New Economics Papers
on Business, Economic and Financial History
Issue of 2012‒03‒28
seventeen papers chosen by

  1. Slave numeracy in the Cape Colony and comparative development in the eighteenth century By Jörg Baten; Johan Fourie
  2. Political Institution and Long Run Economic Trajectory: Some Lessons from Two Millennia of Chinese Civilization By Ma, Debin
  3. Italy’s Comparative Advantage: A Long-Run Perspective By Federico, Giovanni; Wolf, Nikolaus
  4. Who Are the Entrepreneurs: The Elite or Everyman? By Haveman, Heather A.; Habinek, Jacob; Goodman, Leo A.
  5. Shanghai’s Trade, China’s Growth: Continuity, Recovery, and Change since the Opium War By Keller, Wolfgang; Li, Ben; Shiue, Carol Hua
  6. Democratization and Civic Capital By Guiso, Luigi; Pinotti, Paolo
  7. Rent dissipation or government predation ? The notes issuance activity in Italy 1865-1882 By Antoine Gentier; Giuseppina Gianfreda; Nathalie Janson
  8. Stability in long-term growth : evidence for a single deterministic trend in Germany (1870-1989) By Belliveau, Stefan
  9. A Century of Human Capital and Hours By Diego Restuccia; Guillaume Vandenbroucke
  10. The Legacy of Historical Conflict: Evidence from Africa By Besley, Timothy J.; Reynal-Querol, Marta
  11. A Series of Unfortunate Events: Common Sequencing Patterns in Financial Crises By Reinhart, Carmen
  12. Rethinking China.s Path of Industrialization By Wu, Harry X.
  13. ONE UNIVERSITY: The Evolution of an Idea By Patricia A. Pelfrey
  14. What doesn’t kill you makes you stronger? The Impact of the 1918 Spanish Flu Epidemic on Economic Performance in Sweden By Karlsson, Martin; Nilsson, Therese; Pichler, Stefan
  15. The Costs of VAT: A Review of the Literature By Luca Barbone; Richard Bird; Jaime Vázquez Caro
  16. El financiamiento de la seguridad social en el Uruguay (1896-2008): una aproximación a su análisis en el largo plazo By Ulises García Repetto
  17. Chipping Away at Tobacco Traditions in Tobacco Country: Tobacco Industry Political Influence and Tobacco Policy Making in North Carolina 1969-2011 By Washington, Michelle; Barnes, Richard L; Glantz, Stanton

  1. By: Jörg Baten; Johan Fourie
    Abstract: The lack of accurate measures of human capital formation often constrain investigations into the long-run determinants of growth and comparative economic development, especially in regions such as Africa. Using the reported age of criminals in the Courts of Justice records in the Cape Archive, this paper documents, for the first time, the levels of and trends in numeracy for inhabitants of the Cape Colony born between the seventeenth and early nineteenth centuries. Cape inhabitants included the native Khoe and San, European settlers, and imported slaves from other African regions and Asia. This hodgepodge of individuals allows a unique comparison between contemporaneous levels of 18th century development across three continents. By isolating those slaves born at the Cape, we also provide a glimpse into the dynamics of human capital transfer in colonial settings.
    Keywords: Education, Human Capital, South Africa, Whipple, Age-heaping, Africa, Asia
    JEL: N37 O15 I25
    Date: 2012
  2. By: Ma, Debin
    Abstract: Based on a reconstruction of a weighted index of political unification and a time series of incidences of warfare for the past two millennia, this paper develops a narrative to show that the establishment and consolidation towards a single unitary monopoly of political power in China was an endogenous historical process. Drawing on new institutional economics, this article develops a historical narrative to demonstrate that monopoly rule, a long time-horizon and the large size of the empire could give rise to a path of low-taxation and dynastic stability co-evolving with the growth of a private sector under China’s imperial system. But the fundamental problems of incentive misalignment and information asymmetry within its centralized and hierarchical political structure also placed limits to institutional change necessary for modern economic growth.
    Keywords: incentive and information; political institution; unification and fragmentation; warfare
    JEL: H50 N4 O11
    Date: 2012–01
  3. By: Federico, Giovanni; Wolf, Nikolaus
    Abstract: The growth of the Italian economy over the past 150 years since unification was accompanied by a dramatic increase in the country’s integration with European and global commodity markets: foreign trade in the long run grew on average faster than the overall economy. Behind the dynamics of aggregate trade, Italy’s comparative advantage changed fundamentally over the last 150 years. The composition of trade, in terms of both commodities imported and exported and in terms of trading partners, developed from a high concentration of a few trading partners and a handful of rather simple commodities into a wide diversification of trading partners and more sophisticated commodities. In this paper we exploit a new long-term database on Italian foreign trade at a high level of disaggregation to document and analyze these changes. We conclude with an assessment of Italy’s growth prospects from a historical perspective.
    Keywords: 19th and 20th century; comparative advantage; international trade; Italy
    JEL: F14 N73 N74
    Date: 2012–01
  4. By: Haveman, Heather A.; Habinek, Jacob; Goodman, Leo A.
    Abstract: We trace the social positions of the men and women who found new enterprises from the earliest years of one industry’s history to a time when the industry was well established. Sociological theory suggests two opposing hypotheses. First, pioneering entrepreneurs are socially prominent individuals from fields adjacent to the new industry and later entrepreneurs are from an increasingly broad swath of society. Second, the earliest entrepreneurs come from the social periphery while later entrepreneurs include more industry insiders and members of the social elite. To test these hypotheses, we study the magazine industry in America over the first 120 years of its history, from 1741 to 1860. We find that magazine publishing was originally restricted to industry insiders, elite professionals, and the highly educated, but by the time the industry became well established, most founders came from outside publishing and more were of middling stature – mostly small-town doctors and clergy without college degrees. We also find that magazines founded by industry insiders remained concentrated in the three biggest cities, while magazines founded by outsiders became geographically dispersed. Finally, we find that entrepreneurship evolved from the pursuit of a lone individual to a more organizationally-sponsored activity; this reflects the modernization of America during this time period. Our analysis demonstrates the importance of grounding studies of entrepreneurship in historical context. Our analysis of this “old†new media industry also offers hints about how the “new†new media industries are likely to evolve.
    Keywords: Organizational Behavior and Theory
    Date: 2011–04–23
  5. By: Keller, Wolfgang; Li, Ben; Shiue, Carol Hua
    Abstract: In this paper, we provide aggregate trends in China’s trade performance from the 1840s to the present. Based on historical benchmarks, we argue that China’s recent gains are not exclusively due to the reforms since 1978. Rather, foreign economic activity can be understood by developments that were set in motion in the 19th century. We turn our focus to Shanghai, currently the world’s largest port. Shanghai began direct trade relations with western nations starting in 1843. By 1853, Shanghai already accounted for more than half of China’s foreign trade. In tracking the levels and growth rates of the city’s net and gross imports and exports, foreign direct investment, and foreign residents over more than a century, we find that Shanghai’s level of bilateral trade today with the United States, the United Kingdom, or Japan, for example, are by no means high given Shanghai’s 19th century experience. This paper argues that a regional approach that embeds national trading destinations within an international trading system provides a meaningful approach to understanding the history of China’s trade.
    Keywords: colonialism; foreign direct investment; institutions; international migration; re-exports; treaty port
    JEL: F10 F22 F23 N65 N70 N95
    Date: 2012–01
  6. By: Guiso, Luigi; Pinotti, Paolo
    Abstract: We document a sharp reversal in electoral participation between the North and the South of Italy after the 1912 enfranchisement which extended voting rights from a limited élite to (almost) all adult males. When voting was restricted to the élite, electoral turnout was higher in the South but falls significantly below that in the North after the enfranchisement. Furthermore the new gap is never bridged over the following century and participation remains lower in the South despite the enrichment of democratic institutions and further extension of voting rights to the female population during the post war democratic republic. This pattern in the data is consistent with a simple model where individuals’ voting in political elections is affected by private benefits and by civic duty, only elites can grab private benefits from participation in politics and civic culture differs across communities. We also find that extension of voting rights to non-elites results in a significant transfer of power to their political organizations only among populations with a high sense of civic duties. Together with the very persistent gap in participation between North and South our findings suggest that democratization – a process of concession of democratic rights – can benefit non-elites only when the latter have already a high sense of civic capital and is unlikely to be a viable avenue for inducing norms of civic behavior.
    Keywords: civic capital; culture; Democracy; institutions formation
    JEL: A1 E0 N4 Z1
    Date: 2012–02
  7. By: Antoine Gentier (CERGAM-CAE, Aix-Marseille Université); Giuseppina Gianfreda (University of Tuscia); Nathalie Janson (Rouen School of Management)
    Abstract: The aim of the paper is to examine the hypothesis of rent dissipation in the case of the Italian banking system during the suspension of gold convertibility. The major bank of the new born state of Italy – the Banca Nazionale nel regno d’Italia – experienced over the period 1866-1881 a decrease in its profitability inconsistent with the suspension of convertibility exclusively granted to its notes until 1874 but consistent with rent-seeking activity. The Banca Nazionale d’Italia was giving up present profit in order to maximize its chance to get the monopoly over money issue. Under these circumstances the rent seeking cost is not represented by the bribes offered to civil servants but by the forgone profit borne by shareholders. The complex relationships between banks and government in order to capture the benefits of seignoriage lead to a rent seeking game with evolving rules. The government changed the rules, and adopted an opportunistic behavior.
    Keywords: rent-seeking, dissipation of the rent, seignoriage, free banking, investment effort, social waste
    JEL: N23 G21 G28 E42 D72 D73
    Date: 2011
  8. By: Belliveau, Stefan
    Abstract: This working paper presents analysis about long-term trend in economic growth by examining per-capita GDP in Germany for the years 1870-1989. It supports explanation for economic growth by way of a single, deterministic trend in market-centered economies, when holding non-economic features constant. This working paper's conclusions do not exclude the possibility that a change to trend growth in per-capita GDP occurs in the post-war German period; but it is suggestive that a single, deterministic trend is more influential than the surface data appear.
    Keywords: Economic growth ; economic history ; Germany; 1870-1989
    JEL: N13 N00 O50 O52 N14
    Date: 2012–03–20
  9. By: Diego Restuccia; Guillaume Vandenbroucke
    Abstract: An average person born in the United States in the second half of the nineteenth century completed 7 years of schooling and spent 58 hours a week working in the market. By contrast, an average person born at the end of the twentieth century completed 14 years of schooling and spent 40 hours a week working. In the span of 100 years, completed years of schooling doubled and working hours decreased by 30 percent. What explains these trends? We consider a model of human capital and labor supply to quantitatively assess the contribution of exogenous variations in productivity (wage) and life expectancy in accounting for the secular trends in educational attainment and hours of work. We find that the observed increase in wages and life expectancy account for 80 percent of the increase in years of schooling and 88 percent of the reduction in hours of work. Rising wages alone account for 75 percent of the increase in schooling and almost all the decrease in hours in the model, whereas rising life expectancy alone accounts for 25 percent of the increase in schooling and almost none of the decrease in hours of work.
    Keywords: Schooling, hours of work, productivity, life expectancy, trends, United States
    JEL: E1 I25 J11 O4
    Date: 2012–03–21
  10. By: Besley, Timothy J.; Reynal-Querol, Marta
    Abstract: There is a great deal of interest in the causes and consequences of conflict in Africa, one of the poorest areas of the world where only modest economic progess has been made. This paper asks whether post-colonial conflict is, at least in part, a legacy of historical conflict by examining the empirical relationship between conflict in Africa since independence with recorded conflicts in the period 1400 to1700. We find evidence of a legacy of historical conflicts using between- country and within-country evidence. The latter is found by dividing the continent into 120kmm-20km grids and measuring the distance from 91 documented historical conflicts.We also provide evidence that historical conflict is correlated with lower levels of trust, a stronger sense of ethnic identity and a weaker sense of national identity.
    Keywords: conflict; identity; trust
    JEL: N47 O43 O55
    Date: 2012–02
  11. By: Reinhart, Carmen
    Abstract: We document that the global scope and depth of the crisis the began with the collapse of the subprime mortgage market in the summer of 2007 is unprecedented in the post World War II era and, as such, the most relevant comparison benchmark is the Great Depression (or the Great Contraction, as dubbed by Friedman and Schwartz, 1963) of the 1930s. Some of the similarities between these two global episodes are examined but the analysis of the aftermath of severe financial crises is extended to also include the most severe post-WWII crises as well. As to the causes of these great crises, we focus on those factors that are common across time and geography. We discriminate between root causes of the crises, recurring crises symptoms, and common features (such as misguided financial regulation or inadequate supervision) which serve as amplifiers of the boom-bust cycle. There are recurring temporal patterns in the boom-bust cycle and their broad sequencing is analyzed.
    Keywords: debt; default; financial crises; financial repression
    JEL: E6 F3 N0
    Date: 2012–01
  12. By: Wu, Harry X.
    Abstract: This study shows that China.s post-1949 state-led industrialization has closely followed an underlying path that began in the late nineteenth century. It was initiated by pressing national defence needs and has since been motivated by the same and strong incentives for a faster catch-up with the West despite radical regime shifts. Government determined or influenced resource allocation benefited selected industries and hence nurtured vested interest groups connecting and integrating with the ruling elite, which have strengthened and sustained the path. This means that the path is inherently inefficient which is evidenced by a newly constructed dataset. Reform measures can only temporarily improve efficiency performance, but are unable to break the path in the absence of a genuine political democracy.
    Keywords: government engineered industrialization, path dependence, central planning, economic reform, efficiency
    Date: 2011
  13. By: Patricia A. Pelfrey
    Abstract: The one-university idea—that the University of California is a single institution whose campuses are united in the pursuit of a common mission and common standards of quality—has been a guiding organizational principle since UC President Robert Gordon Sproul first articulated it in the 1930s. This paper examines the origins of the one-university idea in the Sproul era, the role it has played in UC’s institutional development through waves of decentralization and campus expansion, and whether it remains relevant today.
    Keywords: Education
    Date: 2011–01–01
  14. By: Karlsson, Martin; Nilsson, Therese; Pichler, Stefan
    Abstract: We study the impact of the 1918 influenza pandemic on economic performance in Sweden. The pandemic was one of the severest and deadliest pandemics in human history, but it has hitherto received only scant attention in the economic literature – despite important implications for modern-day pandemics. In this paper, we exploit seemingly exogenous variation in incidence rates between Swedish regions to estimate the impact of the pandemic. Using difference-in-differences and high-quality administrative data from Sweden, we estimate the effects on earnings, capital returns and poverty. We find that the pandemic led to a significant increase in poverty rates. There is also relatively strong evidence that capital returns were negatively affected by the pandemic. On the other hand, we find robust evidence that the influenza had no discernible effect on earnings. This finding is surprising since it goes against most previous empirical studies as well as theoretical predictions.
    Keywords: Spanish Flu; Difference-in-Differences
    Date: 2012–03–16
  15. By: Luca Barbone; Richard Bird; Jaime Vázquez Caro
    Abstract: This paper reviews the published literature on the definition and measurement of the administrative and compliance costs of taxation, with special reference to VAT (including evasion and fraud) in the European Union.
    Keywords: Taxation, Subsidies, Revenue
    JEL: H20 H21 H25 H26 M48
    Date: 2012
  16. By: Ulises García Repetto (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper presents an estimation of the revenues of the Uruguayan pension system, its financial situation and itsimpact on the Central Government finances between 1896 and 2008. The revenues and expenditures of the Social Security Bank (wich covers the retirement funds for workers of the Civil Service and Public Schools, Industry and Commerce, Rural and Domestic)are discussed. The paper also considers the public retirement funds directly paid by the State (for military and policy personnel)and others non public retirement funds (workers of the banking system, Notaries, University Professionals). We study the use of financial instruments, the evolution of the rights garanted to the beneficiaries and the various crises that affected the system that imposed a heavy burden on the finances of the central government. We also present an overview of the institutional process to organize the system and the institutional arrangements arrived at in different moments to salve the problems that emerged in terms of retirement and pension payments.
    Keywords: social security, financial balances, crisis, financial assistance
    JEL: N26 H55
    Date: 2011–11
  17. By: Washington, Michelle; Barnes, Richard L; Glantz, Stanton
    Abstract: North Carolina, the top U.S. tobacco producing state and home to RJ Reynolds and Lorillard tobacco companies, has a historic, economic, and social legacy tied to tobacco, creating particular resistance to tobacco control efforts. The tobacco manufacturers historically relied on tobacco grower organizations, which had more influence on political and public opinion than tobacco manufacturers, to act on their behalf to shape policy in North Carolina. To influence policymakers, between 1996 and 2008, the tobacco industry contributed nearly $1.3 million to North Carolina political parties and individual candidates for state-level office, focusing contributions around pivotal elections, with candidates for governor and key legislative leadership being the largest recipients. There is a statistically significant relationship between the amount of tobacco industry campaign contributions a legislator received and his or her support for pro-tobacco policies. In 1969, North Carolina became the last state in the nation to enact an excise tax on tobacco, a modest 2 cents. Due to the passage of the 1969 excise tax, the Tobacco Institute increased its lobbying presence in 1972. As early as the late 1960s, the tobacco manufacturers anticipated that if North Carolina increased their tobacco excise tax other states would follow. They devoted considerable resources to defeating tobacco excise tax increase proposals, and as a result there were only small incremental increases in the tax during the 1990’s and 2000’s, still placing North Carolina 45th for tobacco excise taxes in 2011 (at $0.45 per pack). North Carolina was one of a few states, and the only tobacco growing state, that participated in both the National Cancer Institute COMMIT (1986-1995) and ASSIST (1991-1998) studies. ASSIST allowed the state to create a lasting tobacco control infrastructure by setting up local tobacco control coalitions in the majority of key media markets throughout the state. The resulting state tobacco control infrastructure remained active even after the studies ended and was still active in 2011. Beginning in the late 1980s, local jurisdictions began adopting policies to restrict smoking in publicly owned government buildings. By 1993, 15 counties and 22 cities had some kind of policy to restrict public smoking including in restaurants throughout North Carolina. In response to health advocates’ growing success in passing local clean indoor air ordinances and board of health regulations, in 1993 the tobacco industry secured passage of a weak, preemptive state “dirty air†law which only allowed local jurisdictions to pass smoking restrictions for 90 days. (Eighty-nine more communities passed ordinances during his 90 day window.) The tobacco industry sued and invalidated the local county board of health regulations, prompting the tobacco control advocates to implement a strategy to “chip away†at resistance to tobacco control policies, beginning with youth access laws. In 1997 advocates began working to implement voluntary tobacco free school campus policies, an important step in changing social norms around tobacco use, with support in 2000 from Gov. James Hunt (D). By 2007, 75 percent of the school districts were voluntarily tobacco free when the state legislature enacted legislation requiring all school districts to be 100% tobacco free by August 1, 2008. North Carolina attorney general Michael Easley (D) did not sue the tobacco industry in the mid-1990s, but was one of the negotiators of the Master Settlement Agreement in 1998. He filed a pro-forma suit in 1998 so North Carolina could benefit from the cash payouts in the MSA, amounting to $4.6 billion over the first 25 years of the MSA for North Carolina. In 1999, the Legislature allocated 75% of North Carolina’s MSA money to diversify the state’s tobacco dependent economy and 25% to health related programs, of which a small portion was spent on youth-oriented tobacco-related projects beginning in 2002. In 2000, the Department of Health and Human Services Tobacco Prevention and Control Branch, along with tobacco control advocates, created the Vision 2010 strategic plan for the tobacco control part of the MSA money, including youth prevention programs and tobacco free school campuses, adding resources and funding for programming. The federal tobacco quota buyout in 2004 exacerbated the rift between the tobacco growers and manufacturers, resulting in reduced tobacco farmers’ opposition to tobacco control policies. Tobacco control advocates successfully used this lack of opposition to begin a push for stronger tobacco control laws. Despite tobacco manufacturers’ opposition, between 2003 and 2009 state tobacco control advocates built strong coalitions including nontraditional partners such as the hospitality industry, cultivated relationships with key legislators, and generated grassroots support resulting in 100% tobacco free schools, prisons and hospitals, and 100% smokefree government buildings, long-term care facilities, restaurants, and bars, effectively “chipping away†at preemption. In 2009 North Carolina became the first tobacco growing state to implement a statewide 100% smokefree restaurant and bar law. The 2009 law also partially repealed preemption, giving local governments the authority to enact more stringent restrictions on outdoor public property. Private workplaces remained preempted. Between 2003 and 2009, it was not uncommon for a state legislator to receive campaign contributions from the tobacco industry and then vote in favor for tobacco control policies, suggesting declining tobacco industry influence among policymakers. Tobacco control gains in North Carolina were incremental and required continue persistence and coordinated collaboration among tobacco control advocates, which allowed meaningful policies to be implemented. Tobacco control advocates should continue to work to strengthen state tobacco control laws including 100% smokefree workplaces, repealing preemption of all smokefree laws, and securing higher excise taxes. Advocates should continue to leverage the existing divergence between the interests of tobacco manufacturers and growers by promoting alternative crop production and uses for tobacco, and coalition building to further strengthen the states tobacco control policies. -
    Keywords: Public Health
    Date: 2011–06–01

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