New Economics Papers
on Business, Economic and Financial History
Issue of 2012‒08‒23
thirty-six papers chosen by

  1. New Multi-City Estimates of the Changes in Home Values, 1920-1940 By Price V. Fishback; Trevor Kollmann
  2. What Was New About the New Deal? By Price V. Fishback; John Joseph Wallis
  3. The Spread of Manufacturing to the Periphery 1870-2007: Eight Stylized Facts By Agustin S. Benetrix; Kevin H. O'Rourke; Jeffrey G. Williamson
  4. Incentives that saved lives: Government regulation of accident insurance associations in Germany, 1884-1914 By Timothy W. Guinnane; Jochen Streb
  5. The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment By Richard Schmalensee; Robert Stavins
  6. Money Matters: A Critique of the Postan Thesis on Medieval Population, Prices, and Wages By John H. MUNRO
  7. Family Investment Strategies in Pre-modern Societies: Human Capital, Migration, and Birth Order in Seventeenth and Eighteenth Century England By Marc Klemp; Chris Minns; Patrick Wallis; Jacob Weisdorf
  8. Missed Opportunity or Inevitable Failure? The Search for Industrialization in Southeast Europe 1870-1940 By Michael Kopsidis
  9. Trade and the Pattern of European Imperialism, 1492-2000 By Roberto Bonfatti
  10. In-group favouritism and out-group discrimination in naturally occurring groups By Klaus Abbink; Donna Harris
  11. De Jure and De Facto Determinants of Power: Evidence from Mississippi By Bertocchi, Graziella; Dimico, Arcangelo
  12. Standardizing the fiscal state: cabal tax farming as an Intermediate Institution in early-modern England and France By Noel D., Johnson; Mark, Koyama
  13. Credit Business of an Agricultural Cooperative in Modern Japan: The Case of the Takedate Cooperative By Izumi Shirai
  14. The Law and Economics of Private Prosecutions in Industrial Revolution England By Koyama, Mark
  15. Where do ideas come from? Book production and patents in global and temporal perspective By Aurelian Plopeanu, “Alexandru Ioan Cuza”; Peter Foldvari; Bas van Leeuwen; Jan Luiten van Zanden
  16. Did the Americanization Movement Succeed? An Evaluation of the Effect of English-Only and Compulsory Schools Laws on Immigrants' Education By Adriana Lleras-Muney; Allison Shertzer
  17. Some Consequences of the Early Twentieth Century Divorce of Ownership from Control By James Foreman-Peck; Leslie Hannah
  18. Property rights in land: institutional innovations, social appropiations, and path dependence By Rosa Congost; Jorge Gelman; Rui Santos
  19. "Veblen's Institutionalist Elaboration of Rent Theory" By Michael Hudson
  20. The Great Leveraging By Alan M. Taylor
  21. Pre-colonial Ethnic Institutions and Contemporary African Development By Michalopoulos, Stelios; Papaioannou, Elias
  22. Econometric Fellows and Nobel Laureates in Economics By Ho Fai Chan; Benno Torgler
  23. The Acceptability of Money with Multiple Notes Issuers:the Case of Italy (1861-1893) By Fabrizio Mattesini; Giuseppina Gianfreda
  24. Latifundia Revisited. Market Power, Land Inequality and Efficiency in Interwar Italian Agriculture By Pablo Martinelli
  25. International trade and institutional change: Medieval Venice's response to globalization By Puga, Diego; Trefler, Daniel
  26. The Resource-Based Horizontal Acquisition Strategy of JBS By Ronald Jean Degen
  27. Determinants and Economic Consequences of Colonization: A Global Analysis By Arhan Ertan; Louis Putterman; Martin Fiszbein
  28. The Cluster Scoreboard: Measuring the Performance of Local Business Clusters in the Knowledge Economy By Yama Temouri
  29. Have the Poor Always Been Less Likely to Migrate? Evidence From Inheritance Practices During the Age of Mass Migration By Ran Abramitzky; Leah Platt Boustan; Katherine Eriksson
  30. Clusters, human capital and economic development in Oxfordshire and Cambridgeshire By Rupert Waters; Helen Lawton Smith
  31. Reconstruction of continuous time series of mortality by cause of death in Belarus, 1965–2010 By Pavel Grigoriev; France Meslé; Jacques Vallin
  32. Economic Effects of Runs on Early 'Shadow Banks': Trust Companies and the Impact of the Panic of 1907 By Carola Frydman; Eric Hilt; Lily Y. Zhou
  33. Mergers & acquisitions research: A bibliometric study of top strategy and international business journals By João Carvalho Santos; Manuel Portugal Ferreira; Nuno Rosa Reis; Martinho Ribeiro Almeida
  34. General Hamilton and Dr. Smith By Scherer, F. M.
  35. Fiscal Policy and Public Debt Dynamics in Italy, 1861-2009 By Alessandro Piergallini; Michele Postigliola
  36. Changes in governance, the market for corporate control, and the mechanisms for hostile takeovers in Continental Europe: The case of Arcelor?s takeover by Mittal Steel By Ronald Jean Degen

  1. By: Price V. Fishback; Trevor Kollmann
    Abstract: The boom and bust in housing during the 2000s has led to renewed interest in the boom and bust in housing between 1920 and 1940. The most commonly used housing value series for this period is reported by Robert Shiller in Irrational Exuberance. We investigate the changes in housing values in cities between 1920 and 1940 using a variety of alternative sources with many more cities available for comparison than in the Shiller series. We find that all nominal housing value series show a strong decline between the late 1920s and the early 1930s. However, all of the series except the Shiller series imply that housing values in 1920 were well below the 1930 value and thus imply much stronger growth rates in housing values during the 1920s housing boom. Only the Shiller series predicts a strong recovery in housing values to within 5 percent of the 1930 level. All of the others suggest that nominal housing values in 1940 remained at least 18 percent below the 1930 values and several series suggest that values lurched downward between 1933 and 1940. The results suggest that a significant reconsideration of the operation of housing markets in the 1920s and 1930s is required.
    JEL: N32 N92 R30
    Date: 2012–08
  2. By: Price V. Fishback; John Joseph Wallis
    Abstract: During the presidential election of 1932 Franklin Roosevelt promised a New Deal for the American people. Our goal is to describe the changes wrought by the New Deal. To what extent did the New Deal expand existing programs? What new programs were created at all levels of government? How did the Federal government take over programs that had previously been the responsibility of state and local governments? We then survey the recent research that examines the impact of the programs. Finally, why did some programs persist and others fail?
    JEL: H11 H7 N12 N42 N9
    Date: 2012–08
  3. By: Agustin S. Benetrix; Kevin H. O'Rourke; Jeffrey G. Williamson
    Abstract: This paper documents industrial output growth around the poor periphery (Latin America, the European periphery, the Middle East and North Africa, Asia, and sub-Saharan Africa) between 1870 and 2007. We provide answers to the following questions. When and where did rapid industrial growth begin in the periphery? When and where did peripheral growth rates exceed those in the industrial core? When was the high-point of peripheral industrial growth? When and where did it become widespread? When was the high-point of peripheral convergence on the core? How variable was the growth experience between countries? And how persistent was peripheral industrial growth?
    Keywords: Third World Industrialization, History
    JEL: F1 N7 O2
    Date: 2012
  4. By: Timothy W. Guinnane (Economics Department, Yale University); Jochen Streb (University of Mannheim)
    Abstract: The German government introduced compulsory accident insurance for industrial firms in 1884. This insurance scheme was one of the main pillars of Bismarck’s famous social insurance system. The accident-insurance system achieved only one of its intended goals: it successfully compensated workers and their survivors for losses due to accidents. The accident-insurance system was less successful in limiting the growth of work-related accidents, although that goal had been a reason for the system’s creation. We trace the failure to stem the growth of accidents to faulty incentives built into the 1884 legislation. The law created mutual insurance groups that used an experience-rating system that stressed group rather than firm experience, leaving firms with little hope of saving on insurance contributions by improving the safety of their own plants. The government regulator increasingly stressed the imposition of safety rules that would force all firms to adopt certain safety practices. Econometric analysis shows that even the flawed tools available to the insurance groups were powerful, and that more consistent use would have reduced industrial accidents earlier and more extensively.
    Keywords: Social insurance, accident insurance, workman’s compensation, regulation
    JEL: N33 G22 H55
    Date: 2012–08
  5. By: Richard Schmalensee; Robert Stavins
    Abstract: Two decades have passed since the Clean Air Act Amendments of 1990 launched a grand experiment in market-based environmental policy: the SO2 cap-and-trade system. That system performed well but created four striking ironies. First, this system was put in place to curb acid rain, but the main source of benefits from it was unexpected. Second, a substantial source of this system’s cost-effectiveness was an unanticipated consequence of earlier railroad deregulation. Third, it is ironic that cap-and-trade has come to be demonized by conservative politicians in recent years, since this market-based, cost-effective policy innovation was initially championed and implemented by Republican administrations. Fourth, court decisions and subsequent regulatory responses have led to the collapse of the SO2 market, demonstrating that what the government gives, the government can take away.
    JEL: Q40 Q48 Q54 Q58
    Date: 2012–08
  6. By: John H. MUNRO
    Abstract: This paper is a critique of Michael Postan's famous Malthusian-Ricardo model demonstrating that late-medieval prices and wages were essentially determined by demographic factors, especially after the Black Death, while contending that monetary factors played no role in determining prices or wages. His central argument is simple: that rapid and drastic depopulation (falling perhaps from ca. 1320) - by about 50% in England ca. 1450 - drastically altered the land:labour ratio so that real wages increased, both from a rise in the marginal productivity of labour and also from a corresponding fall in the costs of foodstuffs. As Ricardo had argued, a population decline necessarily led to lower grain prices, reduced rents, as well as to increased real wages. A related part of Postan's model is the contention that grain prices alone fell after the Black Death, while prices of most livestock products and especially industrial products rose, thus producing a widening divergence in commodity prices in late-medieval Europe. This paper seeks to show that monetary factors also played a role in determining or influencing both prices and real wages in medieval Europe, both before and after the Black Death. The evidence produced here reveals cycles of inflation and deflation from the late 12th to early 16th century: with a sharp deflation before the Black Death, an equally severe inflation for the quarter century following the Black Death, which was then followed by steep deflation into the early 15th century, after which the deflationary trend was broken only by the final phase of the Hundred Years' War and by civil wars in Flanders. Deflation resumed in the very late 15th century, enduring until the eve of the inflationary European Price Revolution, from ca. 1515-20 to ca. 1650. The tables in this paper demonstrate that during both periods of inflation and of deflation, agricultural and industrial prices rose and fell together, if not necessarily in full tandem. These cycles of inflation and deflation were essentially due to monetary and not demographic factors; but differences in relative prices can be explained as well by real factors. Thus the core theme of the paper: 'money matters', though monetary factors certainly do not explain all economic phenomena. The final section of the paper deals with post-Plague real wages, demonstrating first a sharp fall in real wages following the Black Death and then a sharp rise in real wages from the later 14th century. That was essentially a result and function of downward nominal wage-stickiness during the deflations that took place in this era, especially during the two bullion famines of ca. 1370 - ca. 1415 and ca. 1440 - 1475. An examination of the root causes of wage-stickiness, essentially a post-Plague phenomenon, has been more thoroughly explored in many other of my online working papers and numerous publications (since 2003). The statistical evidence on prices and wages is taken from both England and Flanders (up to ca. 1500): i.e., from both a basically rural agrarian economy (England) and a much more commercialized, industrialized, urbanized economy (Flanders). If such radically different economies experienced the same trends in commodity prices and wages (nominal and real)- as they did, the agrarian-based Ricardo model cannot provide the full explanation - so that again a role for monetary factors must be allowed, all the more so in light of the detailed monetary evidence supplied in this paper.
    Keywords: Ricardo; Malthus; Postan; marginal productivity; population; nominal wages; real wages; agricultural labourers; building craftsmen; masters and journeymen; money; bullion; credit; inflation; deflation; relative prices; England; Flanders; Middle Ages
    JEL: E E41 E42 E51 E52 E62 F33 H11 H27 N13 N23 N43
    Date: 2012–08–08
  7. By: Marc Klemp (University of Copenhagen); Chris Minns (London School of Economics); Patrick Wallis (London School of Economics); Jacob Weisdorf (University of Southern Denmark)
    Abstract: The study develops a real wage series for Germany c. 1500-1850 and analyzes its relationship with population size. From 1690 data density allows the estimation of a structural time series model of this relationship. The major results are the following: First, there was a strong negative relationship between population and the real wage until the middle of the seventeenth century. The dramatic rise of material welfare during the Thirty Years’ War was thus entirely due to the war-related population loss. Second, the relationship between the real wage and population size was weaker in the eighteenth than in the sixteenth century; the fall of the marginal product of labor was less pronounced, and the beginning of the eighteenth century saw a marked increase of labour demand. Third, labor productivity underwent a strong positive shock during the late 1810s and early 1820s, and continued to rise at a weaker pace during the following decades. This growth was only temporarily interrupted by negative shocks during the late 1840s and early 1850s. Results two and three suggest the onset of sustained economic growth well before the beginnings of industrialization, which set in during the third quarter of the nineteenth century.
    Date: 2012–06
  8. By: Michael Kopsidis (IAMO Halle)
    Abstract: Southeast Europe’s countries are often denominated as the ‘first developing nations’. Since the end of the 19th century the question of industrialization dominated public economic debates in Romania, Bulgaria, Greece, and later on Yugoslavia. However, despite all soaring rhetoric no sustained industrial spurts occurred before 1940. Still today the failure of industrialisation in Southeast Europe is fiercely debated in economic history. Some researchers argue that inherently backward ‘Balkan peasant societies’ were incapable to modernize. Others emphasize unfavourable external conditions which hindered industrialisation. The paper argues in favor of external reasons without neglecting the partial failure of native elites.ngs of industrialization, which set in during the third quarter of the nineteenth century.
    Date: 2012–07
  9. By: Roberto Bonfatti
    Abstract: I construct a trade model of empire, and use it to interpret some of the key patterns in the history of European imperialism. I begin from the observation that trade was a key source of wealth for the colonies, and trade restrictions a key tool of extraction for colonial powers. But the value of this tool must be seen in relation to the value of colonial trade, and to the extent of international competition for it. The model interprets the colonial empires that emerged in the 16th-18th century as a set of political institutions designed to appropriate the value of colonial trade to the mother country, at a time in which colonial trade was both valuable and highly competed for. It explains the fluctuations in the fortunes of empire in the 19th and early 20th century with the rise of a clear industrial leader, Britain, and her subsequent decline. Finally, it attributes the fall of colonial empires to a secular fall in the importance of colonial trade, relative to trade between the industrial countries. I provide detailed historical evidence in support of these predictions. The model also has predictions for the impact of empire-building on trade relations between the imperial powers. These are consistent with the apparent inverse relation between European imperial expansion and globalization.
    Keywords: Imperialism, Preferential trade agreements, Intra-industry trade, Hegemonic stability
    JEL: F1 F5 N4
    Date: 2012
  10. By: Klaus Abbink; Donna Harris
    Abstract: I construct a trade model of empire, and use it to interpret some of the key patterns in the history of European imperialism. I begin from the observation that trade was a key source of wealth for the colonies, and trade restrictions a key tool of extraction for colonial powers. But the value of this tool must be seen in relation to the value of colonial trade, and to the extent of international competition for it. The model interprets the colonial empires that emerged in the 16th-18th century as a set of political institutions designed to appropriate the value of colonial trade to the mother country, at a time in which colonial trade was both valuable and highly competed for. It explains the fluctuations in the fortunes of empire in the 19th and early 20th century with the rise of a clear industrial leader, Britain, and her subsequent decline. Finally, it attributes the fall of colonial empires to a secular fall in the importance of colonial trade, relative to trade between the industrial countries. I provide detailed historical evidence in support of these predictions. The model also has predictions for the impact of empire-building on trade relations between the imperial powers. These are consistent with the apparent inverse relation between European imperial expansion and globalization.
    Keywords: In-group favouritism, Out-group discrimination, Corruption, In-group, Out-group, Political conflict, Experimental design
    JEL: D70 D71 D73 D74
    Date: 2012
  11. By: Bertocchi, Graziella (University of Modena and Reggio Emilia); Dimico, Arcangelo (Queen's University Belfast)
    Abstract: We evaluate the empirical relevance of de facto vs. de jure determinants of political power in the U.S. South between the end of the nineteenth and the beginning of the twentieth century. We apply a variety of estimation techniques to a previously unexploited dataset on voter registration by race covering the counties of Mississippi in 1896, shortly after the introduction of the 1890 voting restrictions encoded in the state constitution. Our results indicate that de jure voting restrictions reduce black registration but that black disfranchisement starts well before 1890 and is more intense where a black majority represents a threat to the de facto power of white elites. Moreover, the effect of race becomes stronger after 1890 suggesting that the de jure barriers may have served the purpose of institutionalizing a de facto condition of disfranchisement.
    Keywords: race, voting, institutions, education, inequality
    JEL: J15 N41 O43 P16
    Date: 2012–07
  12. By: Noel D., Johnson; Mark, Koyama
    Abstract: How did modern and centralized fiscal institutions emerge? We develop a model that explains (i) why pre-industrial states relied on private individuals to collect taxes; (ii) why after 1600 both England and France moved from competitive methods for collecting revenues to allocating the right to collect taxes to a small group of financiers—a intermediate institution that we call cabal tax farming—and (iii) why this centralization led to investments in fiscal capacity and increased fiscal standardization. We provide detailed historical evidence that supports our prediction that rulers abandoned the competitive allocation of tax rights in favor of cabal tax farming in order to gain access to inside credit and that this transition was accompanied by investments in standardization. Finally (iv) we show why this intermediate institution proved to be self-undermining in England where it was quickly replaced by direct collection, but lasted in France until the French Revolution.
    Keywords: State Capacity; Standardization; Tax Farming; France; England; Transaction Costs
    JEL: N23 H11 K00 D02 N44
    Date: 2012–07–31
  13. By: Izumi Shirai (Graduate School of Economics, Osaka University)
    Abstract: This study examines the well-known Takedate Cooperativefs credit activities from 1907 until the 1930s. This cooperative established its credit division in 1914 because its members had difficulty raising money from the financial market after poor rice harvests. Additionally, the another purpose was to controlled member behavior by providing preferential financing terms to frequent users of its production and marketing activities and to those who obeyed its rules. This lending practice allowed cooperative members to grow apples as well as rice until the early 1920s. However, in the wake of poor business conditions after World War I, the cooperative reduced loan amounts, lent money only to cover living expenses, and pressed members to save money. The cooperativefs loan rate rose above that of the Aomori prefecturefs financial market, leading many competent members to withdraw their memberships. However, this action did not result in the stagnation of the cooperative. In Takedate village, the central area of the cooperative, peasants could still borrow money without security, and thus, 80% of farm households continued to grow apples, leading to greater affluence in the 1930s.
    Keywords: Japanese economic history, Japanese business history, agricultural cooperative, credit business
    JEL: N55 N85
    Date: 2012–07
  14. By: Koyama, Mark
    Abstract: Can the market provide law enforcement? This paper addresses this question by examining an historical case-study: the system of private prosecutions that prevailed in England prior to the introduction of the police. Using a model of the market for crime, I examine why this system came under strain during the Industrial Revolution, and how private associations were able to emerge to internalize the externalities that caused the private system to generate too little deterrence. The model and historical evidence suggest that these private order institutions were partially successful in meliorating the problem of crime in a period when Public Choice considerations precluded the introduction of a professional police force.
    Keywords: Economics of Crime; Private Prosecutions; Club Goods; Deterrence; Free- Riding
    JEL: N13 K00 K42 K14 N43
    Date: 2012–07–08
  15. By: Aurelian Plopeanu, “Alexandru Ioan Cuza”; Peter Foldvari; Bas van Leeuwen; Jan Luiten van Zanden (Universiteit Utrecht and Erasmus University Rotterdam)
    Abstract: In this paper we try to establish the link between book production and the spread of “ideas” as proxied by patents. Two mechanisms may be distinguished. First, in the initial phase of economic development, the production of books may stimulate the accumulation of knowledge already present in society. After such an accumulation is complete, books may stimulate a common research focus within a certain geographic space. Applying this to the case of England, we find that books indeed had a significant on the number of patents during the second Industrial Revolution. However, when education became increasingly important, the role of books eventually broke down in the second half of the twentieth century. This pattern does not hold true for less developed regions where, due to the lack of efficient education, linguistic fragmentation, an overwhelmingly oral culture, and a structural different kind of knowledge, book production stagnated and no knowledge could be imported (for example via translated books).
    Keywords: book production, patents, ideas, economic development, England, world
    Date: 2012–07
  16. By: Adriana Lleras-Muney; Allison Shertzer
    Abstract: In the early twentieth century, education legislation was often passed based on arguments that new laws were needed to force immigrants to learn English and “Americanize.” We provide the first estimates of the effect of statutes requiring English as the language of instruction and compulsory schooling laws on the school enrollment, work, literacy and English fluency of immigrant children from 1910 to 1930. English schooling statutes did increase the literacy of foreign-born children, though only modestly. Compulsory schooling and continuation school laws raised immigrants’ enrollment and the effects were much larger for children born abroad than for native-born children.
    JEL: I28 K30 N32
    Date: 2012–08
  17. By: James Foreman-Peck (Cardiff University); Leslie Hannah (University of Tokyo)
    Abstract: Because ownership was already more divorced from control in the largest stock market of 1911 (London) than in the largest stock market of 1995 (New York), the consequences for the economy, for good or ill, could have been considerable. Using a large sample of quoted companies with capital of £1 million or more, we show that this separation did not generally operate against shareholders’ interests, despite the very substantial potential for agency problems. More directors were apparently preferable to fewer over a considerable range, as far as their influence on company share price and return on equity was concerned: company directors were not simply ornamental. A greater number of shareholders was more in shareholders’ interest than a smaller, despite the enhanced difficulties of coordinating shareholder ‘voice’. A larger share of votes controlled by the Board combined with greater Board share ownership was also on average consistent with a greater return on equity. Corporate governance thus appears to have been well adapted to the circumstances of the Edwardian company capital market. Hence the reduction in the cost of capital for such a large proportion of British business conferred a substantial advantage on the economy.
    Keywords: corporate governance, company directors, shareholders, board voting control, directors’ shareholdings, corporate performance
    JEL: G32 G34 L25
    Date: 2012–07
  18. By: Rosa Congost; Jorge Gelman; Rui Santos
    Abstract: This paper addresses critically, from the standpoints of social history and sociology, dominant views on path dependence, institutions and property in the New Institutional Economics and Law and Economics literatures, which we find lacking in what concerns the analysis of concrete social relationships and processes. We argue for an approach to property rights, specifically in land, that goes beyond the perspective on property as an institution and builds on the analytical potential of the definition of property rights as social relations, as well as for the view of property as a bundle of rights and against the revival of the absolute concept of property under a juridical numerus clausus of property forms. We submit that it is at this more concrete level of social relations that we may detect the historical sequences of events and outcomes generating path dependence.
    Keywords: institutions, path dependence, property rights, social relations, agrarian history
    JEL: B52 N50 Q15 Z13
    Date: 2012–07
  19. By: Michael Hudson
    Abstract: As the heirs to classical political economy and the German historical school, the American institutionalists retained rent theory and its corollary idea of unearned income. More than any other institutionalist, Thorstein Veblen emphasized the dynamics of banks financing real estate speculation and Wall Street maneuvering to organize monopolies and trusts. Yet despite the popularity of his writings with the reading public, his contribution has remained isolated from the academic mainstream, and he did not leave behind a "school." Veblen criticized academic economists for having fallen subject to "trained incapacity" as a result of being turned into factotums to defend rentier interests. Business schools were painting an unrealistic happy-face picture of the economy, teaching financial techniques but leaving out of account the need to reform the economy's practices and institutions. In emphasizing how financial "predation" was hijacking the economy's technological potential, Veblen’s vision was as materialist and culturally broad as that of the Marxists, and as dismissive of the status quo. Technological innovation was reducing costs but breeding monopolies as the finance, insurance, and real estate (FIRE) sectors joined forces to create a financial symbiosis cemented by political-insider dealings—and a trivialization of economic theory as it seeks to avoid dealing with society’s failure to achieve its technological potential. The fruits of rising productivity were used to finance robber barons who had no better use of their wealth than to reduce great artworks to the status of ownership trophies and achieve leisure-class status by funding business schools and colleges to promote a self-congratulatory but deceptive portrayal of their wealth-grabbing behavior.
    Keywords: History of Economic Thought; Institutionalism; FIRE Sector; Financialization
    JEL: B15
    Date: 2012–08
  20. By: Alan M. Taylor
    Abstract: What can history can tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the economy. I term this long-run evolution “The Great Leveraging” and present a ten‐point examination of its main contours and implications.
    JEL: E3 E5 E6 N1 N2
    Date: 2012–08
  21. By: Michalopoulos, Stelios; Papaioannou, Elias
    Abstract: We investigate the role of deeply-rooted pre-colonial ethnic institutions in shaping comparative regional development within African countries. We combine information on the spatial distribution of ethnicities before colonization with regional variation in contemporary economic performance, as proxied by satellite images of light density at night. We document a strong association between pre-colonial ethnic political centralization and regional development. This pattern is not driven by differences in local geographic features or by other observable ethnic-specific cultural and economic variables. The strong positive association between pre-colonial political complexity and contemporary development also holds within pairs of adjacent ethnic homelands with different legacies of pre-colonial political institutions.
    Keywords: Africa; Development; Ethnicities; Institutions
    JEL: N17 O10 O40 O43 Z10
    Date: 2012–07
  22. By: Ho Fai Chan; Benno Torgler
    Abstract: An academic award is method by which peers offer recognition of intellectual efforts. In this paper we take a purely descriptive look at the relationship between becoming a Fellow of the Econometric Society and receiving the Nobel Prize in economics. We discover some interesting aspects: of all 69 Nobel Prize Laureates between 1969 and 2011, only 9 of them were not also Fellows. Moreover, the proportion of future Nobel winners among the Fellows has been quite high throughout time and a large share of researchers who became Fellows between the 1930s and 1950s became Nobel Laureates at a later stage. On average, researchers become Fellows relatively early in their career (14.9 years after their PhD) and those who were subsequently made Nobel Laureates become Fellows earlier than other researchers. Interestingly, Harvard and MIT have been the dominant PhD granting institutions to generate Fellows and Nobel Laureates in the past.
    Keywords: Fellows of the Econometric Society; Nobel Laureate; ececonomics of science; awards
    JEL: D71 A14
    Date: 2012–08
  23. By: Fabrizio Mattesini (Università di Roma "Tor Vergata"); Giuseppina Gianfreda (Università della Tuscia)
    Abstract: We study the Italian monetary regime from 1861 to the creation of the Bank of Italy in 1893. The regime was characterized by a multi- plicity of note issuers although one of them, the BNS, rapidly became the dominant bank of the country following a process of territorial expansion. We carefully describe the evolution of the system and we analyze its functioning by studying the acceptaibility of banknotes. Since by law banknotes had to be redeemed at par, acceptability is measured by the number of days notes were in circulation. We es- timate the acceptability of the BNS notes in the provinces were the bank had branches and we ?nd that the entry of a smaller issuer lim- ited the capacity of the dominant bank to keep its notes in circulation at local level. We take this as evidence that competition in notes issue worked as an e¤ective discipline device and we argue the fall of the sys- tem should not be readily attributed to the failure of the competittive mechanism.
    Keywords: money acceptability,notes redemption, multiple issuers.
    JEL: E42 N13 C33
    Date: 2012
  24. By: Pablo Martinelli (HEC Department, European University Institute)
    Abstract: This paper explores a simple though neglected mechanism linking land inequality and inefficiency: market power. In underdeveloped economies with serious constraints on labour mobility, high ownership concentration will endow landowners with market power in local labour markets. The resulting equilibrium explains many of the often criticised features of pre-war Italian latifundia, without the need to factor in irrational behaviour (the preferred explanation of Italian traditional historians) or social institutions and capital market imperfections (explanations advanced by economists in different contexts). According to the model here explored the main effects of inequality are of a distributive rather than of a productive nature. The market power hypothesis is strongly supported by the available quantitative evidence provided by an unexploited dataset on all local labour markets of Italy at the end of the 1930s.
    Keywords: Monopsony, Agricultural labour markets, Land distribution, Inequality, Italy
    JEL: J42 J43 N54 O13 Q15
    Date: 2012–07
  25. By: Puga, Diego; Trefler, Daniel
    Abstract: International trade can have profound effects on domestic institutions. We examine this proposition in the context of medieval Venice circa 800-1350. We show that (initially exogenous) increases in long-distance trade enriched a large group of merchants and these merchants used their new-found muscle to push for constraints on the executive i.e., for the end of a de facto hereditary Doge in 1032 and for the establishment of a parliament or Great Council in 1172. The merchants also pushed for remarkably modern innovations in contracting institutions (such as the colleganza) that facilitated large-scale mobilization of capital for risky long-distance trade. Over time, a group of extraordinarily rich merchants emerged and in the almost four decades following 1297 they used their resources to block political and economic competition. In particular, they made parliamentary participation hereditary and erected barriers to participation in the most lucrative aspects of long-distance trade. We document this 'oligarchization' using a unique database on the names of 8,103 parliamentarians and their families' use of the colleganza. In short, long-distance trade first encouraged and then discouraged institutional dynamism and these changes operated via the impacts of trade on the distribution of wealth and power.
    Keywords: institutions; international trade; medieval Venice
    JEL: F1
    Date: 2012–08
  26. By: Ronald Jean Degen (International School of Management Paris)
    Abstract: This paper examines the resource-based horizontal acquisition strategy of JBS. This strategy transformed a relatively small business that was founded in 1953 (comprising a butcher shop and small abattoir located in a small town in the interior of Brazil) into the world?s biggest meat producer by 2010.
    Keywords: JBS, world?s biggest meat producer, horizontal acquisition strategy, resource-based strategy
    JEL: M0 M1
    Date: 2012–04–23
  27. By: Arhan Ertan; Louis Putterman; Martin Fiszbein
    Abstract: Research on economic growth suggests that the era of colonization has had an impact on the levels of economic development of countries around the globe. However, why some countries were colonized early, some late, and others not at all, and what effect these differences have had on current income, has not been studied systematically. In the first part of this paper, we show that both the occurrence and the timing of colonization can be explained by (a) differences in levels of pre-1500 development, (b) proximity to the colonizing powers, (c) disease environment, and (d) latitude. In the second part, we analyze the developmental consequences of colonization while taking the endogeneity of colonization’s occurrence and timing into account. Whereas naïve estimates can suggest large impacts, we find that neither the fact nor the timing of colonization affect income today once colonization’s impact on the composition of the population and the quality of institutions is controlled for.
    Keywords: Colonization, Growth, Institutions, Pre-Modern Development, Migration.
    Date: 2012
  28. By: Yama Temouri
    Abstract: This paper shows the performance of eighty leading innovative local clusters on six measures of enterprise performance: share of new and young firms and growth of employment, turnover, profitability, liquidity ratio and solvency ratio. The data show the performance of clusters before and during the global economic crisis and suggest that clusters doing well in the phase of economic expansion had different characteristics from those that were able to grow in a time of economic slowdown. The data permit comparison of performance among the clusters. In the pre-recession period the two top performing clusters were the Madison Research District and Silicon Valley in the United States, while during the recession the two leading clusters were the Coimbra Biotech cluster in Portugal and Daedoek Science Town in Korea.
    Date: 2012–08
  29. By: Ran Abramitzky; Leah Platt Boustan; Katherine Eriksson
    Abstract: Using novel data on 50,000 Norwegian men, we study the effect of wealth on the probability of internal or international migration during the Age of Mass Migration (1850-1913), a time when the US maintained an open border to European immigrants. We do so by exploiting variation in parental wealth and in expected inheritance by birth order, gender composition of siblings, and region. We find that wealth discouraged migration in this era, suggesting that the poor could be more likely to move if migration restrictions were lifted today. We discuss the implications of these historical findings to developing countries.
    JEL: J61
    Date: 2012–08
  30. By: Rupert Waters (University of Buckingham); Helen Lawton Smith (Department of Management, Birkbeck College University of London)
    Abstract: Building on previous work (Lawton Smith and Waters, 2011) this paper draws on national datasets to review the continued and different development of the high tech economies of Oxfordshire and Cambridgeshire.
    Date: 2012–01
  31. By: Pavel Grigoriev (Max Planck Institute for Demographic Research, Rostock, Germany); France Meslé; Jacques Vallin
    Abstract: -
    Keywords: Belarus, causes of death, classification, mortality, mortality trends
    JEL: J1 Z0
    Date: 2012–08
  32. By: Carola Frydman; Eric Hilt; Lily Y. Zhou
    Abstract: We use the unique circumstances that led to the Panic of 1907 to analyze its consequences for non-financial corporations. The onset of the panic occurred following a series of scandalous revelations about the investments of prominent financiers, which triggered widespread runs on trust companies associated with those men. Using newly collected data, we find that corporations with close ties to the trust companies that faced severe runs experienced an immediate decline in their stock price, and performed worse in the years following the panic: they earned fewer profits and paid fewer dividends, and faced higher interest rates on their debt. Consistent with the notion that information asymmetries aggravated the consequences of the contraction of credit intermediation, these effects were largest for smaller firms and for industrials, whose collateral was more difficult to value than that of railroads.
    JEL: E44 G01 G21 N11 N21 N81
    Date: 2012–07
  33. By: João Carvalho Santos (Instituto Politécnico de Leiria); Manuel Portugal Ferreira (Instituto Politécnico de Leiria); Nuno Rosa Reis (Instituto Politécnico de Leiria); Martinho Ribeiro Almeida (Universidade de São Paulo)
    Abstract: Mergers and acquisitions (M&As) are important modes through which firms carry out their domestic and international strategies. This bibliometric review examines the extant published research on M&As in top sixteen leading business journals notable for publishing strategic management and international business research, during a twenty one years period ? from 1980 to 2010. The results of our bibliometric study on a sample of 334 articles on M&As permit us conclude that M&As scholars focus mostly on ?performance? and ?environmental modeling: governmental, social, and political influences on strategy? and that M&A research does not have a specific theoretical ground. We conclude by presenting a broad discussion, and pointing out limitations and avenues for future enquiry.
    Keywords: mergers & acquisitions; international business journals, bibliometric study, review
    JEL: M0 M1
    Date: 2012–05–07
  34. By: Scherer, F. M. (Harvard University)
    Abstract: In 1791 Alexander Hamilton submitted as U.S. Secretary of the Treasury a now-famous Report on the Subject of Manufactures. In it he criticized arguments that the U.S. colonies should remain preponderantly agricultural. He does not name the "respectable patrons of opinions" whose views he was contradicting. This paper attempts to clear up the identity mystery.
    Date: 2012–07
  35. By: Alessandro Piergallini (Faculty of Economics, University of Rome "Tor Vergata"); Michele Postigliola (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: We examine the historical dynamics of government debt in post-unification Italy, from 1861 to 2009. Unit root tests for the debt-GDP ratio are unable to reject either the non-stationarity or the stationarity null hypothesis. Controlling debt dynamics for fiscal feedback policies of the Barro-Bohn style, however, the debt-GDP ratio is found to be mean-reverting. Mean-reversion in the debt-GDP ratio is due not only to a nominal growth dividend, but also to a positive response of primary surpluses to variations in outstanding debt. There is indeed significant evidence that, over the history of Italy, fiscal policy makers have reacted to the accumulation of debt, taking corrective measures to rule out potential long-term sustainability problems.
    Keywords: Fiscal Policy; Public Debt; Fiscal Sustainability
    JEL: E62 H60 C20
    Date: 2012–07–27
  36. By: Ronald Jean Degen (International School of Management Paris)
    Abstract: This paper describes the changes in governance, the market for corporate control, and the mechanism for hostile takeovers that have occurred in the last decade in Continental Europe, using the hostile takeover of Arcelor by Mittal Steel to illustrate these changes.
    Keywords: governance, market for corporate control, hostile takeovers, Arcelor takeover
    JEL: M0 M1
    Date: 2012–02–07

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.