nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2012‒12‒22
twenty papers chosen by
Bernardo Batiz-Lazo
Bangor University

  1. The declines in infant mortality and fertility: Evidence from British cities in demographic transition By Andrew Newell; Ian Gazeley
  2. From Kuttabs to Schools:Educational Modernization, Religion, and Human Capital in Twentieth Century Egypt By Saleh, Mohamed
  3. The Economic Environment surrounding Developing Countries By Toshikatsu Aoyama
  4. External Imbalances and Financial Crises By Taylor, Alan M.
  5. The Labor Demand Was Downward Sloping: Disentangling Migrants' Inflows and Outflows, 1929-1957 By Biavaschi, Costanza
  6. Urban Working-Class Food Consumption and Nutrition in Britain in 1904 By Andrew Newell; Ian Gazeley
  7. Harvests and Financial Crises in Gold-Standard America By Christopher Hanes; Paul W. Rhode
  8. Causes of mortality and development: Evidence from large health shocks in 20th century America By Casper Worm Hansen
  9. Indicadores de inversión en el largo plazo. Una propuesta para Uruguay (1870-2011) By Carolina Román; Henry Willebald
  10. Deindustrialisation and re-industrialisation in the Middle East: Reflections on the cotton industry in Egypt and western Anatolia By Laura Panza
  11. Why did the Dutch East India Co. outperform the British East India Co.? —A theoretical explanation based on the objective of the firm and limited liability— By Tetsuya Shinkai; Takao Ohkawa; Makoto Okamura; Kozo Harimaya
  12. Replacement versus Historical Cost Profit Rates: What is the difference? When does it matter? By Deepankar Basu
  13. Non-Financial Hurdles for Human Capital Accumulation: Landownership in Korea under Japanese Rule By Jun, Bogang
  14. Ecology, trade and states in pre-colonial Africa By James Fenske
  15. The Making of Modern America: Migratory Flows in the Age of Mass Migration By Bandiera, Oriana; Rasul, Imran; Viarengo, Martina
  16. The Political Economy of Law and Economic Development in Islamic History By Metin Cosgel
  17. The Diffusion of Military Dictatorships By Raul Caruso; Ilaria Petrarca; Roberto Ricciuti
  18. Mapping of Issues Development in Asia Pacific Economic Cooperation (APEC) and Indonesia Agenda toward 2013: A Historical Perspective By Maddaremmeng A. Panennungi; Rahadjeng Pulungsari; Evi Fitriani; Lily Tjahjandari; Surjadi; Padang Wicaksono
  19. The changing spatial economic structure of the state of Michigan, through 1970-2008 By Jeroen Bakker
  20. Thirty Years of Prospect Theory in Economics: A Review and Assessment By Nicholas C. Barberis

  1. By: Andrew Newell (Department of Economics, University of Sussex, UK; IZA, Bonn, Germany); Ian Gazeley (Department of History, University of Sussex, UK)
    Abstract: At the beginning of the twentieth century Britain was roughly halfway through a 60-year demographic transition with declining infant mortality and birth rates. Cities exhibited great and strongly correlated diversity in these rates. We demonstrate cross–section correlations with, for instance, women’s employment, population density, literacy and improved water supply and sanitation, that have been linked to the transition. When we analyse data from the late 1850s and the early 1900s, the changes in the two rates are not correlated across cities, but we find a robust and large impact from sanitation improvement to long-period infant mortality reduction. We also find the extension of basic literacy is related to increases in female labour market participation, which is in turn related to fertility reduction. Lastly we find that more rapid urban growth accelerates fertility decline, but, in late 19th century Britain it slowed the reduction of infant mortality.
    Keywords: Fertility, infant mortality, education and sanitary reform, 19th century and early 20th century Britain.
    JEL: N33 J13 I15
    Date: 2012–12
  2. By: Saleh, Mohamed (TSE,IAST)
    Abstract: I examine the impact of the transformation of elementary religious schools (kuttabs) into modern primary schools in 1953-56 on the educational and occupational differentials between religious groups in Egypt. Before the reform, non-Muslims enjoyed better educational and occupational outcomes than the Muslim majority and, unlike Muslims, were almost all enrolled in modern schools. Using several new data sources, the individual-level census sample from 1996, the official schooling reports from 1907 to 1969, and the village/urban quarter-level census data from 1897 to 1986, I find that the inter-religious educational and occupational gaps both declined in the second half of the twentieth century. The educational reform seems to explain the reduction in the occupational gap, but cannot explain the decline of the educational gap.
    Keywords: educational modernization; religious schools; Middle Eastern economic history; human capital; modern schools
    JEL: I N35
    Date: 2012–08
  3. By: Toshikatsu Aoyama (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: I was in charge of the United Nations Conference on Trade and Development (UNCTAD) as a mission of the Ministry of Foreign Affairs of Japan in the second half of 1980's. At that time, the UNCTAD played a central role on economic problem of developing countries, particularly that of primary commodities. Through this experience, I took notice of the subjects concerning economic difficulties surrounding developing countries. After a great war, many developing countries have achieved their independence shaking off the political restriction. However, in reality, they were still suffering from economic difficulties and fumbling about how to take off for their economies with a view to realizing their actual economic independence. The economic disparities among developed and developing countries has been more and more widening in progress of globalization towards the 21st century. Therefore, the purpose of this article is to identify the reasons why the economic disparities expanded by pursuing the historical events of the international economic regencies, such as the Newly International Economic Order (NIEO) in 1974, the Integrated Program for Commodities (IPC) in 1076, the Dollar-Shock in 1971, and the First and Second Oil crises in 1973 and 1979, which finally led to speculative transactions of trade and a stream of globalization.
    Date: 2012–12
  4. By: Taylor, Alan M.
    Abstract: In broad perspective, there have been essentially two competing views of the global financial crisis, albeit there are some complementarities among them. One view looks across the border: it mainly blames external imbalances, the large-scale mix of unprecedented pattern current account deficits and surpluses which entailed massive and growing net and gross international financial flows in the last decade. The alternative view looks within the border: it finds more fault in the domestic arena of the afflicted countries, attributing the problems to financial systems where risks originated in excessive credit booms in local banks. This paper uses the lens of macroeconomic and financial history to confront these dueling hypotheses with evidence. Of the two, the credit boom explanation stands out as the most plausible predictor of financial crises since the dawn of modern finance capitalism in the late nineteenth century. Historically, we find that global imbalances are not as important as a factor in financial crises as is often perceived, and they have much less correlation with subsequent episodes of financial distress compared to direct indicators like credit drawn from the financial system itself.
    Keywords: credit booms; external imbalances; financial crises
    JEL: E3 E4 E5 F3 F4 N1
    Date: 2012–12
  5. By: Biavaschi, Costanza (IZA)
    Abstract: This paper studies in- and out-migration from the U.S. during the first half of the twentieth century and assesses how these flows affected state-level labor markets. It shows that out-migration positively impacted the wages of remaining workers, while in-migration had a negative impact. Hence, immigrant arrivals were substitutes of the existing workforce, while out-migration reduced the competitive pressure on labor markets.
    Keywords: migration flows, impact of migration
    JEL: F22 J01 J61 N32
    Date: 2012–11
  6. By: Andrew Newell (Department of Economics, University of Sussex, UK; IZA, Bonn, Germany); Ian Gazeley (Department of History, University of Sussex, UK)
    Abstract: This article re-examines the food consumption of working class households in 1904 and compares the nutritional content of these diets with modern measures of adequacy. We find a fairly steep gradient of nutritional attainment relative to economic class, with high levels of vitamin and mineral deficiency among the very poorest working households. We conclude that the average unskilled-headed working households was better fed and nourished than previously thought. When proper allowance is made for the likely consumption of alcohol, household energy intakes were significantly higher still. We investigate the likely impact of contemporary cultural food distribution norms and conclude on the basis of the very limited evidence available that women were receiving about 0.8 of the available food, which was consistent with their nutritional needs. We adjust energy requirements for likely higher physical activity rates and smaller stature and find that except among the poorest households, early twentieth century diets were sufficient to provide energy for reasonably physically demanding work. This is consistent with recent attempts to relate the available anthropometric evidence to long-run trends in food consumption. We also find that the lower tail of the household nutrition distribution drops away very rapidly, so that few households suffered serious food shortages.
    Keywords: nutrition, well-being, Britain, early 20th century.
    JEL: I14 I32 N34
    Date: 2012–12
  7. By: Christopher Hanes; Paul W. Rhode
    Abstract: Most American financial crises of the postbellum gold-standard era were caused by fluctuations in the cotton harvest due to exogenous factors such as weather. The transmission channel ran through export revenues and financial markets under the pre-1914 monetary regime. A poor cotton harvest depressed export revenues and reduced international demand for American assets, which depressed American stock prices, drained deposits from money-center banks and precipitated a business-cycle downturn - conditions that bred financial crises. The crises caused by cotton harvests could have been prevented by an American central bank, even under gold-standard constraints.
    JEL: E32 E4 N11
    Date: 2012–12
  8. By: Casper Worm Hansen (Aarhus University)
    Abstract: Exploiting pre-intervention variation in flu/pneumonia, tuberculosis and maternal mortality, together with time variation arising from medical breakthroughs starting in the late 1930s, this paper studies the aggregate impact of large health shocks across US states. The analysis demonstrates that the shocks influenced income per capita in different ways. While the shock to flu/pneumonia mortality has been conductive for development, the large reduction in the incidence of tuberculosis deaths has been a negative force in the development of US states over the second-half of 20th century. In addition, the decline in maternal mortality has a fragile, but positive relationship with income per capita. Because these specific health shocks affected mortality across the life cycle differently, the evidence here underscores the general tenet of regarding health as multifaceted.
    Keywords: Economic development; Mortality; Population growth; Large health shocks; Medical innovations; US states
    JEL: I15 J24 O11 O51
    Date: 2012–12–07
  9. By: Carolina Román (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Henry Willebald (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: In Uruguay the efforts to reconstruct national historical statistics have focused on the production side (productive activitis) providing confident estimations for a very long period, since 1870. However, scarce attention has being provided to the demand components. Although some sporadic efforts have being made, systemtic information of the expenditure components can be found since 1955 published by the official national accounts system. This article aims at fulfilling this gap and brings new historical series of gross fixed investment, at current and constant prices, for the period 1870-1955 which are consistent with the available information from national accounts. In addition, new long-term series of capital stock, inventory investment and capital prices are also provided. The sources and methodology are carefully detailed. To validate the estimations, the trajectories of the series are discussed within the national historical context and comparisons with other variables are presented.
    Keywords: Gross fixed investment, Capital stock, Uruguay
    JEL: O11 E01 E22
    Date: 2012–12
  10. By: Laura Panza
    Abstract: This paper undertakes an investigation of the process of decline and rebirth of textile manufacturing in two Middle Eastern regions, Egypt and western Anatolia during the first wave of globalisation (1850-1914). Through the application of the “Dutch Disease” model we explore the linkages between terms of trade and industrialisation. These are further related to the evolution of price transmission between domestic and global raw cotton markets. We find that different levels of market integration have contributed to diverging trajectories in industrial development in the two regions: while in Egypt the process of de-industrialisation was not reversed, in western Anatolia weaker international price transmission and domestic policy interventions facilitated the creation of a nascent domestic textile industry.
    Date: 2012–12
  11. By: Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Takao Ohkawa (Faculty of Economics, Ritsumeikan University); Makoto Okamura (Faculty of Economics, Hiroshima University and Ritsumeikan University); Kozo Harimaya (Faculty of Business Administration, Ritsumeikan University)
    Abstract: We examine the relationship between the objective of a monopolist and limited liability. We establish that the owners of a monopolistic firm are better off to choose profit maximization rather than sales maximization under both unlimited and limited liability. This is consistent with the fact that the Dutch East India Company, whose objective was profit maximization, was better off in the seventeenth century than the British East India Company, whose objective was sales maximization. We also show that a monopolist should choose to organize as a limited liability entity regardless of its objective.
    Keywords: limited liability, firm objective, managerial incentives, monopoly
    JEL: G32 L13 L12
    Date: 2012–12
  12. By: Deepankar Basu (University of Massachusetts, Amherst)
    Abstract: This paper explains the BEA methodology for computing historical cost and replacement cost measures of the net stock of capital in the U.S. economy. It is demonstrated that there exists a threshold rate of inflation in the price of capital goods that keeps the percentage difference between the two capital stock measures constant. Hence, over periods when average inflation in the price index for capital goods is equal to the threshold value, historical cost and replacement cost profit rates would show equal percentage changes; an example of such a period for the U.S economy is the whole postwar period 1946–2010. Moreover, trends in both replacement cost and historical cost profit rates display very similar movements over long periods, making the choice of capital stock valuation irrelevant for empirical analysis of profitability trends. JEL Categories: E01, B51
    Keywords: replacement cost, historical cost, capital stock, profitability trends
    Date: 2012–12
  13. By: Jun, Bogang
    Abstract: This paper suggests that inequality of landownership is a non-financial hurdle for human capital accumulation. It is the first to present evidence that inequality of landownership had an adverse effect on the level of public education in the Korean colonial period. Exploiting variations in inequality in land concentration across regions in Korea and accounting for unobserved heterogeneity across theses regions, using a fixed effect model, the analysis establishes a highly significant adverse effect of land inequality on education in Korea’s colonial period.
    Keywords: Land inequality; Education; Development; Korean economic history
    JEL: I2 N35 Q15
    Date: 2012–12–07
  14. By: James Fenske
    Abstract: State capacity matters for growth. I test Bates’ explanation of pre-colonial African states. He argues that trade across ecological boundaries promoted states. I find that African societies in ecologically diverse environments had more centralized states. This is robust to reverse causation, omitted heterogeneity, and alternative interpretations of the link between diversity and states. Ecological diversity also predicts states outside of Africa. I test mechanisms connecting trade to states, and find that trade supported class stratification between rulers and ruled. I underscore the importance of ethnic institutions and inform our knowledge of the effects of geography and trade on institutions.
    Date: 2012
  15. By: Bandiera, Oriana; Rasul, Imran; Viarengo, Martina
    Abstract: We provide new estimates of migrant flows into and out of America during the Age of Mass Migration at the turn of the twentieth century. Our analysis is based on a novel data set of administrative records covering the universe of 24 million migrants who entered Ellis Island, New York between 1892 and 1924. We use these records to measure inflows into New York, and then scale-up these figures to estimate migrant inflows into America as a whole. Combining these flow estimates with census data on the stock of foreign-born in America in 1900, 1910 and 1920, we conduct a demographic accounting exercise to estimate out-migration rates in aggregate and for each nationality-age-gender cohort. This exercise overturns common wisdom on two fronts. First, we estimate flows into the US to be 20% and 170% higher than stated in official statistics for the 1900-10 and 1910-20 decades, respectively. Second, once mortality is accounted for, we estimate out-migration rates from the US to be around .6 for the 1900-10 decade and around .75 for the 1910-20. These figures are over twice as high as official estimates for each decade. That migration was effectively a two-way flow between the US and the sending countries has major implications for understanding the potential selection of immigrants that chose to permanently reside in the US, their impact on Americans in labor markets, and institutional change in America and sending countries
    Keywords: Ellis Island; migration accounting; migratory inflows and outflows
    JEL: F22 N31 N32 O15
    Date: 2012–12
  16. By: Metin Cosgel (University of Connecticut)
    Abstract: There appear to be two seemingly contradictory images of law and economic change in the Islamic world. Whereas some scholars have viewed Islamic societies as rigid and incapable of adapting to a changing environment, others have held the opposite image of Islamic societies as flexible, quick to adapt to change, and conducive to economic development. Researchers have often focused on either stagnation or change as being the more representative image that needs explanation, rarely looking to explain why both images coexisted. Using a political economy approach, this paper explains the nuanced flexibility of Islamic law by focusing on the relationship between the ruler and the legal-religious community. This community has been an influential group in Islamic societies because of its power in the interpretation and adjudication of the law and its ability to confer legitimacy on the rulers. Change or stagnation has emerged as the outcome of the strategic interaction between the rulers and legal community, rather than from a fixed characteristic of Islamic societies or an intrinsic quality of a new development.
    Keywords: Islamic law, change, stagnation, technology, legal community, political economy
    JEL: D7 H2 H3 N7 O3 O5 P48 P5 Z12
    Date: 2012–12
  17. By: Raul Caruso (Catholic University of the Sacred Heart); Ilaria Petrarca (Department of Economics (University of Verona)); Roberto Ricciuti (Department of Economics (University of Verona))
    Abstract: In this note we show the existence of a diffusion process of military dictatorships in Sub-Saharan Africa from 1970 through 2007, using panel data probit estimation. We also find that Manufacturing share of GDP and Primary share of GDP positively affect the probability of military dictatorship, whereas Openness to trade and the UK colonial origin are negatively associated.
    Keywords: Military rule, Africa, diffusion of government institutions.
    JEL: D74 P48 Q34
    Date: 2012–12
  18. By: Maddaremmeng A. Panennungi (APEC Study Centre of University of Indonesia and Faculty of Economics University of Indonesia); Rahadjeng Pulungsari (APEC Study Centre of University of Indonesia and Faculty of Humanities University of Indonesia); Evi Fitriani (APEC Study Centre of University of Indonesia and Faculty of Social and Political Science University of Indonesia); Lily Tjahjandari (APEC Study Centre of University of Indonesia and Faculty of Humanities University of Indonesia); Surjadi (APEC Study Centre of University of Indonesia and Faculty of Economics University of Indonesia); Padang Wicaksono (APEC Study Centre of University of Indonesia and Faculty of Economics University of Indonesia)
    Abstract: APEC (Asia-Pacific Economic Cooperation) is one of the international economic cooperation which was established 1989. In the beginning of APEC, it was focused only for economic issues, especially related to the trade and investment; however, overtime the issues in APEC have moved into the non-economic issues. This study is aimed to analyze the development issues in APEC, in particular: first, analyzing the process and factor that affect the issues in APEC; second, mapping or grouping issues in APEC that accumulated from 1989 until 2010; third, analyze the potential agenda of APEC meeting in Indonesia 2013. Methods of data collection and information are based on literature studies of APEC meeting documents, interviews with resource persons from within and outside the Indonesia, and Focus Group Discussions (FGD of stakeholders). Method of analysis is based on descriptive analysis and simple statistics. Some findings are: First, issues development in APEC are influenced by two factors:(i) the events or factors related to the development of economic, social, political, and security in global, regional of APEC and APEC host country; (ii) the role of agents that bring the issues to the APEC also plays an important role apart from the government of a country/economy are PECC (Pacific Economic Cooperation Council), ASEAN (Association Southeast Asian Nations), WTO (World Trade Organization), ABAC (APEC Business Advisory Council), ASCC (APEC Study Centre Consortium), EPG (Eminent Persons Group) and PBF (Pacific Business Forum). Second, even though the issues are very broad in APEC which moves from the economic into broader of non-economic issues, the issues are still focused on the achievement of the APEC economic integration, particularly related to the Bogor Goals, as the nucleus of the whole issues. Third, all issues that evolved in APEC are part of the development issues in Indonesia in general; however, from the official documentation development plan document in Indonesia during the period, attention to issues in economic in the APEC begins to decline during the crisis and reform in Indonesia. By putting attention of the latest of issues development in APEC, the possible specific agendas of Indonesia in 2013 summit are inclusive economic growth (developments), connectivity (especially related to infrastructures), and blue economy (especially related to ocean related). All those agendas are inter-related issues of developments that have been developed since the establishment of APEC.
    Keywords: APEC, Economic Integration, Non-Economic Issues
    JEL: F0 F15 F55
    Date: 2012–11
  19. By: Jeroen Bakker
    Date: 2012–09–26
  20. By: Nicholas C. Barberis
    Abstract: Prospect theory, first described in a 1979 paper by Daniel Kahneman and Amos Tversky, is widely viewed as the best available description of how people evaluate risk in experimental settings. While the theory contains many remarkable insights, economists have found it challenging to apply these insights, and it is only recently that there has been real progress in doing so. In this paper, after first reviewing prospect theory and the difficulties inherent in applying it, I discuss some of this recent work. While it is too early to declare this research effort an unqualified success, the rapid progress of the last decade makes me optimistic that at least some of the insights of prospect theory will eventually find a permanent and significant place in mainstream economic analysis.
    JEL: D03 D81
    Date: 2012–12

This nep-his issue is ©2012 by Bernardo Batiz-Lazo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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.