nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2010‒05‒22
fourteen papers chosen by
Bernardo Batiz-Lazo
University of Leicester

  1. A Long-Run View of the University Gender Gap in Australia By Booth, Alison L.; Kee, Hiau Joo
  2. A History of Violence: Testing the ‘Culture of Honor’ in the US South By Pauline Grosjean
  3. Infant Mortality and the Health of Survivors: Britain 1910-1950 By Hatton, Timothy J.
  4. Two is Company, N is a Crowd? Merchant Guilds and Social Capital By Dessi, Roberta; Piccolo, Salvatore
  5. Against the Stand-Alone-Cost Test in U.S. Freight Rail Regulation By Russell Pittman
  6. America's secret competitive advantage is a dirty secret By Sreedharan, Ranjan
  7. Stress Testing Credit Risk: The Great Depression Scenario By Simone Varotto
  8. From Detroit to Singur: On the Question of Land Acquisition for Private Development By Subhash C. Ray
  9. The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century By Atkinson, Anthony B.; Leigh, Andrew
  10. The evolution of agricultural trade flows By Aksoy, M. Ataman; Ng, Francis
  11. Quantitative Easing: Entrance and Exit Strategies By Alan S. Blinder
  12. The Political Economy of Fiscal Reform in Latin America: The Case of Argentina By Alejandro Bonvecchi
  13. The rise and decline of a Belgian banking giant – communication and business ethics in the Fortis case By Limbos S.; Phillips D.
  14. The Political Economy of Fiscal Reform: The Case of Colombia, 1986-2006 By Mauricio Olivera; Monica Pachon; Guillermo Perry

  1. By: Booth, Alison L. (University of Essex); Kee, Hiau Joo (Australian National University)
    Abstract: The first Australian universities were established in the 1850s, well before the introduction of compulsory schooling. However it was not until the twentieth century that growing industrialisation, technological change and the development of the so-called 'knowledge industries' fed into an increased demand in Australia for better-educated workers. As the twentieth century progressed, technological change and industrial restructuring saw a shift from brawn to brain. From the middle of the twentieth century, the introduction of mass secondary school education and the expansion of the number of universities widened access. At the same time, subjects offered in higher education increased in scope, and explicit and implicit labour market discrimination began to be eroded. These factors, together with a series of supply-side changes, meant that women were more easily able to shift into investing in the skills in which labour demand was increasing. By 1987, Australian women were more likely than men to be enrolled at university. These aggregate figures disguise considerable heterogeneity across fields of study.
    Keywords: higher education, gender, Australia
    JEL: I23 J1 N3
    Date: 2010–04
  2. By: Pauline Grosjean (University of San Francisco)
    Abstract: Using historical data on early settlers to the United States, this paper tests and confirms the “Culture of Honor” hypothesis by socio-psychologists Dov Cohen and Richard Nisbett (1994, 1996). This hypothesis argues that the high prevalence of homicides in the US South stems from the fact that it was a frontier region settled by people whose economy was based on herding: the Scotch-Irish. Herding societies develop cultures of honors for reasons having to do with their precariousness: violence is a necessary condition to preserve a reputation for toughness and deter animal theft. Using historical census data on waves of settlers from Europe and relating contemporaneous violence to early Scotch-Irish settlers, this paper provides a test of the link between Scotch-Irish settlers and the culture of honor. The results confirm that high numbers of Scotch-Irish immigrants to the US South by 1790 are associated with higher homicide rates today, including homicides by white offenders. Similar results do not hold for different origins of migrants or other violent crime or offenses. The effect is stronger in counties with high headcounts of pigs and sheep in the 19th century, confirming the herding origin of the culture of honor. An important contribution of this paper is to suggests an instrument for violence, based on past economic occupations and ecological suitability for herding vs. farming.
    Keywords: Cuture of honor, US South
    JEL: K4 Z Z13
    Date: 2010–05
  3. By: Hatton, Timothy J. (Australian National University)
    Abstract: The first half of the twentieth century saw rapid improvements in the health and height of British children. Average height and health can be related to infant mortality through a positive selection effect and a negative scarring effect. Examining town-level panel data on the heights of school children I find no evidence for the selection effect but some support for the scarring effect. The results suggest that the improvement in the disease environment, as reflected by the decline in infant mortality, increased average height by about half a centimeter per decade in the first half of the twentieth century.
    Keywords: heights of children, infant mortality, health in Britain
    JEL: I12 J13 N34
    Date: 2010–05
  4. By: Dessi, 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.
    Date: 2009–07
  5. By: Russell Pittman (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)
    Abstract: The stand-alone-cost test has become an expensive, extensive, and time-consuming part of the regulatory practice of the U.S. Surface Transportation Board in the performance of its statutory duty to protect "captive shippers" from monopoly rail rates. Worse, a close examination of the history of its adoption and application suggests only a very tenuous connection with its claimed intellectual foundations, the classic works of Faulhaber (1975) and Baumol, Panzar, and Willig (1982). It is time to retire this tool and replace it with something simpler and more effective and transparent.
    Date: 2010–04
  6. By: Sreedharan, Ranjan
    Abstract: The noted management guru Michael E Porter identifies seven unique competitive advantages for the U.S. economy to explain the country’s pre-eminence; they range from (among others) its environment for entrepreneurship, its institutions of higher learning, its technology and innovation machine, to its commitment to competition and free markets. In this article, I argue that there is another critical competitive advantage exclusive to the U.S. that arises from its electoral system characterised by consistently low levels of voter turnout in national elections and with disproportionately large numbers of its poorest and least educated citizens not voting. I begin by looking at reasons why the poor in America vote in far lesser proportions than their numbers, and particularly, at the various formal and informal impediments that prevent voting by the poor. I then consider the impact this would have had on America’s economy and its competitiveness. The core idea of this paper is that when an electoral process effectively filters out significant sections of the poor, the country would find it far easier to put in place (and sustain) sound free-market economic policies focussed on long term objectives with generous incentives for creation of wealth and with a tight leash on welfare and other entitlement programmes. I contend that America’s undeniably greater acceptance of the rigours of the free-market system is not (as is commonly believed) a product of a unique history or culture but, in truth, is closely tied to a discriminatory and exclusionary electoral system that has strong historical roots.
    Keywords: Competitive advantage, Voter turnout, Disenfranchisement
    JEL: O51 M21
    Date: 2009–09–01
  7. By: Simone Varotto (ICMA Centre, University of Reading)
    Abstract: By using Moody's historical corporate default histories we explore the implications of scenarios based on the Great Depression for banks' economic capital and for existing and proposed regulatory capital requirements. By assuming different degrees of portfolio illiquidity, we then investigate the relationship between liquidity and credit risk and employ our findings to estimate the Incremental Risk Charge (IRC), the new credit risk capital add-on introduced by the Basel Committee for the trading book. Finally, we compare our IRC estimates with stressed market risk measures derived from a sample of corporate bond indices encompassing the recent financial crisis. This allows us to determine the extent to which trading book capital would change in stress conditions under newly proposed rules. We find that, typically, banking book regulation leads to minimum capital levels that would enable banks to withstand Great Depression-like events, except when their portfolios have long average maturity. We also show that although the IRC in the trading book may be considerable, the capital needed to absorb market risk related losses in stressed scenarios can be more than twenty times larger.
    Keywords: Credit Risk, Financial Crisis, Economic Capital, Basel II, Liquidity Risk
    JEL: G11 G21 G22 G28 G32
    Date: 2010–03
  8. By: Subhash C. Ray (University of Connecticut)
    Abstract: Private land is often taken by the government on behalf of another private investor in the interest of employment creation or general economic development of a region. This paper draws upon the parallel between the experiences of General Motors in Poletown, MI in the 1980s and the recent events relating to Tata Motors and the agricultural land in Singur, West Bengal to raise a number of questions about government taking of land for private development .A brief review of the history of land acquisition through Eminent Domain in the US serves as the background for a discussion of the different important questions like the problem of strategic holdouts and fair compensation. The essay ends with an emphasis on the moral obligation of the government, especially in India, for proper rehabilitation of the displaced when exercise of Eminent Domain powers becomes unavoidable.
    Keywords: Eminent Domain; Strategic Holdout; Fair compensation
    JEL: K11 R11
    Date: 2010–05
  9. By: Atkinson, Anthony B. (Nuffield College, Oxford); Leigh, Andrew (Australian National University)
    Abstract: Taxation data have been used to create long-run series for the distribution of top incomes in quite a number of countries. Most of these studies have focused on the national experience of individual countries, but we can also learn from cross-country comparisons. Comparative analysis is therefore the next stage in the research program. At the same time, we know from other fields that there are dangers in simply pooling all available time series, without regard to the specific nature of data and reality. In this paper, we therefore adopt an intermediate approach, taking five Anglo-Saxon countries that have relatively similar backgrounds and tax systems: Australia, Canada, New Zealand, the UK, and the US. The first part of the paper tackles the challenge of comparability of income-tax based estimates across countries and across time. The second part summarizes the evidence about top income shares. Across these five countries, the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1 percent is highly correlated across Anglo-Saxon countries, more so than the share of the next 4 percent. The third part of the paper looks at the relationship between taxes and top income shares. Controlling for country and year fixed effects, we find that a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group.
    Keywords: inequality, taxation, Australia, Canada, New Zealand, United Kingdom, United States
    JEL: D31 H23 N30
    Date: 2010–05
  10. By: Aksoy, M. Ataman; Ng, Francis
    Abstract: Earlier research showed that during the 1980s and 1990s most of the global agricultural trade expansion took place among the industrial countries and among countries within trade blocs. These were also periods of declining agricultural prices. These prices increased during the 2000s, there were continuous trade reforms, and many developing countries started to support their agricultural sectors. This paper analyzes trade flows during the past two decades, and tries to measure whether all these developments have changed the trade balances and the share of different groups within the global trade flows. In addition, it looks at the trade balances on food to see the impact of these changes on net food importing countries. In conclusion, unlike the case with manufacturing, developing countries have not been able to increase their export shares in agriculture as significantly. They have maintained their trade shares by primarily expanding exports to other developing countries.
    Keywords: Emerging Markets,Food&Beverage Industry,Economic Theory&Research,Trade Policy,Free Trade
    Date: 2010–05–01
  11. By: Alan S. Blinder (Princeton University)
    Abstract: Apparently, it can happen here. On December 16, 2008, the Federal Open Market Committee (FOMC), in an effort to fight what was shaping up to be the worst recession since 1937, reduced the federal funds rate to nearly zero.1 From then on, with all of its conventional ammunition spent, the Federal Reserve was squarely in the brave new world of quantitative easing. Chairman Ben Bernanke tried to call the Fed’s new policies credit easing, probably to differentiate them from what the Bank of Japan had done earlier in the decade, but the label did not stick.
    Keywords: Recession, Federal Reserve, open market committee, banking policy, deflation, monetary policy
    JEL: E31 E58 G21
    Date: 2010–03
  12. By: Alejandro Bonvecchi
    Abstract: This paper investigates the political economy of fiscal reform activism in Argentina since the late 1980s. Between 1988 and 2008, tax legislation was changed 83 times, fiscal federal rules 14 times, and budgetary institutions sixteen times. Tax and budgetary reforms moved from centralizing revenue sources and spending authority in the federal government to mild decentralization lately. Fiscal federal rules combined centralization of revenues and management in the federal government with short-term compensations for the provinces. This paper contends that reform activism can be explained by the recurrence of economic and policy shocks while reform patterns may be accounted for as consequences of the decreasing political integration of national parties in a polity whose decisionmaking rules encourage the formation of oversized coalitions. The decrease in political integration weakened the national party leaderships’ ability to coordinate intergovernmental bargaining, and strengthened the local bosses and factions needed to form oversized coalitions.
    Keywords: Public finance, Budget, Taxes, Federalism, Intergovernmental relations
    JEL: H77 H61 H20
    Date: 2010–05
  13. By: Limbos S.; Phillips D.
    Abstract: Like many other countries Belgium was hit by a major banking crisis in 2008-2009. In this article we shall discuss the case of one Belgian bank, namely Fortis. For many years Fortis was considered to be the crown jewel in the Belgian financial landscape. At the global level Fortis Bank was the only Belgian company which as recently as 2007 was ranked in the top 20 of the Fortune 500 list, being preceded by only two other banking competitors.By the end of September 2008, however, Fortis was facing near bankruptcy and could only be saved thanks to crucial government intervention. Although most banks? problems were directly linked to the US sub-prime crisis the Fortis case is more complex. We shall here concentrate on Fortis? poor communication during the crisis and its effects on the bank?s image and reputation.In the first part of this article we shall retrace the Fortis success story up to June 2008 and also sketch the context of some of the managerial decisions taken in this period, which were - with the benefit of hindsight - most unfortunate. These include, firstly, a massive investment in CDOs (Collateralized Debt Obligations); secondly, Fortis? overly ambitious takeover of the large Dutch bank ABN AMRO; and thirdly, a communications policy focusing on problem denial at the start of the collapse in June 2008. The second part will examine the impact of these decisions and how they forced Fortis into a downward spiral as from June 2008.An interesting question is whether in this particular case the bank?s denial policy can be imputed to a lack of ethics or whether it was the result of a lack of well-managed financial communication vis-à-vis the various types of stakeholders. We follow de Bruin?s (1999) definition of financial communication as denoting “any activity involving financial information and the promotion of the financial corporate image” and Balmer and Dinnie?s (1999) categorization of target audiences to whom financial communication should be addressed.The Fortis case may become a textbook example of communication gone wrong because of the failure, on the one hand, to distinguish between financial information and financial communication, and on the other, to diversify communication strategies and formats aimed at different stakeholders. As shown by research conducted by Watson Wyatt (1999), the failure of the majority of mergers and acquisitions could have been prevented if more attention had been paid to what is defined in the literature as soft or peripheral issues. The communication of information to the various stakeholders is one such issue. The findings of our analysis of three decisive communication events in the Fortis case illustrate that companies which fail to recognize this and to act accordingly do so at their peril.
    Date: 2010–05
  14. By: Mauricio Olivera; Monica Pachon; Guillermo Perry
    Abstract: This paper explores the characteristics of the political economy process that conditioned the scope and success of the combination of fiscal reforms before and after Colombia’s 1991 constitutional reforms. Using formal analysis of reforms and interviews with actors, reforms in taxation, decentralization, the budgetary process and pensions are examined in times of political crisis, economic crisis, and economic boom. The results generally confirm the hypothesis that increased political fragmentation and limited unilateral executive power after the 1991 reforms restricted the extent of reforms, particularly in tax law. Nonetheless, the enactment of piecemeal reforms was encouraged by crisis conditions.
    Keywords: Policymaking process, Political economy, Structural reform, Colombia
    JEL: H20 H71 H77
    Date: 2010–05

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