New Economics Papers
on Business, Economic and Financial History
Issue of 2011‒06‒18
fourteen papers chosen by

  1. The Political Economy of Global Financial Liberalisation in Historical Perspective By Rui P. Esteves
  2. The microeconomics of bullionism : arbitrage, smuggling and silver outflows in Spain in the early 18th century By Pilar Nogues-Marco
  3. Knocking on Heaven’s Door? Protestantism and Suicide By Becker, Sascha O.; Woessmann, Ludger
  4. Una revisión del desempeño de la industria en Uruguay entre 1930 y 1959 By Arnabal, Rodrigo; Magdalena Bertino; Sebastián Fleitas
  5. Exports and Italy’s economic development: a long-run perspective (1863-2004) By Barbara Pistoresi; Alberto Rinaldi
  6. Different Paths to the Modern State in Europe: The interaction between domestic political economy and interstate competition By K. Kivanç Karaman & Sevket Pamuk
  7. Explicit Evidence on an Implicit Contract By Andrew T. Young; Daniel Levy
  8. Old Times, Better Times? German Miners’ Knappschaften, Pay-as-you-go Pensions, and Implicit Rates of Return, 1854–1913 By Tobias A. Jopp
  9. The Hazard of Merger by Absorption – Why Some Knappschaften Merged and Others Did not: 1861–1920 By Tobias Alexander Jopp
  10. French mega-suppliers’ trajectories during the modular era: some evidences on Faurecia, Valeo and Plastic Omnium By Vincent FRIGANT (GREThA)
  11. Persecution Perpetuated: The Medieval Origins of Anti-Semitic Violence in Nazi Germany By Nico Voigtlaender; Hans-Joachim Voth
  12. Mujeres en ascenso: dinámica del sistema educativo y del mercado laboral en Colombia, 1900-2000 By María del Pilar López-Uribe; Diana Quintero Castellanos; Loly Aylú Gaitán Guerrero
  13. Vintage capital theory: Three breakthroughs By Raouf Boucekkine; David De La Croix; Omar Licandro
  14. Big ideas: economic geography By Henry Overman

  1. By: Rui P. Esteves (Department of Economics and Brasenose College, University of Oxford,)
    Abstract: This paper is a first attempt to garner the theory and evidence on the political economy of the first wave of financial liberalisation during the nineteenth and early twentieth century, and of its demise after World War I. Not everyone gained from the process of globalisation (of trade, labour, and finance), which brought about important changes in the structure of the economy and the distribution of income in nations across the world. This paper explores how the economic incentives generated by these dislocations translated, through the political system, into choices about openness to foreign capital and financial integration. The period before World War I is remarkable by the almost absence of restrictions on cross-border capital flows, which may explain the little attention it has received in the historical literature, compared to the extensive study of trade protectionism in this period. After the War, many countries experimented with capital controls which varied in nature and intensity and were intensified during the Depression. Despite the attempt made here to reconcile these stylized facts to models of political economy, the analysis requires a better empirical foundation and some suggestions for further research are also proposed.
    Keywords: political economy, financial liberalisation, capital controls, pre-war
    JEL: F4 G18 N20
    Date: 2011–06–01
  2. By: Pilar Nogues-Marco
    Abstract: In the Early Modern period, there was a systematic flow of precious metals from the American colonies to Spain and Portugal and, from there, throughout the world. In this paper, I use newly discovered data on the black market for silver in Cadiz to reconstruct a picture of Castilian smuggling and international silver flows in the Age of Bullionism (1729-1741). The arbitrage equation shows persistent violations of the silver-point that made arbitrage systematically profitable until devaluation pegged the exchange rate to the arbitrated parity. Market structure explains the persistent violations. The Cadiz shadow price was lower than the international market price because bullionist regulations configured an oligopsonistic structure. The price gap was the reason for the Castilian silver outflows to Europe
    Keywords: Bullionism, Capital controls, Silver outflows, Silver-point mechanism, Smuggling, Oligopsony, Arbitrage
    JEL: D43 E52 L22 N13
    Date: 2011–06
  3. By: Becker, Sascha O. (University of Warwick, Ifo, CEPR, CESifo, and IZA); Woessmann, Ludger (University of Munich, Ifo, CESifo, and IZA)
    Abstract: We model the effect of Protestant vs. Catholic denomination in an economic theory of suicide, accounting for differences in religious-community integration, views about man’s impact on God’s grace, and the possibility of confessing sins. We test the theory using a unique micro-regional dataset of 452 counties in 19th century Prussia, when religiousness was still pervasive. Our instrumental-variable model exploits the concentric dispersion of Protestantism around Wittenberg to circumvent selectivity bias. Protestantism had a substantial positive effect on suicide in 1816-21 and 1869-71. We address issues of bias from mental illness, misreporting, weather conditions, within-county heterogeneity, religious concentration, and gender composition. Key words: Religion ; suicide ; Prussian economic history JEL classification: Z12 ; N33
    Date: 2011
  4. By: Arnabal, Rodrigo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Magdalena Bertino (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Sebastián Fleitas (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: The process of industrialization by import substitutions in Uruguay has shown special characteristics in the Latin-American context, given its early beginning and its rapid conclusion. Additionally, this period has presented the biggest economic growth in the Uruguayan history, where significant advances in the quality of life of the population were made. This is why many contributions have been made in order to try to understand, describe and explain this process, both at a global level, as well as by industrial sectors. Nevertheless, the last efforts in this direction date back two decades. This work revisits the performance of the industry from a sector perspective. To do so, first of all, the main previous works in this matter are discussed, together with the introduction of a new database of industrial performance by sectors. Then, a quick description of the macroeconomic evolution results in the study of the industries performance through several dimensions: critical analysis of industrial classifications criteria; output, employment, productivity and wages evolution; and a brief discussion of economic growth and wages behavior par rapport to productivity.
    Keywords: Industrial sectors, Wages, Productivity, Uruguay
    JEL: N66 O25 L16
    Date: 2011–04
  5. By: Barbara Pistoresi; Alberto Rinaldi
    Abstract: This paper investigates the relationship between real export and real GDP in Italy from 1863 to 2004 by using cointegration analysis and causality tests. The outcome suggests that these variables comove in the long run but the direction of causality depends on the level of economic development: in the period prior to WW1 the growth of the Italian economy led that of exports, while in the post-WW2 period the causal relationship was reversed with the expansion of exports that determined the growth of the Italian economy
    Keywords: Export led growth hypothesis, unit root tests, cointegration analysis, Granger – causality
    JEL: F43 O11 N1 N7
    Date: 2011–05
  6. By: K. Kivanç Karaman & Sevket Pamuk
    Abstract: Theoretical work on state formation and capacity has focused mostly on early modern Europe and on the experience of western European states during this period. While a number of European states monopolized domestic tax collection and achieved gains in state capacity during the early modern era, for others revenues stagnated or even declined, and these variations motivated alternative hypotheses for determinants of fiscal and state capacity. In this study we test the basic hypotheses in the existing literature making use of the large date set we have compiled for all of the leading states across the continent. We find strong empirical support for two prevailing threads in the literature, arguing respectively that interstate wars and changes in economic structure towards an urbanized economy had positive fiscal impact. Regarding the main point of contention in the theoretical literature, whether it was representative or authoritarian political regimes that facilitated the gains in fiscal capacity, we do not find conclusive evidence that one performed better than the other. Instead, the empirical evidence we have gathered lends supports to the hypothesis that when under pressure of war, the fiscal performance of representative regimes was better in the more urbanized-commercial economies and the fiscal performance of authoritarian regimes was better in rural-agrarian economies.
    Date: 2011–05–30
  7. By: Andrew T. Young (West Virginia University); Daniel Levy (Bar-Ilan University, Emory University, and RCEA)
    Abstract: We offer the first direct evidence of an implicit contract in a goods market. The evidence we offer comes from the market for Coca-Cola. We demonstrate that the Coca-Cola Company left a substantial amount of written evidence of its implicit contract with its consumers—a very explicit form of an implicit contract. The contract represented the promise of a five cent (nominal) price and adherence to the “Secret Formula”. In general, the implicit nature of such contracts makes observation difficult. To overcome this difficulty, we adopt a narrative approach. Based on the analysis of a large number of historical documents obtained from the Coca-Cola Archives and other sources, we offer evidence of the Coca-Cola Company both acknowledging and acting on this implicit contract. We also make another unique contribution by exploring quality as a margin of adjustment available to Coca-Cola. The implicit contract included a promise not only of a constant nominal price but also a constant quality (i.e., 6.5 oz. of the Secret Formula). During a period of over 70 years, we find evidence of only a single case of true quality change. By studying the margin of adjustment the Coca-Cola Company chose in response to changes in market conditions, we demonstrate that the perceived costs of breaking the implicit contract were large. We argue that one piece of direct evidence on the magnitude of these costs is the aftermath “New Coke’s” introduction in 1985.
    Keywords: Implicit Contract, Explicit Contract, Invisible Handshake, Customer Market, Long- Term Relationship, Price Rigidity, Nickel Coke, Coca-Cola
    JEL: E12 E31 L14 L16 L66 M30 N80 A14
    Date: 2011–03
  8. By: Tobias A. Jopp
    Abstract: This paper contributes to the literature on the weakness of modern pay-as-you-go social security systems in financing pensions by taking a business and economic historical perspective on the issue. It focuses on Prussian Knappschaften (plural of Knappschaft), which provided miners with compulsory invalidity and implicit old-age insurance, and studies the period from 1854 to 1913. Knappschaften used the pay-as-you-go mechanism, and, in the long-term, came under financial pressure by the rising number of pensioners. The question to be answered is whether Knappschaften were able to off er cohorts of miners entering the system at diff erent times the same implicit rates of return. Did Knappschaften provide an intergenerationally sustainable policy, or did adjustments of contributions and other parameters decrease the dividend for insured miners over time?
    Keywords: Insurance; implicit rates of return; Knappschaft; mining; pay-as-you-go; pensions; Prussia; welfare state
    JEL: N33 N83 H53 H55
    Date: 2011–01
  9. By: Tobias Alexander Jopp
    Abstract: By the mid-19th century, following the Prussian mining reform, German miners‘ combined mutual health and pension funds took on the characteristics of social insurance and underwent a concentration process driven by mergers, liquidations, and unequal internal growth. This paper investigates the determinants of mergers by absorption among Prussian funds combined with quantitative evidence from a regression model, provides new insights into the first social-insurance merger wave in Germany. While most contemporary sources convey the impression that funds were merged to stabilize the entire insurance scheme by sorting out actuarially unviable and financially distressed funds, statistical evidence suggests that funds were absorbed over time primarily because they offered advantages to the absorbing fund and, hence, were quite attractive targets.
    Keywords: Competing risk; financial distress; insurance; Knappschaft; liquidation; merger; mining
    JEL: C41 G22 G23 I31
    Date: 2011–03
  10. By: Vincent FRIGANT (GREThA)
    Abstract: The purpose of this paper is to present factual elements concerning the rise (decline) of French mega-suppliers. The study will focus on France’s three main mega-suppliers, all actors that have had a stake in carmakers’ modularisation strategies: Faurecia, Plastic Omnium and Valeo. Section 1 returns to the late 1980s and shows that the emergence of today’s mega-suppliers is rooted in this era and was piloted by French carmakers. Section 2 positions French mega-suppliers in a global hierarchy and distinguishes between two varieties: suppliers of simple parts; and module suppliers, with the latter constituting the focus for the rest of this text. Section 3 shows how module suppliers’ rise is rooted in their aggressive mergers and acquisitions (M&A) strategies. It also demonstrates differences between suppliers in terms of the two leading acquisition strategies that were observed. Section 4 explains why these companies’ profitability continues to disappoint, developing the idea that modular strategies imply a big rise in fixed costs, something that suppliers cannot knock onto sales prices. Finally, section 5 returns to companies’ internationalisation strategies and offers a typology for the different entities that mega-suppliers consolidate
    Keywords: modularity, supply chain, industrial architecture, automobile.
    JEL: L23 L24 L62 N84
    Date: 2011
  11. By: Nico Voigtlaender; Hans-Joachim Voth
    Abstract: How persistent are cultural traits? This paper uses data on anti-Semitism in Germany and finds continuity at the local level over more than half a millennium. When the Black Death hit Europe in 1348-50, killing between one third and one half of the population, its cause was unknown. Many contemporaries blamed the Jews. Cities all over Germany witnessed mass killings of their Jewish population. At the same time, numerous Jewish communities were spared. We use plague pogroms as an indicator for medieval anti-Semitism. Pogroms during the Black Death are a strong and robust predictor of violence against Jews in the 1920s, and of votes for the Nazi Party. In addition, cities that saw medieval anti-Semitic violence also had higher deportation rates for Jews after 1933, were more likely to see synagogues damaged or destroyed in the 'Night of Broken Glass' in 1938, and their inhabitants wrote more anti-Jewish letters to the editor of the Nazi newspaper <i>Der Stürmer.</i>
    JEL: N33 N34 N53 N54 Z1 Z10
    Date: 2011–06
  12. By: María del Pilar López-Uribe; Diana Quintero Castellanos; Loly Aylú Gaitán Guerrero
    Abstract: El objetivo principal de la presente investigación es describir y analizar los cambios en la transmisión de conocimiento en los establecimientos educativos femeninos de Bogotá y la participación de la mujer dentro del mercado laboral bogotano. Con base en los resultados que arrojó la Encuesta de empleo de 1963-1970 para Bogotá y la Encuesta Integrada de hogares 2006, se elaboró un estudio por cohortes para analizar la relación entre educación y participación laboral femenina. Adicionalmente, se realizó una exhaustiva revisión de los Diarios Oficiales entre 1900 y 1950, con el fin de identificar las principales leyes y decretos educativos y la evolución en la estructura curricular de las escuelas para hombres y mujeres. Asimismo, se revisaron los principales periódicos nacionales de la época para analizar los cambios en la mentalidad sobre el papel de la mujer dentro de la sociedad bogotana. Los principales resultados de la investigación revelan que la mujer tuvo un rol más activo dentro de la sociedad al ingresar a la universidad y al mercado laboral. Así, el promedio de años de educación de la mujer aumentó de 3 a casi 6, durante la primera mitad del siglo XX y, a partir de la cohorte de los años treinta, la mujer comenzó a integrarse más al mercado laboral como resultado de las políticas educativas y los cambios en la estructura y en la organización de la economía nacional.
    Date: 2011–05–16
  13. By: Raouf Boucekkine (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); David De La Croix (CORE - Department of Economics - Université Catholique de Louvain); Omar Licandro (IAE - Institut d'Anàlisi Econòmica - Universitat Autónoma de Barcelona)
    Abstract: Vintage capital growth models have been at the heart of growth theory in the 60s. This research line collapsed in the late 60s with the so-called embodiment controversy and the technical sophisitication of the vintage models. This paper analyzes the astonishing revival of this literature in the 90s. In particular, it outlines three methodological breakthroughs explaining this resurgence: a growth accounting revolution, taking advantage of the availability of new time series, an optimal control revolution allowing to safely study vintage capital optimal growth models, and a vintage human capital revolution, along with the rise of economic demography, accounting for the vintage structure of human capital similarly to physical capital age structuring. The related literature is surveyed.
    Keywords: Vintage capital; embodied technical progress; growth accounting; optimal control; endogenous growth; vintage human capital; demography.
    Date: 2011–06–08
  14. By: Henry Overman
    Abstract: Henry Overman sketches the evolution of CEP research on why prosperity is so unevenly distributed across cities, regions and nations
    Date: 2011–03

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