New Economics Papers
on Business, Economic and Financial History
Issue of 2012‒09‒30
sixteen papers chosen by

  1. The Elusive Promise of Independent Central Banking By Marvin Goodfriend
  2. iPEHD: The ifo Prussian Economic History Database By Becker, Sascha O.; Cinnirella, Francesco; Hornung, Erik; Woessmann, Ludger
  3. Reassessing the Evolution of World Trade, 1870-1949 By Klasing, Mariko J.; Milionis, Petros
  4. Urban(c)idade: diálogo entre a Sociologia, a Arquitectura, a Economia e a Geografia - a experiência do Mestrado em Metropolização, Planeamento Estratégico e Sustentabilidade By Reis, Judite Lourenço; Salvador, Regina; Cardoso, Sónia Paulo; Marques, Bruno Pereira
  5. History, gravity and international finance By Livia Chiţu; Barry Eichengreen; Arnaud Mehl
  6. The Topsy-Turvy Sharing of the Gaming Tax Field in Canada, 1970-2010: Provincial Payments, Federal Withdrawal By Étienne Desjardins; Mélina Longpré; Francois Vaillancourt
  7. Shaping of the Nation: The Effect of Fourth of July on Political Preferences and Behavior in the United States By Madestam, Andreas; Yanagizawa-Drott, David
  8. Accounting fraud, business failure and creative auditing: A micro-analysis of the strange case of Sunbeam Corp. By Marisa Agostini; Giovanni Favero
  9. Evolution of Teachers' Salaries in Latin America at the Turn of the 20th Century: How Much Are They (Under or Over) Paid? By Mizala, Alejandra; Nopo, Hugo
  10. The Bank of Amsterdam through the lens of monetary competition By Stephen Quinn; William Roberds
  11. Competition and the railroads: A European perspective By Knieps, Günter
  12. Educational Attainment in the OECD, 1960-2010 By Angel de la Fuente; Rafael Domenech
  13. Book review: what money can’t buy: the moral limits of markets. By Shidlo, Gil
  14. Individualism and the cultural roots of management practices By Hoorn, André van
  15. Commercial Pressures on Land and Their Impact on Child Rights: A review of the literature By Bethelhem Ketsela Moulat; Ereblina Elezaj; Lucia Luzi; Ian Brand-Weiner; UNICEF Innocenti Research Centre
  16. Financial Globalization and the Rise of IPOs outside the U.S. By Doidge, Craig; Karolyi, George Andrew; Stulz, Rene M.

  1. By: Marvin Goodfriend (Professor of Economics, Tepper School of Business, Carnegie Mellon University (E-mail:
    Abstract: Independent central banking is reviewed as it emerged first under the gold standard and later with an inconvertible paper money. Monetary and credit policy are compared and contrasted as practiced by the 19th century Bank of England and the Federal Reserve. The lesson is that wide operational and financial independence given to monetary and credit policy in the public interest subjects the central bank to incentives detrimental for macroeconomic and financial stability. An independent central bank needs the double discipline of a priority for price stability and bounds on expansive credit initiatives to secure its promise for stabilization policy.
    Keywords: Bank of England, central bank independence, credit turmoil of 2007-8, Federal Reserve, Great Inflation, lender of last resort, monetary policy
    JEL: E3 E4 E5 E6
    Date: 2012–09
  2. By: Becker, Sascha O. (University of Warwick); Cinnirella, Francesco (CESifo); Hornung, Erik (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: This paper provides a documentation of the ifo Prussian Economic History Database (iPEHD), a county-level database covering a rich collection of variables for 19th-century Prussia. The Royal Prussian Statistical Office collected these data in several censuses over the years 1816-1901, with much county-level information surviving in archives. These data provide a unique source for micro-regional empirical research in economic history, enabling analyses of the importance of such factors as education, religion, fertility, and many others for Prussian economic development in the 19th century. The service of iPEHD is to provide the data in a digitized and structured way.
    Keywords: economic history, Prussia, 19th century, database, county
    JEL: N13 N33
    Date: 2012–08
  3. By: Klasing, Mariko J.; Milionis, Petros (Groningen University)
    Abstract: The typical narrative regarding the evolution of world trade prior to World War II refers to a secular rise that started around 1870 and a subsequent collapse that began in 1914. This narrative, though, is based on measures of trade openness that do not fully take into account purchasing power di¤erences across countries, as in the literature non-PPP-adjusted trade data are typically denominated by PPP-adjusted GDP data. The present paper seeks to resolve this inconsistency by constructing new trade share estimates for 51 countries spanning the period from 1870 to 1949 by combining historical import and export data with non-PPP-adjusted GDP values that we estimate via the "short-cut" method. Our estimates indicate a much more pronounced rise and fall of world trade over this period with trade shares being on average 32% higher than previously documented and the world's level of openness to trade in 1913 being comparable to that in 1974. In addition, performing a similar correction for purchasing power differences in the context of standard gravity regressions for the 1870-1939 period we find that the existing literature has overestimated the importance of income movements during this period relative to tariffs changes and the evolution of the gold standard.
    Date: 2012
  4. By: Reis, Judite Lourenço; Salvador, Regina; Cardoso, Sónia Paulo; Marques, Bruno Pereira
    Abstract: We should consider that, if mankind was “born” in the African savanna, it was in the Middle East agrarian communities that it became “civilized”. Thus, as mentioned by O. Spengler, world history is largely the history of cities. Far from being a theoretical essay and challenging of existing paradigms, we will try to transmit the personal and professional experiences of the communication proponents, students and faculty of the Master in Metropolization, Strategic Planning and Sustainability, with academic backgrounds raging from Sociology, to Architecture, Economics and Geography. Sociology, the present congress main subject, emerged as a Science in the 19 th Century, strongly supported in the need to understand the challenges presented by the emerging Industrial Revolution, i.e., the biunivocal relation between Urbanization and Industrialization. However, the “mark” of Urbanization in the Epistemology of Sociology was not limited to the, then emerging science, foundational act. Indeed, the 1920s and 1930s saw the emergence of the so-called Chicago School, more recently stood out authors such as Manuel Castells and Saskia Sassen, just to mention two of the best known contemporary urban sociologists. Thus, shown the importance of Sociology in the analysis of issues related to Cities and Urban Spaces, we will try to emphasize the contribution of other sciences and disciplines, because the approaches can be multiple and only through an interdisciplinary and systemic view we can understand in more detail the urban scale.
    Keywords: City; Interdisciplinarity; “Metropolização; Planeamento Estratégico e Sustentabilidade”; Sociology
    JEL: O18 R0 A12
    Date: 2012
  5. By: Livia Chiţu (European Central Bank, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.); Barry Eichengreen (University of California, Berkeley, 603 Evans Hall, Berkeley, CA 94720, USA.); Arnaud Mehl (European Central Bank, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: We analyze persistence in patterns of bilateral financial investment using data on US investors’ holdings of foreign bonds. We document a “history effect” in which the pattern of holdings seven decades ago continues to influence holdings today. 10 to 15% of the cross-country variation in US investors’ foreign bond holdings is explained by holdings 70 years ago, plausibly reflecting fixed costs of market entry and exit. This effect is twice as large for bonds denominated in currencies other than the dollar, suggesting the existence of even higher fixed costs of initiating US foreign investment in currencies other than the dollar. Our findings point to history and path dependence as key sources of financial market segmentation. JEL Classification: F30, N20
    Keywords: Gravity model, international finance, geography of asset holdings, persistence, hysteresis, international role of the dollar
    Date: 2012–09
  6. By: Étienne Desjardins (BSc (Econ) Université de Montréal); Mélina Longpré (MSc (Econ), University of British Columbia); Francois Vaillancourt (University of Montreal and CIRANO)
    Abstract: This paper presents an unusual inter-governmental financial arrangement: a payment by constituent units of a federation to the federal government to keep it out of a fiscal field and thus gain sole occupancy for themselves. This paper thus presents the history of the federal/provincial relationship in the gaming field in Canada focusing on the key period of 1976-1980 when both levels of governments operated lotteries. It chronicles the attempts of both levels of governments to reach an agreement on their sharing of this revenue field. Revenue sharing was rejected, market slicing was agreed to but since 1980, the provinces have purchased a sole occupancy right through an annual payment to the federal government. It shows, using multivariate analysis, that the presence of Loto-Canada reduced provincial gaming revenues in 1978 and 1979 and thus that the provinces were right to seek sole occupancy of the lottery field. It also shows, using numerical simulations of alternative formulas, that the agreement negotiated is very advantageous for the provinces as it did not take into account either the future growth of the lottery market or the diversification of the gaming market in Canada from 1980 to 2010, let alone both.
    Keywords: Lottery, Gaming revenues, fiscal federalism, Canada
    Date: 2012–09–19
  7. By: Madestam, Andreas (Bocconi University); Yanagizawa-Drott, David (Harvard University)
    Abstract: This paper examines whether social interactions and cultural practices affect political views and behavior in society. We investigate the issue by documenting a major social and cultural event at different stages in life: the Fourth of July celebrations in the United States during the 20th century. Using absence of rainfall as a proxy for participation in the event, we find that days without rain on Fourth of July in childhood shift adult views and voting in favor of the Republicans and increase turnout in presidential elections. The effects we estimate are highly persistent throughout life and originate in early age. Rain-free Fourth of Julys experienced as an adult also make it more likely that people identify as Republicans, but the effect depreciates substantially after a few years. Taken together, the evidence suggests that political views and behavior derive from social and cultural experience in early childhood, and that Fourth of July shapes the political landscape in the Unites States.
    Date: 2012–08
  8. By: Marisa Agostini (Department of Management, Università Ca' Foscari Venezia); Giovanni Favero (Department of Management, Università Ca' Foscari Venezia)
    Abstract: This paper puts under the magnifying glass the path to failure of Sunbeam Corp. and emphasizes the reasons of its singularity and exceptionality. This corporate case emerges as an outlier from the analysis of the US fraud cases mentioned by WebBRD: the consideration of the time between fraud disclosure and the final bankruptcy reveals the presence of an exceptional sampled case. In fact, the maximum value of this temporal variable is estimated equal to 840 days: it is really far from the range estimated by the survival function for the entire sample and it refers to Sunbeam Corp. Different hypotheses are evaluated in the paper, starting from the consideration of Sunbeam's history peculiarities: fraud duration, scapegoating and creative auditing represent the three main points of analysis. Starting from a micro-analysis of this case that the SEC investigated in depth and this work describes in detail, inputs for future research are then provided about more general problems concerning auditing and accounting fraud.
    Keywords: accounting fraud, failure path, creative auditing, historical micro-analysis
    JEL: M41 M42 N80 N82 M48
    Date: 2012–09
  9. By: Mizala, Alejandra (University of Chile); Nopo, Hugo (Inter-American Development Bank)
    Abstract: How much are teachers paid in comparison to those in other professions in Latin America? How have these differences evolved at the turn of the 20th century? This paper reports the evolution, between circa 1997 and circa 2007, of teachers´ salaries vis-à-vis workers in other professional and technical occupations for thirteen Latin-American countries. After controlling the earnings differentials by observable characteristics linked to productivity it is found that the hourly earnings gap, although substantial, decreased throughout the decade. This has been the case for earnings gaps at the main and secondary jobs, and also for those measured in terms of monthly and yearly earnings. Nonetheless, behind the region averages there is an important cross-country heterogeneity.
    Keywords: wage differentials, professional labor markets, national and international labor standards, Latin America, Caribbean
    JEL: J31 J44 J8 O54
    Date: 2012–08
  10. By: Stephen Quinn; William Roberds
    Abstract: In 1683 the Bank of Amsterdam introduced a form of fiat money that successfully competed with the coinage of the time. We argue that the principal motive for this monetary innovation was the uncertain value of coins circulating within the Dutch Republic. The Bank's fiat money regime persisted until the downfall of the Dutch Republic in 1795 and incorporated modern features such as gross settlement of financial obligations, open market operations, central bank repurchase agreements (the equivalent thereof), and emergency liquidity facilities.
    Date: 2012
  11. By: Knieps, Günter
    Abstract: The reform of European railroads is a time-consuming process strongly charac-terized by its path-dependency. Firstly, a short outline of the historical roots of the controversial debates on the role of the state and the markets, and the organi-zation of competition in European railroad industries is provided. Secondly, the opening of the market for train services in the context of the liberalization of European transport markets since 1985 is characterized and the regulatory pre-conditions for competition on the tracks are presented. Thirdly, the evolution of track access regulation in Europe during the last decades is analyzed, differenti-ating between the period of negotiated third party access since 1991, the intro-duction of ex ante regulation by the first railroad infrastructure package in 2001, and the danger of overregulation posed by the recent Draft Directive of July 2012 establishing a single European railway area. Fourthly, the role of competi-tion on the markets for rail services and the reform process of interoperability requirements are considered. Finally, competition on the markets for rail ser-vices and public subsidies for rail infrastructures as well as subsidies for train services are evaluated. --
    Date: 2012
  12. By: Angel de la Fuente; Rafael Domenech
    Abstract: This paper describes the construction of series of educational attainment of the adult population in a sample of 21 OECD countries covering the period 1960-2010. These series are a revised version of the data set described in de la Fuente and Domenech (2002).
    Keywords: educational attainment, schooling
    JEL: I20
    Date: 2012–09
  13. By: Shidlo, Gil
    Abstract: In What Money Can’t Buy, Sandel examines one of the biggest ethical questions of our time and provokes a debate that’s been missing in our market-driven age: What is the proper role of markets in a democratic society, and how can we protect the moral and civic goods that markets do not honour and money cannot buy? Gil Shidlo feels that Sandel brings the issue to be debated and raises it in a way each one of us feels fully equipped to voice concerns.
    Date: 2012–06–17
  14. By: Hoorn, André van (Groningen University)
    Abstract: We study the cultural foundations of management practices, which are increasingly recognized as important determinants of firm performance. This research closes the loop on two developing literatures, one seeking cultural explanations for economic development and the other seeking to account for differences in firm performance from differences in how firms are managed. Theoretically, we expect individualist culture to improve management practices because it formalizes the labor relation. Results show higher individualism is strongly associated with more sophisticated management practices. Several robustness checks confirm our findings and using historical presence of pathogens as an instrument affirms the causal effect of culture on management practices. In a direct test, culture is a much more important determinant of management practices than are key formal institutions. This evidence moves us forward in opening up the black box of culture-performance linkages, helping us to understand better the channels through which culture can affect economic prosperity.
    Date: 2012
  15. By: Bethelhem Ketsela Moulat; Ereblina Elezaj; Lucia Luzi; Ian Brand-Weiner; UNICEF Innocenti Research Centre
    Abstract: This paper aims to provide a comprehensive review of the existing literature on the political economy of CPLs with the specific intention of mapping the relevant channels of impact on the rights and well-being of children living in rural areas where CPLs are fast-proliferating. Although there are some documented benefits, according to the large majority of the literature reviewed, the twin outcomes of displacement and dispossession are found to be critical negative socio-economic changes resulting from CPLs. In conjunction with a pervasive lack of transparency in the land transfer negotiation and implementation processes, the twin outcomes are in turn associated with a number of transmission channels that can impact the rights and well-being of children in affected rural communities.
    Keywords: business economics; displaced children; equal access; land acquisition; land speculation; marginality;
    JEL: F02
    Date: 2012
  16. By: Doidge, Craig (University of Toronto); Karolyi, George Andrew (Cornell University); Stulz, Rene M. (OH State University and European Corporate Governance Institute)
    Abstract: During the past two decades, the fraction of the world's initial public offerings (IPOs) accounted for by U.S. firms has fallen sharply. This decrease is attributed to higher IPO activity outside the U.S. and lower IPO activity in the U.S. We show that financial globalization has played a major role in the growth of IPOs outside the U.S. Historically, a country's IPO activity was strongly related to the quality of its institutions and better institutions helped explain the higher IPO activity in the U.S. compared to other countries. However, greater financial globalization has been associated with a reduction in the importance of institutions as determinants of a country's IPO activity. A large part of the increase in IPO activity outside the U.S. occurred through global IPOs, IPOs in which some of the proceeds are raised outside the firm's home country. Financial globalization has enabled firms from countries with poorer institutions to make use of global IPOs and they have done so more than firms from other countries. The evidence is consistent with the view that access to global markets and, more generally, financial globalization helps firms overcome the obstacles of poor institutions.
    JEL: F30 G30
    Date: 2012–07

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