New Economics Papers
on Business, Economic and Financial History
Issue of 2009‒12‒19
seventeen papers chosen by

  1. The origins of a paper money economy - the case of Norway By Lars Fredrik Øksendal
  2. Spain's International Position, 1850-1913 By de la Escosura, Leandro Prados
  3. Why Are More Boys Born During War? - Evidence from Germany at Mid Century By Dirk Bethmann; Michael Kvasnicka
  4. On the Problem of Economic Power: Lessons from the Natural History of the Hawaiian Archipelago By Funk, Matt
  5. Upon Daedalian Wings of Paper Money: Adam Smith and the Crisis of 1772 By Hugh Rockoff
  6. Productivity Growth and Levels in France, Japan, the United Kingdom and the United States in the Twentieth Century By Gilbert Cette; Yusuf Kocoglu; Jacques Mairesse
  7. The Great Depression Analogy By Michael D. Bordo; Harold James
  8. Processes of Migration in Latin America and the Caribbean (1950-2008) By Durand, Jorge
  9. Financial Market Regulation in the Wake of Financial Crises: The Historical Experience By Alfredo Gigliobianco (editor); Gianni Toniolo (editor)
  10. From Angela’s Ashes to the Celtic Tiger: Early Life Conditions and Adult Health in Ireland By Liam Delaney; Mark McGovern; James P Smith
  11. The role of national/regional identity in aircraft ordering By Grancay, Martin
  12. Droughts, Floods and Financial Distress in the United States By John Landon-Lane; Hugh Rockoff; Richard H. Steckel
  13. Krueger/Schiff/Valdés Revisited: Agricultural Price and Trade Policy Reform in Developing Countries since 1960 By Anderson, Kym
  14. Market Responses to Climate Stress: Rice in Java in the 1930s By Pierre van der Eng
  15. On the Travesty of the Tragedy of the Commons: Hardin's Nontrivial Error By Funk, Matt
  16. Estimating the Evolution of Money's Role in the U.S. Monetary Business Cycle By Efrem Castelnuovo
  17. The evolution of Norway’s national innovation system By Fagerberg, Jan; Mowery , David C; Verspagen, Bart

  1. By: Lars Fredrik Øksendal (Norwegian School of Economics and Business Administration (NHH))
    Abstract: This article sketches the origins of paper money in Norway back to the last half of the 18th century and asks why there was no circulation of full-bodied coins even after notes had become convertible into silver at par in 1842. The argument put forward is that the choice of fiat paper money reflected the relative economic backwardness of the country. Although Gresham’s law also applied for Norway, the most important reason paper money caught on and maintained that position as the most important part of the money stock was the chronic shortage of means of payment. In such a situation, bad money was not that bad after all. Moreover, times of war and political havoc besides, paper money managed to stay fairly stable and fulfil an essential function as a store of wealth. With time, paper money became institutionalised in the Norwegian economy, overwhelmingly dominating the domestic circulation and functioning as the key monetary reference (unit of account). Thus, convertibility in 1842 linked the domestic currency with international money at fixed rates, but had hardly any bearing on the domestic function of money.
    Keywords: Banknotes, bullion standard, convertibility, Gresham’s law, paper money
    JEL: E42 E58 N23
    Date: 2009–12–04
  2. By: de la Escosura, Leandro Prados
    Abstract: Spain's financial position during the late 19th and early 20th century has usually been presented as one of persistent deficit on current account, which resulted from her integration into international commodity and factor markets and this, in turn, slowed down growth. In this essay a preliminary reconstruction of the balance of payments on current account allows us to reject this view. In fact, a net capital inflow made possible to meet the demand for investment boosting economic performance. Current account reversals in a context of macroeconomic domestic imperfections help to explain the economic slowdown at the turn of the century.
    Keywords: balance of payments; current account reversals; growth; investment; saving; Spain; sudden stops
    JEL: F21 F32 F43 N13 N73
    Date: 2009–12
  3. By: Dirk Bethmann; Michael Kvasnicka
    Abstract: In belligerent countries, male-to-female sex ratios at birth increased during and shortly after the two world wars. These rises still defy explanation. Several causes have been suggested (but not tested) in the literature. Many of these causes are proximate in nature, reflecting behavioral responses to the dramatically changed marriage market conditions for women and men that were induced by war-related declines in adult sex ratios. Based on county-level census data for the German state of Bavaria in the vicinity and aftermath of World War II, we explore the reduced-form relationship between changes in adult and off spring sex ratios. Our results suggest that war-induced shortfalls of men significantly increased the percentage of boys among newborns.
    Keywords: World War II, adult sex ratio, sex ratio at birth
    JEL: J12 J13 N34
    Date: 2009–11
  4. By: Funk, Matt
    Abstract: One of the greatest logicians of the twentieth century, Bertrand Russell, proposed that Economic power, unlike military power, is not primary, but derivative. Curiously, this conjecture has received scarce attention. This paper explores this theory. Our illustrative discourse tests this overlooked theory in the light of evolution: We model Homo evolution by sampling the past ≈1000 years of cultural evolution in the Hawaiian archipelago. Our analysis concludes Russell's theory is true.
    Keywords: economic power; military power; evolutionary game theory; cultural evolution; resource holding power; long-distance dispersal; Second Amendment; Kamehameha; Hawaii; sovereignty; annexation
    JEL: Z10 C93 N40
    Date: 2009–12–15
  5. By: Hugh Rockoff
    Abstract: Adam Smith advocated laissez faire for most sectors of the economy, but he believed that banking and finance required several forms of regulation including usury laws and the prohibition of small-denomination bank notes. Smith’s support for banking regulation appears to have been a response to the shocks that hit the Scottish banking system during the time that he was composing the Wealth of Nations. The most important was the Crisis of 1772, which has been described as the first modern banking crisis faced by the Bank of England. It resembles the Crisis of 2008 in a number of striking ways. This paper describes the Crisis of 1772, the other shocks that hit the Scottish banking system, and the evolution of Smith’s views on the regulation of banking. It is based on Smith’s writings, the secondary sources, and a quantification of the new issues of Scottish bank notes during Smith’s era.
    JEL: N1
    Date: 2009–12
  6. By: Gilbert Cette; Yusuf Kocoglu; Jacques Mairesse
    Abstract: This study compares labor and total factor productivity (TFP) in France, Japan, the United Kingdom and the United States in the very long (since 1890) and medium (since 1980) runs. During the past century, the United States has overtaken the United Kingdom and become the leading world economy. During the past 25 years, the four countries have also experienced contrasting advances in productivity, in particular as a result of unequal investment in information and communication technology (ICT). The past 120 years have been characterized by: (i) rapid economic growth and large productivity gains in all four countries; (ii) a long decline of productivity in the United Kingdom relative to the United States, and to a lesser extent also to France and Japan, a relative decline that was interrupted by the second world war (WW2); (iii) the remarkable catching-up to the United States by France and Japan after WW2, that stopped in the case of Japan during the 1990s. Capital deepening (at least to the extent this can be measured) accounts for a large share of the variations in performance; increasingly during the past 25 years, this has meant ICT capital deepening. However, the capital contribution to growth varies considerably over time and across the four countries, and it is always less important, except in Japan, than the contribution of the various other factors underlying TFP growth, such as, among others, labor skills, technical and organizational changes and knowledge spillovers. Most recently (in 2006), before the current financial world crisis, hourly labor productivity levels were slightly higher in France than in the United States, and noticeably lower in the United Kingdom (by roughly 10%) and even lower in Japan (30%), while TFP levels are very close in France, the United Kingdom and the United States, but much lower (40%) in Japan.
    JEL: E22 J24 N10 O47 O57
    Date: 2009–12
  7. By: Michael D. Bordo; Harold James
    Abstract: This paper examines three areas in which analogies have been made between the interwar depression and the financial crisis of 2007 which reached a dramatic climax in September 2008 with the collapse of Lehman Brothers and the rescue of AIG: they can be labeled macro-economic, micro-economic, and geo-political. First, the paper considers the story of monetary policy failures; second, there follows an examination of the micro-economic issues concerned with bank regulation and the reorganization of banking following the failure of one or more major financial institutions and the threat of systemic collapse; third, the paper turns to the issue of global imbalances and asks whether there are parallels that might be found in this domain too between the 1930s and the events of today.
    JEL: E58 N0 N12
    Date: 2009–12
  8. By: Durand, Jorge
    Abstract: The main characteristic of the Latin American migration on the 20th century was the change of flow. Until the 1950s, Latin America received migrants from Europe and the Middle East. As a result of economic change, political instability, and economic crisis, Latin America started exporting migrant workers. Now, Latin American migrants mainly go to the U.S., and in less extend to Europe (i.e. Spain, Italy, and Portugal), and in some cases to Japan as it is the case of Peru and Brazil. Several migrant patterns follow this process, which is characteristic to the massive emigration at the dawn of the 21st century.
    Keywords: Latin America; immigration; emigration; United States; Europe
    JEL: Z1 O15
    Date: 2009–07–01
  9. By: Alfredo Gigliobianco (editor) (Bank of Italy, Structural Economic Analysis Department); Gianni Toniolo (editor) (Duke University)
    Abstract: The focus of the present volume - which originates from a workshop held at the Bank of Italy on 16 and 17 April 2009 - is the regulatory response given to financial crises in the past, across countries. Alongside the scholarly interest of such a review its aim is also to offer some insights that may be useful in re-designing regulation in the present time of distress.Financial crises have been examined under many perspectives, including that of regulatory failures. The studies assembled in this volume, which touch on a significant array of countries, can be viewed as part of a historical survey on this issue. The basic question is whether regulatory responses form a pattern, and more specifically, whether they tend to be biased with respect to an optimum, however defined. In the end, rather than finding one pattern of response, we were able to identify the "disturbances" which most often enter the post-crisis decisional process. The awareness of such factors, and some knowledge of their functioning, are instrumental in understanding (for academics) and in governing (for policy makers) the response to major financial crises.
    Keywords: Financial crises, financial regulation, economic history
    JEL: G28 N20
    Date: 2009–11
  10. By: Liam Delaney (University College Dublin); Mark McGovern (University College Dublin); James P Smith (RAND)
    Abstract: We use data from the Irish census and exploit regional and temporal variation in infant mortality rates over the 20th century to examine effects of early life conditions on later life health. Our main identification is public health interventions which eliminated the Irish urban infant mortality penalty. Estimates suggest that a unit decrease in mortality rates at time of birth reduces the probability of being disabled as an adult by between .03 and .05 percentage points. We find that individuals from lower socio economic groups had marginal effects of reduced infant mortality twice as large as those at the top.
    Keywords: Health economics, Early childhood conditions, Economic history
    Date: 2009–12–08
  11. By: Grancay, Martin
    Abstract: The goal of this paper is to analyze impacts of the factor of national/regional identity on aircraft ordering by airlines and other corporate clients. The main focus is on Airbus and Boeing as these are the most important airliner producers of today. After an extensive study of aircraft orders from the past 20 years we come to a conclusion that national/regional identity plays a significant role – North American clients prefer Boeing whereas customers from Europe favor Airbus. The significance of this factor is higher in North America. Also, we take a look at aircraft orders in other regions of the world.
    Keywords: Airbus; Boeing; aircraft producers; civil aviation; national interest
    JEL: L93
    Date: 2009–12–06
  12. By: John Landon-Lane; Hugh Rockoff; Richard H. Steckel
    Abstract: The relationships among the weather, agricultural markets, and financial markets have long been of interest to economic historians, but relatively little empirical work has been done. We push this literature forward by using modern drought indexes, which are available in detail over a wide area and for long periods of time to perform a battery of tests on the relationship between these indexes and sensitive indicators of financial stress. The drought indexes were devised by climate historians from instrument records and tree rings, and because they are unfamiliar to most economic historians and economists, we briefly describe the methodology. The financial literature in the area can be traced to William Stanley Jevons, who connected his sun spot theory to rainfall patterns. The Dust bowl of the 1930s brought the climate-finance link to the attention of the general public. Here we assemble new evidence to test various hypotheses involving the impact of extreme swings in moisture on financial stress.
    JEL: E3 N0 N11 N12
    Date: 2009–12
  13. By: Anderson, Kym
    Abstract: A study of distortions to agricultural incentives in 18 developing countries during 1960-84, by Krueger, Schiff and Valdés (1988; 1991), found that policies in most of those developing countries were directly or indirectly harming their farmers. Since the mid-1980s there has been a substantial amount of policy reform and opening up of many developing countries, and indicators of that progress have been made available recently by a new study that has compiled estimates for a much larger sample of developing countries and for as many years as possible since 1955. The new study also covers Europe’s transition economies and comparable estimates for high-income countries, thereby covering more than 90 percent of world agricultural output and employment. This paper summarizes the methodology used in the new study (pointing out similarities and differences with those used by the OECD and by Krueger, Schiff and Valdés), compares a synopsis of the indicators from Krueger, Schiff and Valdés and the new study for the period to 1984, summarizes the changing extent of price distortions across countries and commodities globally since then, and concludes by evaluating the degree of distortion reduction over the years since 1984 compared with how much still remains, according to the results of a global economy wide model.
    Keywords: Agricultural price distortions; developing countries; trade policies
    JEL: F13 F59 H20 N50 O13 Q18
    Date: 2009–12
  14. By: Pierre van der Eng
    Abstract: Do markets in less-developed countries abate consequences of climate stress? Rainfall is an important factor in rice production in Indonesia. This paper uses changes in regional rice prices across the 19 residencies in less-developed Java to assess how rice markets responded to variations in rainfall during 1935-1940. It finds that rice markets were highly integrated across Java. The El Niño-induced episodes of lower than usual rainfall in 1935 and 1940 did not have a negative effect on levels and variations in regional rice prices, nor did they have adverse consequences for the supply of rice. Adaptive responses of firms specialising in the trade of rice are likely to have mitigated regional deficiencies in food production caused by climate stress.
    JEL: N55 O13 Q13 Q54
    Date: 2009–12
  15. By: Funk, Matt
    Abstract: Garrett Hardin’s "Tragedy of the Commons" remains one of the most frequently cited works across the spectrum of science — indeed, a visit to the website of the influential journal which published this paper in 1968 reveals that this revolutionary communique remains amongst its ‘top articles’. But Hardin's enduring, influential theoretical development presents a serious problem: it is not a single theory, but rather four major theories in a stormy sea of ill-conceived and untenable auxiliary conjecture. Moreover, the solid core of Hardin's central thesis was simply a restatement of a previously published theory, the promethean vision of William Forster Lloyd.
    Keywords: Tragedy of the Commons; William Forster Lloyd; Garrett Hardin; Scientific Method;
    JEL: Q50 B40 Q20
    Date: 2009–12–11
  16. By: Efrem Castelnuovo (University of Padua)
    Abstract: We assess the time-varying money's role in the post-WWII U.S. business cycle by estimating a new-Keynesian framework featuring nonseparability in real balances and consumption, portfolio adjustment costs, and a systematic reaction of policymakers to money growth. Rolling-window Bayesian estimations a la Canova (2009) are contrasted to a full sample fixed-coefficient investigation. Our results suggest that the assumption of stable parameters is unwarranted. The omission of money may induce biased assessments on the impact of structural shocks to the U.S. macroeconomic aggregates, especially during the great inflation period.
    JEL: E31 E51 E52
    Date: 2009–11
  17. By: Fagerberg, Jan; Mowery , David C; Verspagen, Bart
    Abstract: This paper analyses the co-evolution of science, technology and innovation policy and industrial structure in a small, open, resource-based economy (Norway). The contributions of the paper are threefold. First, it develops an evolutionary and historically oriented approach to the study of the development of these policies that may have wide applicability. Second, it focuses on a particular type of innovation, innovation in resource-based activities, that differs in many respects from the more commonly studied case of innovation in ‘high-tech’ industries. Third, the paper advances our understanding of the roles played by institutions and politics in innovation. Previous work on national systems of innovation has devoted little attention to these matters, possibly because much of this work examines ‘snapshots’ of various innovation systems at a specific point in time and lacks historical depth.
    Keywords: innovation; national innovation system; Norway; evolution
    JEL: O1 N10 F50
    Date: 2009–07

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