nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2013‒05‒19
seventeen papers chosen by
Bernardo Batiz-Lazo
Bangor University

  1. Urbanization in the United States, 1800-2000 By Leah Platt Boustan; Devin Bunten; Owen Hearey
  2. Putting the ‘System’ in the International Monetary System By Michael D. Bordo; Angela Redish
  3. What Did the Old Poor Law Really Accomplish? A Redux By Greif, Avner; Iyigun, Murat
  4. From Edgeworth to Econophysics: A Methodological Perspective By Drakopoulos, Stavros A.; Katselidis, Ioannis
  5. Problems of Sample-selection Bias in the Historical Heights Literature: A Theoretical and Econometric Analysis By Howard Bodenhorn; Timothy W. Guinnane; Thomas A. Mroz
  6. The Origins and Persistence of Black-White Differences in Women's Labor Force Participation By Leah Platt Boustan; William J. Collins
  7. How Substitutable are Fixed Factors in Production? Evidence from Pre-industrial England By Joshua Wilde
  8. Early Capitalism in the Low Countries By Oscar Gelderblom; Joost Jonker
  9. Bank panics, government guarantees, and the long-run size of the financial sector: evidence from free-banking America By Benjamin Chabot; Charles C. Moul
  10. What Do Experts Know About Forecasting Journal Quality? A Comparison with ISI Research Impact in Finance By Chia-Lin Chang; Michael McAleer
  11. Single, safe, and sorry? An analysis of the motivations of women to join the early modern beguine movement in the Low Countries By Tine De Moor
  12. The First Great Divergence and the Evolution of Cross-Country Income Inequality during the Last Millennium: the Role of Institutions and Culture By Jakob Madsen; Eric Yan
  13. Total Factor Productivity and the Role of Entrepreneurship By Hugo Erken; Piet Donselaar; Roy Thurik
  14. The Data Revolution and Economic Analysis By Liran Einav; Jonathan D. Levin
  15. The Political Economy of Finance By Enrico Perotti
  16. Growing out of Crises and Recessions: From Regulating Large Financial Institutions To Redefining Government Responsibilities By Boyer, Marcel
  17. The impact of extreme observations in citation distributions By Yungron Li; Javier Ruiz-Castillo

  1. By: Leah Platt Boustan; Devin Bunten; Owen Hearey
    Abstract: This handbook chapter seeks to document the economic forces that led the US to become an urban nation over its two hundred year history. We show that the urban wage premium in the US was remarkably stable over the past two centuries, ranging between 15 and 40 percent, while the rent premium was more variable. The urban wage premium rose through the mid-nineteenth century as new manufacturing technologies enhanced urban productivity; then fell from 1880 to 1940 (especially through 1915) as investments in public health infrastructure improved the urban quality of life; and finally rose sharply after 1980, coinciding with the skill- (and apparently also urban-) biased technological change of the computer revolution. The second half of the chapter focuses instead on the location of workers and firms within metropolitan areas. Over the twentieth century, both households and employment have relocated from the central city to the suburban ring. The two forces emphasized in the monocentric city model, rising incomes and falling commuting costs, can explain much of this pattern, while urban crime and racial diversity also played a role.
    JEL: N91 N92 R0
    Date: 2013–05
  2. By: Michael D. Bordo; Angela Redish
    Abstract: The international gold standard of the late nineteenth century has been described as a system of ‘spontaneous order’, capturing the idea that its architects at the time were fashioning domestic monetary systems which created a system of fixed exchange rates almost as a by-product. In contrast the framers of the Bretton Woods System were intentional in building an international monetary system and so it is by advocates of designing an international monetary order. In this paper we examine the transition from spontaneous order circa 1850 to designed system and then back towards spontaneous order in the late twentieth century, arguing that it is an evolution with multiple stops and starts, and that the threads that underlie the general tendency through these hesitations are the interplay between monetary and fiscal factors and the evolution of the financial system. This transformation is embedded within deep evolving political fundamentals including the rise of democracy, nationalism, fascism and communism and two world wars.
    JEL: E00 N1
    Date: 2013–05
  3. By: Greif, Avner (Stanford University); Iyigun, Murat (University of Colorado, Boulder)
    Abstract: This paper examines the evolving effects of England's Old Poor Law (1601-1834). It establishes that poor relief reduced social unrest from around the late-17th century through the turn of the 19th century, at which point it began to spur population growth and its social stability effects dissipated. These conclusions are based on a new dataset encompassing 39 English counties from 1650 to 1815. It includes observations on the amount of poor relief offered, occurrences of food riots and other types of social unrest, population growth and a host of other variables. The paper first documents that county-level variations in poor relief had a statistically significant and quantitatively meaningful non-monotonic impact on population growth. Aid to the poor reduced population growth through the 1780s or 1820s when it began to exert significantly positive effects. Moreover, the Old Poor Law reduced food riots in the late-17th century and through most of the 18th century, but this effect dissipated in the early 19th century when poor relief began to generate population growth. Our analyses, thus, establish that the Old Poor Law fostered social order and stability for more than a century after which the Malthusian income effects dominated.
    Keywords: social institutions, Malthus, social stability, economic development
    JEL: N0 N33 O10
    Date: 2013–05
  4. By: Drakopoulos, Stavros A.; Katselidis, Ioannis
    Abstract: Although most of the marginalist economists’ methodology was influenced by 19th century classical physics, the work of second generation marginalist Francis Ysidro Edgeworth represents the highest point of classical physics influence to the development of mainstream economic methodology. Edgeworth’s close parallelism between celestial and social mechanics expressed in his analogies between utility and energy and the principle of utility maximization to maximum energy, are important indications of the physics scientific ideal for economics. Subsequent leading theorists were not as explicit, although economic theory continued to be influenced by physics scientific ideal as the work of Pareto, Fisher and Samuelson indicates. However, the physics methodological framework has made a recent reappearance in the relatively new field of econophysics. Although there are methodological similarities, there are also important differences between mainstream economics and econophysics. Econophysicists’ emphasis to statistical mechanics rather to mechanical models, their reservations towards rational agent theory and their rejection of many standard assumptions of mainstream economics, are examples of such differences. This might also explain the resistance of mainstream economic theorists to incorporate econophysics into economics. The paper examines the above from a methodological viewpoint. It also discusses the possible reasons for this historical development and its implications for economic methodology.
    Keywords: Economic Method, Econophysics, Edgeworth
    JEL: A12 B00 B40
    Date: 2013–05
  5. By: Howard Bodenhorn (Department of Economics, Clemson University); Timothy W. Guinnane (Department of Economics, Yale University); Thomas A. Mroz (Department of Economics, Clemson University)
    Abstract: An extensive literature uses anthropometric measures, typically heights, to draw inferences about living standards in the past. This literature's influence reaches beyond economic history; the results of historical heights research appear as crucial components in development economics and related fields. The historical heights literature often relies on micro-samples drawn from sub-populations that are themselves selected: examples include volunteer soldiers, prisoners, and runaway slaves, among others. Contributors to the heights literature sometimes acknowledge that their samples might not be random draws from the population cohorts in question, but rely on normality alone to correct for potential selection into the sample. We use a simple Roy model to show that selection cannot be resolved simply by augmenting truncated samples for left-tail shortfall. Statistical tests for departures from normality cannot detect selection in Monte Carlo exercises for small to moderate levels of self-selection, obviating a standard test for selection in the heights literature. We show strong evidence of selection using micro-data on the heights of British soldiers in the late eighteen and nineteenth centuries. Consequently, widely accepted results in the literature may not reflect variations in living standards during a soldier's formative years; observed heights could be predominantly determined by the process determining selection into the sample. A survey of the current historical heights literature illustrates the problem for the three most common sources: military personnel, slaves, and prisoners.
    Keywords: self-selection, selection bias, heights, anthropometrics, standards of living,industrialization puzzle, long-run economic growth
    JEL: I00 N3 O15 O47 C46 C52 C81
    Date: 2013–05
  6. By: Leah Platt Boustan; William J. Collins
    Abstract: Black women were more likely than white women to participate in the labor force from 1870 until at least 1980 and to hold jobs in agriculture or manufacturing. Differences in observables cannot account for most of this racial gap in labor force participation for the 100 years after Emancipation. The unexplained racial gap may be due to racial differences in stigma associated with women’s work, which Goldin (1977) suggested could be traced to cultural norms rooted in slavery. In both nineteenth and twentieth century data, we find evidence of inter-generation transmission of labor force participation from mother to daughter, which is consistent with the role of cultural norms.
    JEL: J22 N11 N12
    Date: 2013–05
  7. By: Joshua Wilde (Department of Economics, University of South Florida)
    Abstract: The extent to which fixed factors of production such as land constrain per-capita income growth has been a widely discussed topic in economics since at least Malthus (1798). Whether fixed factors limit growth depends crucially on two variables: the substitutability of fixed factors in production, and the extent to which innovation will be biased towards land-saving technologies. However, there are few estimates of either variable, and most models assume this elasticity of substitution is unity out of con- venience. This paper attempts to fill that gap in the literature. Using the timing of plague epidemics as an instrument for labor supply, this paper estimates the elasticity of substitution between fixed and non-fixed factors in pre-industrial England. I find that the elasticity of substitution between land and other factors during this period was signicantly less than one, which implies that the Malthusian effects of population on income were stronger than current models predict. In addition, I am able to esti- mate the direction and magnitude of induced innovation. I find evidence that denser populations -- and hence higher land scarcity -- induced innovation towards land-saving technologies. Specically, I find that a doubling of population density in England from its year 1500 level raises the difference in the growth rates of land- and labor-enhancing productivity by 0.22% per year.
    Keywords: Land, Substitution, Population, England, Industrial Revolution, Demographic Transition, Induced Innovation, Plagues, Malthus
    JEL: E00 N13 N33 N53 O11 O12 O14 O31 O41 O43 O44 O47 O52
    Date: 2013–02
  8. By: Oscar Gelderblom; Joost Jonker
    Abstract: The dynamics of European market development before the Industrial Revolution are demonstrated to good effect by the Low Countries, which underwent several distinct phases of economic growth between 1000 and 1800. This case study presents a highly illuminating contrast between a considerable degree of economic integration between regions and continuing local variations in the organization of markets. We argue that the relative ease of trade and communication combined with economic competition between towns and regions to produce a fairly rapid diffusion of information, production techniques, legal concepts, and market design from one region to the next. Thus, it was not the early decline of feudalism that stimulated the successive phases of economic growth, but urban competition which produced both a dynamic evolution of contracting institutions and effective constraints on local and central executives. This explains why the political and legal fragmentation of the Low Countries did not end in economic stagnation.
    Keywords: Low Countries, Pre-Industrial Europe, Markets, Capitalism, Urban Competition
    Date: 2013–05
  9. By: Benjamin Chabot; Charles C. Moul
    Abstract: Governments often attempt to increase the confidence of financial market participants by making implicit or explicit guarantees of uncertain credibility. Confidence in these guarantees presumably alters the size of the financial sector, but observing the long-run consequences of failed guarantees is difficult in the modern era. We look to America’s free-banking era and compare the consequences of a broken guarantee during the Indiana-centered Panic of 1854 to the Panic of 1857 in which guarantees were honored. Our estimates of a model of endogenous market structure indicate substantial negative long-run consequences to financial depth when panics cast doubt upon a government’s ability to honor its guarantees.
    Date: 2013
  10. By: Chia-Lin Chang (National Chung Hsing University); Michael McAleer (Erasmus University Rotterdam, Complutense University of Madrid, Kyoto University)
    Abstract: Experts possess knowledge and information that are not publicly available. The paper is concerned with forecasting academic journal quality and research impact using a survey of international experts from a national project on ranking academic finance journals in Taiwan. A comparison is made with publicly available bibliometric data, namely the Thomson Reuters ISI Web of Science citations database (hereafter ISI) for the Business - Finance (hereafter Finance) category. The paper analyses the leading international journals in Finance using expert scores and quantifiable Research Assessment Measures (RAMs), and highlights the similarities and differences in the expert scores and alternative RAMs, where the RAMs are based on alternative transformations of citations taken from the ISI database. Alternative RAMs may be calculated annually or updated daily to answer the perennial questions as to When, Where and How (frequently) published papers are cited (see Chang et al. (2011a, b, c)). The RAMs include the most widely used RAM, namely the classic 2-year impact factor including journal self citations (2YIF), 2-year impact factor excluding journal self citations (2YIF*), 5-year impact factor including journal self citations (5YIF), Immediacy (or zero-year impact factor (0YIF)), Eigenfactor, Article Influence, C3PO (Citation Performance Per Paper Online), h-index, PI-BETA (Papers Ignored - By Even The Authors), 2-year Self-citation Threshold Approval Ratings (2Y-STAR), Historical Self-citation Threshold Approval Ratings (H-STAR), Impact Factor Inflation (IFI), and Cited Article Influence (CAI). As data are not available for 5YIF, Article Influence and CAI for 13 of the leading 34 journals considered, 10 RAMs are analysed for 21 highly-cited journals in Finance. The harmonic mean of the ranks of the 10 RAMs for the 34 highly-cited journals are also presented. It is shown that emphasizing the 2-year impact factor of a journal, which partly answers the question as to When published papers are cited, to the exclusion of other informative RAMs, which answer Where and How (frequently) published papers are cited, can lead to a distorted evaluation of journal impact and influence relative to the Harmonic Mean rankings. A linear regression model is used to forecast expert scores on the basis of RAMs that capture journal impact, journal policy, the number of high quality papers, and quantitative information about a journal. The robustness of the rankings is also analysed.
    Keywords: Expert scores, Journal quality, RAMs, Impact factor, IFI, C3PO, PI-BETA, STAR, Eigenfactor, Article Influence, h-index, harmonic mean, robustness
    JEL: C18 C81 C83
    Date: 2013–02–18
  11. By: Tine De Moor
    Abstract: The beguine movement is in many ways one of the most remarkable movements in the history of the Low Countries; the impetus for the movement as a whole still remains to be explained. Factors such as the sex-ratio, diminished access to convents, and the religious revival of the late Middle Ages have been put forward, but remain insufficient to explain the specificity of the movement and its popularity in the long run. In many ways, the beguine movement stands out as different from other female organisations or religious movements. The question then arises why this was possible and whether the local conditions of the Low Countries had something to do with it. In this paper, I argue that the specific attitude towards women in the Low Countries that is reflected in their wages, as well as their level of human capital, and labour market participation created a fertile basis for the beguinages to develop: the beguinages may have offered women in the Low Countries – who enjoyed an exceptional “liberated” position regarding social and financial independence, the origins of this position lying in the emergence of the European Marriage Pattern (EMP) – safety and security in case they chose to remain single
    Keywords: beguines, single women, Low Countries, agency
    Date: 2013–04
  12. By: Jakob Madsen; Eric Yan
    Abstract: Using a millennium of data for 12 countries in the East and in the West this paper tests the extent to which the three most influential hypotheses on growth and development can shed light on why some economies developed earlier than others and which factors were fundamental for the Great Divergence. These hypotheses are the contracting institutions, property right institutions, and culture. It is tested whether these theories influence growth through science and technology or human capital or channels that are independent of these two channels. It is found that culture, contracting institutions and property right institutions have all been relevant for growth and development.
    Keywords: the Great Divergence, culture, institutions
    JEL: O1 P16
    Date: 2013–05
  13. By: Hugo Erken (Ministry of Economic Affairs, The Hague); Piet Donselaar (Ministry of Economic Affairs, The Hague); Roy Thurik (Erasmus School of Economics, Erasmus Universiteit Rotterdam, EIM Business and Policy Research, Zoetermeer)
    Abstract: Total factor productivity of twenty OECD countries for a recent period (1971-2002) is explained using six different models based on the established literature. Traditionally, entrepreneurship is not dealt with in these models. In the present paper it is shown that – when this variable is added - in all models there is a significant influence of entrepreneurship while the remaining effects mainly stay the same. Entrepreneurship is measured as the business ownership rate (number of business owners per workforce) corrected for the level of economic development (GDP per capita).
    Keywords: Total factor productivity, research and development, entrepreneurship, OECD
    JEL: E20 L26 M13 O10 O30 O40 O50
  14. By: Liran Einav; Jonathan D. Levin
    Abstract: Many believe that “big data” will transform business, government and other aspects of the economy. In this article we discuss how new data may impact economic policy and economic research. Large-scale administrative datasets and proprietary private sector data can greatly improve the way we measure, track and describe economic activity. They also can enable novel research designs that allow researchers to trace the consequences of different events or policies. We outline some of the challenges in accessing and making use of these data. We also consider whether the big data predictive modeling tools that have emerged in statistics and computer science may prove useful in economics.
    JEL: C10 C18 C50 C80
    Date: 2013–05
  15. By: Enrico Perotti (University of Amsterdam)
    Abstract: This survey reviews how a recent political economy literature helps explaining variation in governance, competition, funding composition and access to credit. Evolution in political institutions can account for financial evolution, and appear critical to explain rapid changes in financial structure, such as the Great Reversal in the early XX century, unlike time-invariant legal institutions or cultural traits. Future research should model the sources and consequences of financial instability, and to predict how major redistributive shocks will shape regulatory choices and financial governance.
    Keywords: political institutions, property rights, investor protection, financial development, access to finance, entry, banking
    JEL: G21 G28 G32 P16
    Date: 2013–02–25
  16. By: Boyer, Marcel
    Abstract: I characterize and discuss in this paper the challenges and pitfalls we must face to grow out for good of the recent and future financial crises and economic recessions. I propose a brief history of the last crisis and insist on the loss of confidence within the banking and financial sector, which propagated later to the real sector. I discuss ways to rebuild confidence and move out of a stable bad economic equilibrium, due in part to inefficiently designed bonus systems. Considering data on gross job creation and loss in the private sector, I challenge the sorcerer’s apprentices plan for reforming capitalism and I recall the role of creative destruction. I show that government deficits and economic growth are not good friends and I offer a reference to the Canadian experience of the two decades 1985-2005. Finally, I discuss fiscal and regulatory reforms and propose redesigned roles for governmental and competitive sectors in generating a more prosperous economy.
    Keywords: Financial crisis, confidence, creative destruction, fiscal reform, prudential regulation, competitive social-democracy.
    Date: 2013–04
  17. By: Yungron Li; Javier Ruiz-Castillo
    Abstract: This paper studies the role of extremely highly cited articles in two instances: the measurement of citation inequality, and mean citation rates. Using a dataset, acquired from Thomson Scientific, consisting of 4.4 million articles published in 1998-2003 in 22 broad fields with a five-year citation window, the main results are the following. Firstly, both within each of 22 broad fields and in the all-sciences case, citation inequality is strongly affected by the presence of a handful of extreme observations, particularly when it is measured by citation inequality indices that are very sensitive to citation differences in the upper tail of citation distributions. Secondly, the impact of extreme observations on citation averages is generally much smaller. The concluding Section includes some practical lessons for students of citation inequality and/or users of high-impact indicators
    Date: 2013–04

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