Colonial India; Comparative development; National income |
| JEL: | N10 N15 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7522&r=his |
| By: | Beetsma, Roel; Cukierman, Alex; Giuliodori, Massimo |
| Abstract: | The paper presents evidence of an upward ratchet in transfers and taxes in the U.S. around World-War II. This finding is explained within a political-economy framework involving an executive who sets defense spending and the median voter in the population who interacts with a (richer) agenda setter in Congress in setting redistribution. While the setter managed to cap redistribution in the pre-war period, the War itself pushed up the status-quo tax burden, raising the bargaining power of the median voter as defense spending receded. This raised the equilibrium level of redistribution. The higher share of post-War transfers may thus be interpreted as a delayed fulfilment of a, not fully satisfied, popular demand for redistribution inherited from the Great Depression. |
| Keywords: | agenda setter; ratchets; redistribution; taxes; transfers; World-War II |
| JEL: | E62 E65 N11 N12 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7501&r=his |
| By: | Salcedo, Alejandrina; Schoellman, Todd; Tertilt, Michèle |
| Abstract: | Living arrangements have changed enormously over the last two centuries. While the average American today lives in a household of only three people, in 1850 household size was twice that figure. Further, both the number of children and the number of adults in a household have fallen dramatically. We develop a simple theory of household size where living with others is beneficial solely because the costs of household public goods can be shared. In other words, we abstract from intra-family relations and focus on households as collections of roommates. The model’s mechanism is that rising income leads to a falling expenditure share on household public goods, which endogenously makes household formation less beneficial and privacy more attractive. To assess the magnitude of this mechanism, we first calibrate the model to match the relationship between household size, consumption patterns, and income in the cross-section at the end of the 20th century. We then project the model back to 1850 by changing income. We find that our proposed mechanism can account for 37% of the decline in the number of adults in a household between 1850 and 2000, and for 16% of the decline in the number of children. |
| Keywords: | economies of scale; fertility decline; household public goods; household size; living arrangements; roommates |
| JEL: | D10 E10 J11 N30 O10 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7543&r=his |
| By: | Joachim Voth; Nico Voigtländer |
| Abstract: | This paper argues that Malthusian regimes are capable of sustained changes in per capita incomes. Shifting mortality and fertility schedules can lead to different steady-state income levels, with long periods of growth during the transition. Europe checked the downward pressure on wages through late marriage, which reduced fertility, and a mortality regime that combined high death rates with high incomes. We argue that both emerged as a result of the Black Death. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1185&r=his |
| By: | Rafael Dobado (Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales); David Guerrero (Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales) |
| Abstract: | In this work it is shown evidence supporting the idea that, if globalization is defined as the convergence of commodity prices between distant markets, the process started and advanced gradually in the eighteenth century instead of suddenly appearing after 1820, as claimed by the canonical version developed in a series of important works by O’Rourke and Williamson (1999, 2002, 2004). We use long time-series of grain prices for several markets in Western Europe and the Americas to explore the extent and dynamics of market integration across the Western Hemisphere throughout the eighteenth century. An innovative methodology, consisting in studying the standard deviations of the innovations in the ARMA model of pairwise relative prices between markets, is used. A general decrease in price dispersion is observed when the early eighteenth century is compared with the three decades preceding 1793. Neither Argentina nor Mexico participated in this general trend towards closer market integration across the Western Hemisphere. From 1793 to 1828 we observe a substantial increase in dispersion between markets. After this first backlash, globalization resumed at an unprecedented pace since it was favored by the transport revolution and other factors. |
| Keywords: | market integration, globalization. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ucm:wpaper:09-09&r=his |
| By: | Edlund, Lena Cecilia; Machado, Cecilia |
| Abstract: | Women’s economic emancipation arguably took off in the late 1960s and early 1970s. While ubiquitous, its origins are not well understood. In an influential paper, Goldin and Katz [2002] pointed to the role of unmarried women’s access to the oral contraceptive (the Pill), ushered in by the extension of legal rights to "mature minors" in the late 1960s early 1970s. However, the Pill was FDA approved already in 1960, and many states allowed a minor to marry, thereby emancipating her with respect to medical treatment, including the Pill. By the mid-1970s, the minimum marriage age had been lowered to 18 in almost all states. Exploiting changes in the legal rights of young adults by state, we find evidence that the Pill made early marriage more attractive and facilitated women’s educational and occupational attainments. Marriage combined with the Pill, we speculate, may have provided women with the means to pursue higher education at a time of limited student aid and ability to borrow against future earnings. |
| Keywords: | Contraceptive Pill; Education; Marriage; Occupation |
| JEL: | J13 J24 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7485&r=his |
| By: | Cecchetti, Stephen G; Kohler, Marion; Upper, Christian |
| Abstract: | We study the output costs of 40 systemic banking crises since 1980. Most, but not all, crises in our sample coincide with a sharp contraction in output from which it took several years to recover. Our main findings are as follows. First, the current financial crisis is unlike any others in terms of a wide range of economic factors. Second, the output losses of past banking crises were higher when they were accompanied by a currency crisis or when growth was low at the onset of the crisis. When accompanied by a sovereign debt default, a systemic banking crisis was less costly. And, third, there is a tendency for systemic banking crises to have lasting negative output effects. |
| Keywords: | Cost of Crisis; Crises; Output loss; Recovery; Systemic Banking Crisis |
| JEL: | E32 E44 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7495&r=his |
| By: | Benk, Szilárd; Gillman, Max; Kejak, Michal |
| Abstract: | The paper shows that US GDP velocity of M1 money has exhibited long cycles around a 1.25% per year upward trend, during the 1919-2004 period. It explains the velocity cycles through shocks constructed from a DSGE model and annual time series data (Ingram et al., 1994). Model velocity is stable along the balanced growth path, which features endogenous growth and decentralized banking that produces exchange credit. Positive shocks to credit productivity and money supply increase velocity, as money demand falls, while a positive goods productivity shock raises temporary output and velocity. The paper explains such velocity volatility at both business cycle and long run frequencies. With filtered velocity turning negative, starting during the 1930s and the 1987 crashes, and again around 2003, results suggest that the money and credit shocks appear to be more important for velocity during less stable times and the goods productivity shock more important during stable times. |
| Keywords: | business cycle; credit shocks; velocity; Volatility |
| JEL: | E13 E32 E44 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7544&r=his |
| By: | Miguel Almunia; Agustín S. Bénétrix; Barry Eichengreen; Kevin H. O'Rourke; Gisela Rua |
| Abstract: | The Great Depression of the 1930s and the Great Credit Crisis of the 2000s had similar causes but elicited strikingly different policy responses. It may still be too early to assess the effectiveness of current policy responses, but it is possible to analyze monetary and fiscal policies in the 1930s as a “natural experiment” or “counterfactual” capable of shedding light on the impact of recent policies. We employ vector autoregressions, instrumental variables, and qualitative evidence for a panel of 27 countries in the period 1925-1939. The results suggest that monetary and fiscal stimulus was effective – that where it did not make a difference it was not tried. The results also shed light on the debate over fiscal multipliers in episodes of financial crisis. They are consistent with multipliers at the higher end of those estimated in the recent literature, consistent with the idea that the impact of fiscal stimulus will be greater when banking system are dysfunctional and monetary policy is constrained by the zero bound. |
| JEL: | E63 F16 N10 N27 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15524&r=his |
| By: | Dessí, Roberta; Piccolo, Salvatore |
| Abstract: | Local merchant guilds were ubiquitous in medieval Europe, and their development was inextricably linked with the development of towns and the rise of the merchant class. We develop a theory of the emergence of local merchant guilds as an efficient mechanism to implement collusion among merchants and rulers, building on the natural complementarity between merchants' market trading and mutual monitoring. Our model explains the main observed features of local merchant guilds' behavior, their rules and internal organization, including membership restrictions and exclusion, and their relationship with rulers. Moreover, it identifies the main channels through which the guilds' social capital influenced their ability to collude with rulers, and hence social welfare. As we show, the available historical evidence supports our theory, shedding new light on the role of the guilds' social capital. We then extend the model to analyze the key trade-offs faced by rulers in choosing whether to grant recognition to one or multiple guilds. This provides an additional rationale for the establishment of the alien merchant guilds first analyzed by Greif, Milgrom and Weingast (1994), helping us to understand the observed distribution of guilds and their characteristics. |
| Keywords: | collusion; merchant guild; political economy; social capital; taxation.; trade |
| JEL: | H2 L4 N4 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7374&r=his |
| By: | Muge Adalet (Koc University) |
| Abstract: | This paper examines the 1931 German banking crisis using a bank-level data set. It specifically focuses on the link between banking structure and financial stability. The universality of banks, a key characteristic of the German banking system, is shown to increase the probability of bank failure after controlling for other bank-level characteristics and macroeconomic variables. |
| Keywords: | Great Depression, Banking Crisis, Universal Banking |
| JEL: | N24 E44 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:0911&r=his |
| By: | Porzecanski, Arturo C. |
| Abstract: | The current episode (2007-09) may well be the first time since Latin America gained its independence in the early 1800s that a major economic contraction and financial calamity in the industrialized world has not caused a wave of currency, sovereign debt or banking crises in the region. What explains Latin America's unprecedented resilience in contrast with, for example, Eastern Europe's now-evident financial vulnerability? Here we review the enormous progress made by many governments in Latin America in the past decade to reduce currency mismatches, allow for more flexible exchange-rate regimes, enhance the capitalization, funding and supervision of their banking systems, encourage the development of local capital markets, and implement sounder and more credible monetary and fiscal policies. Evidently, it is not necessary to wait for an improved international financial regulation in order for reform-minded, well-managed countries to reap the most benefits from, and minimize the deleterious impact of market cycles typical of, financial globalization. |
| Keywords: | Latin America; financial crisis |
| JEL: | F34 F30 F41 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18780&r=his |
| By: | Lucian A. Bebchuk; Michael S. Weisbach |
| Abstract: | This paper, which introduces the special issue on corporate governance co-sponsored by the Review of Financial Studies and the National Bureau of Economic Research (NBER), reviews and comments on the state of corporate governance research. The special issue features seven papers on corporate governance that were presented in a meeting of the NBER’s corporate governance project. Each of the papers represents state-of-the-art research in an important area of corporate governance research. For each of these areas, we discuss the importance of the area and the questions it focuses on, how the paper in the special issue makes a significant contribution to this area, and what we do and do not know about the area. We discuss in turn work on shareholders and shareholder activism, directors, executives and their compensation, controlling shareholders, comparative corporate governance, cross-border investments in global capital markets, and the political economy of corporate governance. |
| JEL: | G34 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15537&r=his |