nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2013‒04‒06
thirteen papers chosen by
Bernardo Batiz-Lazo
Bangor University

  1. The settlement of the United States, 1800 to 2000: the long transition towards Gibrat's law By Klaus Desmet; Jordan Rappaport
  2. How Does Institutional Change Coincide with Changes in the Quality of Life? An Exemplary Case Study By Andreas Exenberger; Simon Hartmann
  3. Integrating Personal Expertise: A History of Japanese Audit Firms, 1965-2010 By Karube, Masaru; Fukukawa, Hironori
  4. Chinese Economic Order and Banknotes -1935 currency reform Reconsidered- By Hiroaki Morota
  5. Taxation and Public Goods Provision in China and Japan before 1850 By Tuan-Hwee Sng; Chiaki Moriguchi
  6. Still Not Allowed on the Bus: It Matters If You're Black or White! By Mujcic, Redzo; Frijters, Paul
  7. The Economic Effects of the Protestant Reformation: Testing the Weber Hypothesis in the German Lands By Cantoni, Davide
  8. Inspiration and Perspiration Factors in Economic Growth: The Former Soviet Union Area versus China (ca. 1920-2010) By Dmitry Didenko; Péter Földvári; Bas van Leeuwen
  9. The U.S. economy today: between systemic crisis and permanent war By Rémy Herrera
  10. “Theory anchors” explain the 1920s NYSE Bubble By Ali Kabiri
  11. Carbon Taxes, Path Dependency and Directed Technical Change: Evidence from the Auto Industry By Philippe Aghion; Antoine Dechezleprêtre; David Hemous; Ralf Martin; John Van Reenen
  12. La stabilité de l'équilibre économique dans la pensée d'Irving Fisher By Adrien Vila
  13. La construction d'une théorie de la dynamique de l'emploi et des salaires chez Kalecki de 1932 à 1944 By Paul Fourchard

  1. By: Klaus Desmet; Jordan Rappaport
    Abstract: A prominent strand of economic literature argues that population growth rates across locations areas are uncorrelated with the population levels of those locations (“Gibrat’s Law”). Such uncorrelated growth, it is argued, can account for the current distribution of population across locations. This paper shows that, on the contrary, locations’ population growth throughout U.S. history has always been highly correlated with their initial population levels. Throughout the entire 19th century and the early 20th century, low-population locations tended to grow faster than intermediate-population locations, thereby causing the distribution of population to become more compressed. Throughout the second half of the 19th century and the entire 20th century, population growth among the highest-population locations was faster than population growth among intermediate-population locations, thereby causing the distribution of population to become more dispersed. ; This pattern of population growth is driven by two separate forces. First is the “entry” of new locations into the United States as the country spread westward. These locations typically entered with a low population after which many of them gradually transitioned up to much larger ones. Such transitions can account for the faster growth of low population locations. Second, the congestion arising from limited supplies of land within any given location may have eased over time. This may have occurred, for example, with the technology-driven move by workers from agriculture to manufacturing and services. Such a shift would cause high-population places to grow faster. ; Understanding historical population growth across locations gives insight into near-future population growth. For example, since 2000 population growth in larger locations (though not necessarily the very largest) has tended to outpace population growth in intermediate and smaller locations. This suggests that ongoing technological change may be continuing to relieve the “congestion” associated with living in large metro areas while increasing the disadvantages of living in small locations. Rapid advances in information technology are a possible source of such technological change.
    Date: 2013
  2. By: Andreas Exenberger; Simon Hartmann
    Abstract: This paper provides a framework to assess correlations between the change of institutional functions (political centralization, plurality, rule of law, security of property, economic liberty, measured by 12 indicators) and improvements in human development (income, education, health) and violence limitations (conflict-related death tolls) to separate effective from ineffective institutional change. We apply this framework to a low-end institutional environment and provide a century case study of today’s Democratic Republic of the Congo (DRC). Major results are threefold: first, we provide a thick description of institutional development in the Congo in a colonial and post-colonial and hence long-run setting; secondly, we identify periods of institutional change with distinctly different degrees of effectiveness; and thirdly, we are able to provide qualitative information on the questions of perspective (we follow a non-elitist approach), institutional connections, and timing of effects. Finally we propose extension of the framework, especially with respect to in-depth studies of critical transition periods, and its application to comparative case studies.
    Keywords: Institutions, Human Development, Congo (Democratic Republic), History, Effectiveness
    JEL: O43 O55 O15 N37 N47 B52
    Date: 2013–04
  3. By: Karube, Masaru; Fukukawa, Hironori
    Abstract: To examine empirically the knowledge integration process of professional expertise that individuals have in a professional firm, this paper examines the emergence and growth of four large audit firms (ShinNihon, Azusa, Tohmatsu, and ChuoAoyama) in Japan over a period from the mid- 1960s to 2010. Known as the Big Four, these firms.the product of a series of mergers between more than 70 audit firms.handled the vast majority of audit services for listed companies during this period. After the dissolution of ChuoAoyama in 2006, the remaining three audit firms have dominated the market. A longitudinal case study documents how these professional service firms were successful in providing nationwide services through mergers with domestic competitors and the provision of global services in alliance with large international firms, even though they did not sufficiently realize the systematic attainment of individual expertise. The historical account of this process suggests that the two driving forces underpinning the merger growth of the Big Four were strategic intent in (1) systematizing individual expertise and (2) establishing nationwide and global service networks in response to the increase in size and growing diversity and complexity of their client base. Finally, this paper discusses the knowledge tension between localized individual expertise and organizational knowledge in a global context.
    Date: 2013–03
  4. By: Hiroaki Morota (Graduate School of Economics, Keio University)
    Abstract: The purpose of this paper is to evaluate Weather Chinese free banking contributed to stabilizing market order or not through analyzing the case of Tianjin's free banking from 1912 to the 1935 currency reform. There are conflicting two aspects in the 20th century's Chinese free banking in relation to market order. One is the market disorder caused by private banks that were ruled by reactionary warlords. The other is the contribution for stabilizing market order as the case of the Four Bank Joint Treasury shows. Although the circumstance of Chinese free banking was completely different from ideal free banking, it can be said that spontaneous elements was crucial for market order and market quality under Chinese free banking.
    Date: 2013–03
  5. By: Tuan-Hwee Sng; Chiaki Moriguchi
    Abstract: We develop a principal-agent model to study fiscal capacity in pre-modern China and Japan. Before 1850, both nations were ruled by stable dictators who relied on bureaucrats to govern their domains. We hypothesize that agency problems increase with the geographic size of a domain. In a large domain, the ruler's inability to closely monitor bureaucrats creates opportunities for the bureaucrats to exploit taxpayers. To prevent overexploitation, the ruler has to keep taxes low and government small. Our dynamic model shows that while economic expansion improves the ruler's finances in a small domain, it could lead to lower tax revenues in a large domain as it exacerbates bureaucratic expropriation. To test these implications, we assemble comparable quantitative data from primary and secondary sources. We find that the state taxed less and provided fewer local public goods per capita in China than in Japan. Furthermore, while the Tokugawa shogunate's tax revenue grew in tandem with demographic trends, Qing China underwent fiscal contraction after 1750 despite demographic expansion. We conjecture that a greater state capacity might have prepared Japan better for the arrival of the West after 1850.
    Keywords: Comparative Institutional Analysis, Principal-Agent Problem, Dictatorships
    JEL: D73 N15 N40 O43 P52
    Date: 2013–03
  6. By: Mujcic, Redzo (University of Queensland); Frijters, Paul (University of Queensland)
    Abstract: We employ a natural field experiment to study the extent and nature of racial discrimination in Queensland, Australia. Mimicking the historical case of Rosa Parks who was denied seating in a bus because she was black, an important moment for the U.S. civil rights movement, we sent trained testers who differed in ethnic appearance to bus stops asking the driver for a free ride on the basis that their bus pass was faulty (which it was). In total, we obtained 1,552 observations of testers either allowed a free ride or not, in each case recording the characteristics of the bus driver, the tester, and the circumstances. We find strong evidence of discrimination against black-skinned individuals. In the baseline scenario, white testers were accepted during 72% of the interactions versus only 36% for black testers. Indian testers were let on 51% of the time and Asian testers (mainly Chinese) were let on 73% of the time. Favors were more likely to be granted when the bus driver and tester were of the same ethnicity, and when there were fewer people in the bus. Patriotic appearance matters in that testers wearing army uniforms were accepted at a rate of 97% if they were white and 77% if they were black. Status appearance also mattered in that black testers dressed in business attire were just as likely to be favored as casually dressed white testers. When bus drivers were confronted with hypothetical baseline scenarios using photos taken of the real testers, 86% responded they would let on the black individual, more than double the actual number accepted, indicating dishonest self-reporting on this topic.
    Keywords: racial bias, discrimination, natural field experiment, prosocial behavior
    JEL: C93 J15 J71 D03
    Date: 2013–03
  7. By: Cantoni, Davide
    Abstract: Following Max Weber, many theories have hypothesized that Protestantism should have favored economic development. With its religious heterogeneity, the Holy Roman Empire presents an ideal testing ground for this hypothesis. Using population figures of 272 cities in the years 1300–1900, I find no effects of Protestantism on economic growth. The finding is precisely estimated, robust to the inclusion of various controls, and does not depend on data selection or small sample size. Protestantism has no effect when interacted with other likely determinants of economic development. Instrumental variables estimates, considering the potential endogeneity of religious choice, are similar to the OLS results.
    Keywords: Protestantism; Culture; Economic Growth; Historical Development;Germany
    JEL: N13 N33 O11 Z12
    Date: 2013–03
  8. By: Dmitry Didenko; Péter Földvári; Bas van Leeuwen
    Abstract: In this paper we extend our previous studies (Didenko et al., 2012; Földvári et al., 2012; Van Leeuwen et al., 2011) on the role of conventional factors of production (fixed, or physical, and human forms of capital) and their productivity depending on their interrelations and economic development policies. Methodologically based on Solow (1956, 1957) and Mankiw, Romer, and Weil (1992) we apply our theoretical models on the factors of economic growth to compare China with the republics of the former Soviet Union and, to this end, create a new database for both regions. Following Krugman (1994), we decompose economic growth in perspiration (i.e. production factors) and inspiration (i.e. TFP, which consists in turn of technical efficiency of the production factors and a general production frontier) factors and find that in the socialist central-planning period economic growth was largely driven by physical and, to lesser extent, human capital accumulation. Moreover, at these times conventional TFP change was strongly negative (1930s for the FSU, 1950s for China). This means that focusing mainly on physical capital increases the factors of production (hence increasing growth via perspiration) but reduces the technical efficiency of the factors of production strongly (hence lowers the growth via TFP, i.e. inspiration). After the economic transitions were launched (end 1970s in China and end 1980s in the FSU) the inspiration/perspiration pattern changed. China managed to keep technical inefficiency relatively moderate, largely by massively increasing its human capital (which made it easier to make use of physical capital). At the same time, they managed to increase their productivity frontier. In the FSU, however, the change in the human to physical capital ratio was primarily caused not by an increase of human-, but rather by a decrease of physical capital. This means that, even though technical efficiency relatively increased, the general productivity frontier remained stable or declined. This changed in the late 1990s and the start of the 21th century when the FSU started to recover somewhat, only to reach the 1990 level.
    Keywords: factors of production, human capital, productivity, technology, economic development, socialism, USSR, China
    Date: 2013–03
  9. By: Rémy Herrera (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: This paper studies the U.S. economy from an original point of view: that of the links existing between crisis and war. The first part analyzes the workings of the current crisis, considered to be a "systemic" one. The second part places the U.S. economy at the very heart of this crisis. The third part emphasizes the limitations of the anti-crisis policies that are being implemented, as well as the "currency war" issue. Then, the central focus moves towards U.S. warfare as a permanent feature. In a fifth part, the author examines the control exercized by finance capital on the military sector, including military-industrial complex and privately owned military companies. And finally, it examines how these links between crisis and war exacerbe the current capitalist contradictions.
    Keywords: United States; military sector; defence; war; crisis; finance
    Date: 2013–02
  10. By: Ali Kabiri
    Abstract: The NYSE boom of the 1920s ended with the infamous crash of October 1929 and subsequent collapse in common stock prices from 1929-1932. Most approaches have suggested an overvaluation of 100%, usually dating from mid-1927 to September 1929.Excessive speculation based on high real earnings growth rates from 1921-8, amid a euphoric “new age” for the US economy, has been given as the cause. However, the 1920s witnessed the emergence of new ideas emanating from new research on the long-term returns to common stocks (Smith, 1924). The research identified a large premium on common stocks held over the long term compared to corporate bonds. This, in turn led to the formation of new investment vehicles that aimed to hold diversified stock portfolios over the long run in order to earn the large equity risk premium. Whilst such an approach was capable of earning substantial excess returns over bonds, new ideas derived from the research led to a change in stock valuations. The paper reconstructs fundamental values of NYSE stocks from long run dividend growth and stock volatility data, and demonstrates why such a change in theoretical values was unjustified. Investors switched to valuing stocks according to a new theory, which ignored the compensation for stock return volatility, which made up the Equity Risk Premium (ERP), on the assumption that “retained earnings” were the source of the observed ERP.
    Date: 2012
  11. By: Philippe Aghion; Antoine Dechezleprêtre; David Hemous; Ralf Martin; John Van Reenen
    Abstract: Can directed technical change be used to combat climate change? We construct new firm-level panel data on auto industry innovation distinguishing between “dirty” (internal combustion engine) and “clean” (e.g. electric and hybrid) patents across 80 countries over several decades. We show that firms tend to innovate relatively morein clean technologies when they face higher tax-inclusive fuel prices. Furthermore,there is path dependence in the type of innovation both from aggregate spillovers andfrom the firm’s own innovation history. Using our model we simulate the increasesin carbon taxes needed to allow clean to overtake dirty technologies
    Date: 2012–11
  12. By: Adrien Vila (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne)
    Abstract: La thèse de notre étude consistera ainsi à soutenir que la nature des anticipations des agents et la manière dont elles se répercutent sur l'économie déterminent le caractère local ou global de l'instabilité économique chez Fisher c'est-à-dire la gravité et la durée des crises. Pour démontrer ce résultat, nous procéderons en quatre étapes. Dans une première section, nous présenterons de manière générale l'épistémologie de Fisher et de quelle façon il se représente l'équilibre et les fluctuations économiques autour de celui-ci. Il apparaîtra alors que, de son point de vue, l'équilibre est une fiction seulement valable logiquement en statique ce qui revient à inscrire l'étude de l'activité économique dans le cadre du déséquilibre. Dans les seconde et troisième sections, nous exposerons tour à tour sa conception de la stabilité de l'équilibre économique en 1911, puis en 1933. Cette opposition confirmera la thèse d'Assous selon laquelle l'analyse dynamique chez Fisher est d'abord marquée par une instabilité locale tout à fait originale (l'équilibre économique est stable sans convergence) puis par une instabilité globale qui le mène à plaider en faveur de politiques interventionnistes de l'État et de la Banque Centrale pour relancer l'économie. Enfin, dans la quatrième et dernière section, nous traiterons la question de la formation des anticipations chez Fisher. Nous opposerons alors sa théorie de l'inégalité des prévisions au modèle de choix intertemporels qui lui permet de déconnecter les décisions d'épargne des décisions d'endettement et explique le passage d'une dimension locale à une globale de l'instabilité. Dans notre interprétation, l'illusion monétaire n'est plus la seule responsable de l'instabilité des fluctuations, et nous ferons apparaître que c'est précisément parce qu'il n'existe aucun mécanisme marchand garantissant a priori l'identité entre somme des intérêts particuliers privés des firmes et leur intérêt collectif que les crises économiques peuvent devenir systémiques. Cette absence de corrélation nous amènera à pointer les contradictions de la logique et de la structure du système capitaliste, car ce sont elles in fine qui sont mises en cause dans l'analyse de Fisher.
    Keywords: Irving Fisher, stabilité économique
    Date: 2012
  13. By: Paul Fourchard (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne)
    Abstract: Dans le chapitre dix-neuf de la Théorie générale, Keynes justifie l'hypothèse de rigidité nominale présente dans le reste de son ouvrage en fournissant des arguments visant à démontrer que la flexibilité des salaires ne permet pas à l'économie d'atteindre le plein-emploi. Les arguments fournis par Keynes dans ce chapitre sont de nature dynamiques et Tobin, dans son article "Keynesians models of recession and depression" défend l'idée que le meilleur moyen de rendre compte de la théorie de Keynes est de le faire dans un cadre de "déséquilibre dynamique" qui vise à montrer que les mécanisme d'ajustements marchands ne permettent pas de résorber une situation de déséquilibres et de chômage (Tobin, 1975). L'objectif de notre mémoire est de montrer qu'il est également possible d'adopter une telle optique à l'égard de certaines analyses de Kalecki. Nous voudrions faire apparaître le fait qu'il existe dans l'oeuvre de Kalecki une théorie originale de la dynamique de l'emploi et des salaires, qui se construit progressivement au cours des années 1930 et 1940. L'idée que la flexibilité des salaires ne permet pas d'assurer la stabilité du plein emploi, dont nous verrons qu'elle est présente chez Kalecki dès 1932 bien qu'il ne la démontre rigoureusement qu'en 1944, est étroitement liée, comme chez Keynes, à la justification de l'hypothèse de rigidité nominale des salaires. Cette hypothèse est présente dans l'ensemble de la théorie de la demande effective et des cycles de Kalecki (Assous et Lopez, 2007). Nous verrons en effet que ce dernier considère, comme Keynes, que la rigidité nominale des salaires ne saurait être une cause du chômage, mais qu'elle est au contraire un remède à un chômage encore plus élevé et un moyen de stabiliser l'économie autour d'un certain niveau d'emploi.
    Keywords: Michał Kalecki, plein emploi, système de paiement des salaires
    Date: 2012

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