New Economics Papers
on Business, Economic and Financial History
Issue of 2010‒07‒17
nineteen papers chosen by

  2. Parallel Journeys: Adam Smith and Milton Friedman on the Regulation of Banking By Hugh Rockoff
  3. The Adult Recession: Age-Adjusted Unemployment at Post-War Highs By David Rosnick
  4. Georg de Buquoy - Founder of Mathematical Economy with South Bohemian Roots By Dalibor Stys; Miroslav Valcihova
  5. Monetary Policy under the Classical Gold Standard (1870s - 1914) By M Morys;
  6. The Long-Run Labor-Market Consequences of Civil War: Evidence from the Shining Path in Peru By Galdo, Jose
  7. America and its Immigrants: A Game of Mirrors By Alejandro Portes
  8. A guide to studying the socio-ecological transition in european agriculture By Manuel González de Molina
  9. Exploring the long-term impact of development interventions within life-history narratives in rural Bangladesh By Davis, Peter
  10. School Competition and Students' Entrepreneurial Intentions: International Evidence Using Historical Catholic Roots of Private Schooling By Falck, Oliver; Woessmann, Ludger
  11. Resolution of Banking Crises: The Good, the Bad, and the Ugly By Luc Laeven; Fabian Valencia
  12. Patterns of organization in the development of medical know-how: the case of glaucoma research By Consoli, Davide; Ramlogan, Ronnie
  13. The Great Depression in Belgium: an Open-Economy Analysis By Luca PENSIEROSO
  14. Institutions and Development in Mexico By Jose Luis Velasco
  15. Las instituciones laborales en Colombia Contexto histórico de sus antecedentes y principales desarrollos hasta 1990 By Mauricio Avella Gómez
  16. Work and Retirement Patterns for the G.I. Generation, Silent Generation, and Early Boomers: Thirty Years of Change By Richard Johnson; Barbara Butrica; Corina Mommaerts
  17. Instituciones y desarrollo en Argentina By Alejandro Grimson; Ana Castellani; Alexandre Roig
  18. La paradoja colombiana: un análisis institucionalista denso By César Rodríguez Garavito
  19. Institutions and National Development in Latin America: A Comparative Study By Alejandro Portes; Lori D. Smith

  1. By: Wilfredo Lozano (Ibero-American University)
    Abstract: This article summarizes the principal findings of the studies on institutions and development as they refer to the Dominican case study, in the context of the Project Institutions and Development in Latin America, which is directed by Alejandro Portes of the University of Princeton. The project analyses the national experiences of development in Mexico, Colombia, Argentina, Chile and the Dominican Republic, with regard to the contribution to national development in four specific institutional domains: the Stock Exchange, postal service, health and civil aviation. In the Dominican case, besides civil aviation and the postal service as in the other Latin American case studies, the public health system and not a specific organization in the system as well as the internal taxation system and not the stock exchange were studied.
    Keywords: latin america, development, Mexico, Colombia, Argentina, Chile, Dominican Republic, Alejandro Portes
    JEL: D40 E01 H50 N16
    Date: 2010–04
  2. By: Hugh Rockoff (Rutgers)
    Abstract: Adam Smith and Milton Friedman are famous for championing Laissez Faire, yet both supported government regulation of the banking system. In both cases their deviation from free market orthodoxy was based on a careful reading of financial history: especially Smith's reading of the Crisis of 1772 and Friedman's reading of the Crisis of 1929-33. In both cases they based their reading on a complex and nuanced account of human nature. This paper describes their parallel journeys to the conclusion that banking requires government regulation.
    Keywords: banking, Adam Smith, Milton Friedman
    JEL: B10
    Date: 2010–03–19
  3. By: David Rosnick
    Abstract: Since the Great Depression, the worst episode of unemployment came in the second half of 1982 and the first half of 1983. Over that time, the unemployment rate stayed above ten percent from September through June—reaching 10.8 percent of the labor force in November and December of 1982. A naïve examination of the raw unemployment rates would suggest that the downturn of the early 1980s resulted in a labor market even weaker than what we have experienced as a result of the collapse of the housing bubble. However, the demographics of the labor force have changed significantly over the last quarter century. After adjusting for the aging of the population since the early 1980s, the current labor-market downturn has resulted in both a higher unemployment rate and a longer period when the rate of unemployment remained over 10 percent.
    Keywords: unemployment, unemployment rate
    JEL: O51 E E2 E24 J J1 J11
    Date: 2010–07
  4. By: Dalibor Stys; Miroslav Valcihova
    Abstract: Georg de Buquoy, Lord de Vaux, lived in Nove Hrady, Prague and Cerveny Hradek for most of his productive life. From his extensive scientific contributions, both theoretical and experimental, we expand here the discussion of his contributions to mathematical economy. He is mainly celebrated as the first persons to define correctly net yield and describe method for its optimization, which was considered "strikingly modern" still in 1950. Buquoy's program was "systematic overview of all theorems which affect maintenance and increase of national wealth" for which he correctly defined and mathematically expressed many economic terms. The most striking feature of Buquoy's writing is that he was also a very influential economic practitioner. He governed one of the wealthiest possessions in Bohemia, and perhaps in Austria, of his time. Thus his economical thinking expands from the "political part", which is economy in modern sense, to "...sources of national wealth, or the technical part of national economy ...". The complexity of Buquoy's view has little match in modern literature namely because the extent of data sources is hardly available in modern times. The article puts Buquoy's mathematical economy contributions in context to his mathematical physics thoughts and approaches. The last direct citation of Buquoy's work comes from the year 2008.
    Date: 2010–07
  5. By: M Morys;
    Abstract: Drawing on monthly data for 12 European countries, this paper asks whether countries under the Classical Gold Standard followed the so-called “rules of the game” and, if so, whether the external constraint implied by these rules was more binding for the periphery than for the core. Our econometric focus is a probit estimation of the central bank discount rate behaviour. Three main findings emerge: First, all countries followed specific rules but rules were different for core countries as opposed to peripheral countries. The discount rate decisions of core countries were motivated by keeping the exchange-rate within the gold points. In stark contrast, the discount rate decisions of peripheral countries reflected changes in the domestic cover ratio. The main reason for the different rules was the limited effectiveness of the discount rate tool for peripheral countries which resulted in more frequent gold point violations. Consequently, peripheral countries relied on high reserve levels and oriented their discount rate policy towards maintaining the reserve level. Second, there was a substantial amount of discretionary monetary policy left to all countries, even though we find that core countries enjoyed marginally more liberty in setting their discount rate than peripheral countries. Third, interest rate decisions were influenced more by Berlin than by London, suggesting that the European branch of the Classical Gold Standard was less London-centered than hitherto assumed.
    Keywords: gold standard, rules of the game, balance-of-payment adjustment, central banking
    JEL: E4 E5 E6 F3 N13
    Date: 2010–07
  6. By: Galdo, Jose (Carleton University)
    Abstract: This study exploits district-level variation in the timing and intensity of civil war violence to investigate whether early-life exposure to civil wars affects labor-market outcomes later in life. In particular, we examine the impacts of armed conflict in Peru, a country that experienced the actions of a tenacious, brutally effective war machine, the Shining Path, between 1980 and 1995. This study finds that the most sensitive period to early-life exposure to civil war violence is the first 36 months of life. A one standard deviation increase in civil war exposure leads to a four percent fall in adult monthly earnings. Neither fetal, nor pre-school, periods significantly affect long-run earnings. Substantial heterogeneity in the earnings impacts emerge when considering variation in the types of civil war violence. Sexual violations disproportionally affected the wages of women, while torture and forced disappearances disproportionally affected the wages of men. Evidence on intervening pathways suggests that health rather than schooling is the most important channel in connecting early-life exposure to civil war and adult earnings.
    Keywords: civil war, earnings, measurement error, instrumental variable approach, Shining Path
    JEL: I12 J13 O12 O15
    Date: 2010–06
  7. By: Alejandro Portes (Princeton University)
    Abstract: After a lapse of over half a century, the United States has again become a country of immigration. In 1990, the foreign-born population reached 19.8 million or 7.9 percent of the total. By 2008, the number had grown to 39.3 million or 13 percent of the total. Although not yet reaching the situation a century ago, when immigrants accounted for 15 percent of the American population, that figure is being approached fast while the impact of contemporary immigration is significant and growing.2 The public image of contemporary immigration has been colored to a large extent by the Third World origins of most recent arrivals. Because the sending countries are generally poor, many Americans believe that the immigrants themselves are uniformly poor and uneducated. Their move is commonly portrayed as a one-way escape from hunger, want, and persecution and their arrival on U.S. shores as not too different from that of the tired, "huddled masses" that Emma Lazarus immortalized at the base of the Statue of Liberty. A common exercise is to compare this "new" immigration with the "old" inflow of the beginnings of the twentieth century. Similarities include the predominantly urban destination of most newcomers, their concentration in a few port cities, and their willingness to accept the lowest paid jobs. Differences are more frequently stressed, however, for the "old" immigration was overwhelmingly European and white; while the present inflow is, to a large extent, nonwhite and comes from countries of the Third World.
    Keywords: aspirations, expectations, immigrants, adaptation, United States
    JEL: D10 D63 H31 J11 N32
    Date: 2010–04
  8. By: Manuel González de Molina (Agro-Ecosystems History Laboratory. Pablo de Olavide University)
    Abstract: This paper shows the potential of the Social Metabolism approach to study the industrialization of the agriculture. It provides information about the physical functioning of agrarian systems over time and their spatial differences. It also sheds light on how the industrialisation of agriculture occurred; in other words, how the Socio-Ecological Transition (SET) took place in agriculture. The paper begins defining the characteristic features of the Organic Agrarian Metabolism (OAM), the starting point of Sociecological Transition. The next section examines the main changes there been in agrarian metabolism until its complete industrialization. This analysis is enriched by the concept of the SET since, by showing the paths followed by industrialisation from a physical perspective, it establishes the research agenda or points out a series of issues that should be prioritised in research; it facilitates identification of the driving forces for change that interact between social and environmental factors; and it establishes special scales in which transition occurs and the relationship between them. The paper ends with the application of this conceptual fremework to teh First Wave of industrialization in European Agriculture during 19th century.
    Keywords: Social Metabolism; Socio-Ecological Transition; Preindustrial Agriculture; Industrialised Agriculture; Agricultural Change
    JEL: Q10 Q11 Q19 N53
    Date: 2010–07
  9. By: Davis, Peter
    Abstract: This paper explores the long-term effects of a set of development interventions within the life trajectories of people in rural Bangladesh, using findings from 293 life-history interviews and an accompanying set of focus group discussions conducted in 2007. The paper uses various methods to address the challenge of assessing the long-term impact of development interventions. It then goes on to discuss what was learned about the impact of microfinance, educational transfer, and agricultural technology development programs from the life-history narratives. The life-history interviews show that microfinance services are now widespread in rural Bangladesh, with 55 percent of research participants having used these services for some kind of income-generating activity at some time. Microfinance contributed to at least one of the three or four most important causes of well-being improvement within the life trajectories in 18 percent of research participants. However, 37 percent of research participants used microcredit to cope with crises or to maintain consumption, rather than to generate income. Educational transfers, such as food for education and cash for education, were also viewed positively by research participants and were seen as contributing positively in the life histories of 29 percent of participants. However, educational transfers were listed as a main cause of life improvement for only 7 percent of participants. The impact of educational transfers was limited by the relatively low monetary value of the benefits received as compared with other, more important contributors of improvement. Most research participants receiving educational transfers reported that the funds were used to help with education expenses, food, and children’s clothing, with some participants reporting that without these funds, their children may have had to withdraw from school. The life-history interviews detected little long-term benefit from the agricultural technology programs, and a number of reasons for this fact are discussed in the paper.
    Keywords: development interventions, Microfinance, Poverty,
    Date: 2010
  10. By: Falck, Oliver (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: School choice research mostly focuses on academic outcomes. Policymakers increasingly view entrepreneurial traits as a non-cognitive outcome important for economic growth. We use international PISA-2006 student-level data to estimate the effect of private-school competition on students' entrepreneurial intentions. We exploit Catholic-Church resistance to state schooling in 19th century as a natural experiment to obtain exogenous variation in current private-school shares. Our instrumental-variable results suggest that a 10 percentage-point higher private-school share raises students' entrepreneurial intentions by 0.3-0.5 percentage points (11-18 percent of the international mean) even after controlling for current Catholic shares, students' academic skills, and parents' entrepreneurial occupation.
    Keywords: private school competition, entrepreneurship, Catholic schools
    JEL: I20 L33 L26 Z12
    Date: 2010–06
  11. By: Luc Laeven; Fabian Valencia
    Abstract: This paper presents a new database of systemic banking crises for the period 1970-2009. While there are many commonalities between recent and past crises, both in terms of underlying causes and policy responses, there are some important differences in terms of the scale and scope of interventions. Direct fiscal costs to support the financial sector were smaller this time as a consequence of swift policy action and significant indirect support from expansionary monetary and fiscal policy, the widespread use of guarantees on liabilities, and direct purchases of assets. While these policies have reduced the real impact of the current crisis, they have increased the burden of public debt and the size of government contingent liabilities, raising concerns about fiscal sustainability in some countries.
    Date: 2010–06–17
  12. By: Consoli, Davide; Ramlogan, Ronnie
    Abstract: This paper focuses on the longitudinal development of the glaucoma medical specialty with a view to capture the configurations of division of labor that contributed to or followed from novel understanding of the disease. The historical background is corroborated by an analysis of collaborative scholarly research over the period 1973-2003 to illustrate how successive clinical and scientific modalities co-existed and influenced each other.
    JEL: O33 I12
    Date: 2010–07–06
  13. By: Luca PENSIEROSO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper studies the Great Depression in Belgium within the open-economy dynamic general equilibrium approach. Results from the simulations show that a two-good model with total factor productivity shocks and nominal exchange rate shocks can account for most of the 1929-1934 output drop. The data mimicking ability of the model is good along other dimensions as well, most notably hours worked, the consumption price index and the terms of trade. The model is also able to catch some of the dynamics of imports and exports.
    Keywords: Great Depression, Belgium, Dynamic Stochastic General Equilibrium, Open Economy
    JEL: N14 F41 E13
    Date: 2010–05–31
  14. By: Jose Luis Velasco (National Autonomous University of Mexico)
    Abstract: In summarizing the five Mexican cases studied for the Institutions and Development project, The case studies summarized here were conducted from 2005 to 2008, and this paper refers mainly to that period. Yet, whenever possible, information coming from published documents or statistical reports was updated. This paper seeks to answer two main questions. First, what are the main characteristics of the five institutions analyzed, what differences and similarities are there among them? Second, what does the analysis of these institutions say about the situation of development-related institutions in Mexico?
    Keywords: development, Mexico
    JEL: D40 E01 H50 N16
    Date: 2010–04
  15. By: Mauricio Avella Gómez
    Abstract: La historia de las instituciones laborales colombianas gira alrededor del Código Sustantivo del Trabajo expedido en 1950. Aunque con antecedentes memorables en la legislación indiana, las primeras leyes laborales vieron la luz en las dos décadas de apertura del siglo XX; su florecimiento correspondió al período transcurrido entre las dos guerras mundiales, y la tarea de codificación se adelantó a fines de los cuarenta, de modo que el Código pudo expedirse en 1950 para que entrara en vigencia a partir de 1951. Los cambios que desde entonces se han introducido en las instituciones laborales del país, se han materializado como reformas al Código Sustantivo del Trabajo. La experiencia de un país con sus instituciones laborales no es independiente de su organización económica y política, y de sus relaciones con el resto del mundo. No sólo la economía, la política, y las tradiciones jurídicas, sino un amplio espectro de influencias culturales contribuyen a cimentar sus instituciones laborales. La construcción de dichas instituciones no transcurre en el vacío o limitada a sucesos cuyos alcances no desbordan las fronteras nacionales. La experiencia latinoamericana es ilustrativa de numerosos paralelos, similitudes, y en ocasiones de caminos alternativos que confluyeron en la formación de sus instituciones laborales; diversas iniciativas de legislación laboral en Colombia fueron adoptadas tras la revisión explícita de lo aprendido en otras partes del continente. Numerosas experiencias latinoamericanas revelan que la adopción de sus instituciones laborales no fue un proceso expedito; en Colombia, el Código Laboral vino a plasmarse varias décadas después de haberse planteado las primeras tentativas sistemáticas de organización codificada de la legislación. Además, dichos intentos no llevaron siempre el rótulo exclusivo de una ideología o partido político; con frecuencia el tema laboral sirvió de campo de acercamiento entre quienes parecían enarbolar banderas diferentes. La legislación laboral europea arribó a las costas latinoamericanas a principios del siglo XX con el sello de legislación protectora; dicho énfasis protector se afianzó en la primera posguerra, y conservó su predominio hasta entrados los años setenta, cuando se le achacó la falta de flexibilidad de los mercados laborales en numerosas economías. Las tres primeras grandes secciones de este trabajo se ocupan del surgimiento de la legislación laboral moderna en Europa y en los Estados Unidos. La cuarta está dedicada íntegramente a la formación de las instituciones laborales colombianas.
    Date: 2010–07–07
  16. By: Richard Johnson; Barbara Butrica; Corina Mommaerts
    Abstract: This study examines how the shifting choices and constraints facing older workers have changed work and retirement patterns over the past 30 years. Health improvements, declines in physical job demands, changes in Social Security rules, and the erosion in traditional defined benefit pension coverage and employer-sponsored retiree health insurance have altered work incentives at older ages. This paper compares labor force exits by older workers born 1913 to 1917 (part of the G.I. Generation), 1933 to 1937 (part of the Silent Generation), and 1943 to 1947 (part of the Baby Boom Generation). The analysis uses 16-year longitudinal panels from the Health and Retirement Study and decades-long administrative earnings records linked to respondents in the Survey of Income and Program Participation. The results show that early boomers worked longer than members of the Silent Generation, and that the pathways older workers follow out of the labor force have become more complex over time. The median retirement age for men was about one-half year higher in the 1943–47 cohort than in the 1933–37 cohort (62 vs. 61.5), but differences were more pronounced at older ages. By age 65, for example, 40 percent of early boomer men had not yet retired, compared with only 20 percent of Silent Generation men. Both male and female workers in the 1933–37 cohort were much less likely than their counterparts in the 1913–17 cohort to follow the traditional retirement path of exiting the labor force from full-time employment and never returning to work.
    Date: 2010–07
  17. By: Alejandro Grimson (National University General San Martin); Ana Castellani (National University General San Martin); Alexandre Roig (National University General San Martin)
    Abstract: El caso del desarrollo argentino ha presentado para diversos autores la peculiaridad del fracaso. Es frecuente comparar el lugar que ocupaba la Argentina en el concierto latinoamericano a inicios del siglo XX y a inicios del siglo XXI para mostrar a través de diferentes indicadores un proceso de declinación relativa. Una amplia literatura sobre la historia nacional y sobre el proceso de desarrollo adjudica a diferentes factores ese contraste entre el potencial del país (por recursos naturales pero también por nivel educativo de la población) y su proceso real. La devastación económica de la última dictadura militar, la “década perdida” del ochenta o el neoliberalismo de los noventa, vendrían a agregarse a procesos anteriores. La puja intersectorial, la imposibilidad de un grupo económico social de construir hegemonía desde la crisis del treinta en adelante, los vaivenes del peronismo-antiperonismo, son factores señalados.
    Date: 2010–04
  18. By: César Rodríguez Garavito (University of the Andes)
    Abstract: Quince años después de abandonar Colombia, donde vivió entre 1952 y 1956, Albert Hirschman publicó una demoledora reseña de un libro sobre la política y el Estado colombianos, escrito por un joven académico estadounidense, James Payne. En la reseña, incluida en A Bias for Hope, Hirschman se viene lanza en ristre contra la tesis del libro (Payne 1968).
    Date: 2010–04
  19. By: Alejandro Portes (Princeton University); Lori D. Smith (Princeton University)
    Abstract: We review the theoretical and empirical literatures on the role of institutions on national development as a prelude to present a more rigorous and measurable definition of the concept and a methodology to study this relationship at the national and subnational levels. The existing research literature features conflicting definitions of the concept of “institutions” and empirical tests based mostly on reputational indices, with countries as units of analysis. The present study’s methodology is based on a set of five strategic organizations studied comparatively in five Latin American countries. These include key federal agencies, public administrative organizations, and stock exchanges. Systematic analysis of results show a pattern of differences between economically-oriented institutions and those entrusted with providing basic services to the general population. Consistent differences in institutional quality also emerge across countries, despite similar levels of economic development. Using the algebraic methods developed by Ragin, we test six hypotheses about factors determining the developmental character of particular institutions. Implications of results for theory and for methodological practices of future studies in this field are discussed.
    Keywords: institutions, development, organizations, Latin America, Boolean algebra
    JEL: C01 D20 E01 N16
    Date: 2010–01

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