New Economics Papers
on Business, Economic and Financial History
Issue of 2013‒08‒05
nineteen papers chosen by

  1. Locomotives of Local Growth: The Short- and Long-Term Impact of Railroads in Sweden By Thor Berger; Kerstin Enflo
  2. Waterloo: a Godsend for French Public Finances? By Kim Oosterlinck; Loredana Ureche-Rangau; Jacques-Marie Vaslin
  3. Vínculos interregionales en la economía colombiana del siglo XIX: Empresariado del Caribe en el interior del país By Mejía-Cubillos, Javier
  4. Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2004 By Paulina Restrepo-Echavarria; Mark Wright; Lee Ohanian
  5. The Market for Paintings in the Netherlands during the Seventeenth Century By Federico Etro; Elena Stepanova
  6. Law and Social Capital: Evidence from the Code Napoleon in Germany By Johannes C. Buggle
  7. New directions of trade for the agri-food industry: a disaggregated approach for different income countries, 1963-2000 By Raúl Serrano; Vicente Pinilla
  8. International seaborne piracy and the state: Lessons to be learned from history? By Smith, Stefan Halikowski
  9. The Black Man's Burden - The Cost of Colonization of French West Africa By Elise Huillery
  10. Some Observations on the Convergence Experience of Turkey By Murat Ungor
  11. Ministries of labour : comparative overview: history, mandate, challenges world-wide database and organizational charts By Rychly, Ludek
  12. Are modern financial systems shaped by state antiquity? By James B. Ang
  13. Greasing the Wheels of Rural Transformation? Margarine and the Competition for the British Butter Market By Markus Lampe; Paul Sharp
  14. Economic distress and resurgence in U.S. central cities: concepts, causes, and policy levers By Yolanda K. Kodrzycki; Ana Patricia Muñoz
  15. Distributional Impact of Commodity Price Shocks: Australia over a Century By Sambit Bhattacharyya; Jeffrey G. Williamson
  16. Voting Alone? The Political and Cultural Consequences of Commercial TV By Ruben Durante; Paolo Pinotti; Andrea Tesei
  17. Political Structure as a Legacy of Indirect Colonial Rule: Bargaining between National Governments and Rural Elites in Africa By Mizuno, Nobuhiro
  18. Developmental welfare capitalism in East Asia with a special emphasis on South Korea By Kross, Karmo
  19. Corporate governance of banks: A survey By Jakob de Haan; Razvan Vlahu

  1. By: Thor Berger (Lund University); Kerstin Enflo (Lund University)
    Abstract: This paper uses city-level data to examine the impact of a first wave of railroad construction in Sweden, between 1855 and 1870, from the 19th century until today. We estimate that railroads accounted for 50% of urban growth, 1855-1870. In cities with access to the railroad network, property values were higher, manufacturing employment increased, establishments were larger, and more information was distributed through local post offices. Today, cities with early access to the network are 62% larger and to be found 11 steps higher in the urban hierarchy, compared to initially similar cities. We hypothesize that railroads set in motion a path dependent process that shapes the economic geography of Sweden today.
    Keywords: Railroads, Industrialization, Urban Growth, Path Dependence.
    JEL: N73 N93 R12 R40
    Date: 2013–07
  2. By: Kim Oosterlinck (Université Libre de Bruxelles); Loredana Ureche-Rangau (Université de Picardie Jules Verne); Jacques-Marie Vaslin (Université de Picardie Jules Verne)
    Abstract: Following Waterloo, managing French public finances represented a daunting task. Defeated France had lost a substantial part of its population and territory. The country was partially occupied and France was to pay huge amounts as reparations to the victors. Furthermore, France’s reputation had been tarnished by several defaults on its debt in the preceding decades. Despite all these elements, in the ten years between 1815 and 1825, not only did France manage to place a huge amount of debt on the market (resulting in a threefold increase) but it did so with a spread, compared to the British consol, falling from more than 400 basis points to a meagre 100 basis point. Based on an econometric analysis of the yields of the French rentes, we show that the military threat of the Allied coupled to a significant improvement in French institutions explain the dramatic decrease in yields.
    Keywords: Sovereign debt, bond pricing, France, default, financial history, Waterloo
    JEL: N23 F34 G15
    Date: 2013–07
  3. By: Mejía-Cubillos, Javier
    Abstract: This paper analyzes, through case study, the activity of the Colombian Caribbean entrepreneurs in the inland country during the 19th century. It discusses the business of Amador family, Juan Bautista Mainero and Fergusson Noguera family. The aim is to highlight the importance of studying the interregional phenomena, evidencing the existence of national spheres for large business in the 19th century. Thus, it provides elements for a better understanding of the historical process of Colombian economic integration.
    Keywords: Market integration; Caribbean; Colombia; Entrepreneurship; 19th century
    JEL: N86 N96 O54
    Date: 2013–07
  4. By: Paulina Restrepo-Echavarria (The Ohio State University); Mark Wright (UCLA); Lee Ohanian (University of California Los Angeles)
    Abstract: From the end of the SecondWorldWar to the beginning of the Twenty-First Century, per-capita GDP in the economies of East Asia grew almost three times as fast as in the economies of Latin America. Specifically, in 1950, the economies of the Asian Tigers (Japan, South Korea, Singapore and Taiwan) had just 17 percent of US per capita GDP, but grew to have 67 percent by 2001. In contrast, Latin America had 28 percent of US per capita GDP in 1950, and only had 23 percent in 2001. Despite this large growth differential, with Latin America falling behind the US, and with Asia catching up, capital predominantly flowed out of Asia and into Latin America. This paper studies this apparent gross misallocation of capital, and how the global development process after World War II would have differed had capital flowed to the region with the highest returns. We present an analytical framework for analyzing the incentives facing investors who allocate capital internationally. Applying the framework to data on the major Asian and Latin American economies, we account for the pattern of observed capital flows by quantifying distortions in the markets for labor, domestic capital, and international capital. We find that inefficiencies in the allocation of resources within countries play a significant role in determining how capital is allocated across them. Specifically we observe that the reallocation of capital from Asia to Latin America is motivated by a quantitatively important labor market distortion that is isomorphic to a very high labor income tax in Asia. We then use the framework to explore the effect of different policy interventions in labor, domestic capital, and international capital markets at different stages in history, and on the sequencing of these interventions, on capital flows and development.
    Date: 2012
  5. By: Federico Etro (Department of Economics, University Of Venice Cà Foscari); Elena Stepanova (S. Anna School of Advanced Studies, Pisa)
    Abstract: We analyze the price of paintings in Dutch inventories and auctions of the Golden Age. The econometric investigation emphasizes correlations between prices adjusted for inflation and characteristics of the paintings, of the painters, of the owners (job, religion, size of the house) and, in case of auctions, also of the buyers. Price differentials for alternative genres, for the characteristics of the traders and the purpose of the inventory tend to disappear after con-trolling for the unobservable quality of paintings with artists fixed effects. The real price of a representative painting declined over the XVII century. We argue that initial high prices were the fruit of the large increase in demand by the Dutch middle class, which attracted endogenous entry of painters. This led to intense competition and the development of cost-saving innovations for mass production (high specialization in genres, smaller paintings, monochromatic styles) so as to gradually reduce prices. We also run a multinomial probit model to verify the Montias hypothesis on the location of paintings between rooms of Dutch houses.
    Keywords: Art market, Endogenous entry, Dutch Golden Age, Hedonic pricing analysis
    JEL: Z11 N0 D4
    Date: 2013
  6. By: Johannes C. Buggle
    Abstract: Do legal institutions affect norms of cooperation? Using the introduction of the Code Napoleon during the Napoleonic Wars in Germany as a historical experiment, I show that a positive shock to the quality of legal institutions can increase social-capital long-lastingly. I find that individuals living in regions where the Code Napoleon was used display higher levels of interpersonal trust in the data of the German Socio-Economic Panel (SOEP). This result holds true conditional on past development levels, as well as in a less heterogeneous border sample, separating regions that applied the Code Napoleon from those that did not. Artificially moving the border and comparing regional pre-treatment characteristics support the interpretation of a causal treatment effect. In addition, I show immediate effects of the Code Civil on novel measures of 19th century social capital. The analysis of historical employment data furthermore suggests economic cooperation to be a potential mechanism for the relationship between legal institutions and social capital.
    Keywords: Institutions, Long-Term Persistence, Social Capital
    JEL: N43 O10 P48 Z10
    Date: 2013
  7. By: Raúl Serrano (Department of Business Administration, Faculty of Economics and Business Studies, Universidad de Zaragoza); Vicente Pinilla (Department of Applied Economics and Economic History, Faculty of Economics and Business Studies, Universidad de Zaragoza)
    Abstract: The objective of the present study is to explain the fundamental changes experienced by agricultural trade in the second half of the XX century. The first of these was a progressive concentration of this trade among developed countries, while the second was a significant boom in agricultural trade among developing countries, since the final decade of the last century.Our gravity model underlines that, the agricultural products exported by the Southern countries to any destination had a demand elasticity which was negative and statistically signficant. Furthermore, this model has also permitted verification that Regional Trade Agreements have significantly encouraged agricultural trade among developed countries. In contrast, the developing countries were faced with highly protected markets and a relative initial failure in their attempts to liberalize their regional markets. The boom from the final decade of the XX century in South-South agricultural trade can be explained, by the stimulus provided by the new RTAs among developing countries.
    Keywords: Agri-food trade, gravity equation, regional trade agreements, agri-food industry
    JEL: F14 N50 N70 Q17
    Date: 2013–02
  8. By: Smith, Stefan Halikowski
    Abstract: Since 1994 worldwide maritime piracy has witnessed an explosion. While data collection has improved, the incidence of piracy has undoubtedly risen as well, particularly in areas of the world marked by failed or weak states' (Somalia, Papua New Guinea, Sierra Leone), though some areas (South-East Asia) have experienced piracy as a perennial hazard. It is not clear whether modern nation states are sufficiently equipped to deal with such a problem, and it is from within international bodies that we might best expect the lead to be taken against the current piracy epidemic (NATO/UN/EU).However, while the EuNavfor Atalanta taskforce can already boast of some early successes, there are also substantial legal hurdles to be overcome in resurrecting piracy laws unused in 400 years, as some test cases like that of MS Taipan, which got underway in the Hamburg Amtsgericht in October 2010, demonstrate. As a historian, one should ask how the problem of seaborne piracy was addressed and suppressed by European powers in the past, for example in the period 1480-1725 in which I am specifically interested. Means of enforcing stricter penalties, increasing naval patrols of sea lanes, and shifting official attitudes regarding the threat posed by piracy to the well-being of nation states, are all lessons policy-makers today would do well to take heed of. Not all attempts at resolving piracy were successful, and in what follows tree different case studies shall be presented: the piratic attacks by the so-called Victualian Brothers against the Wendish cities of the Hanseatic League over the last fifteen years of the fourteenth century, a relatively small-scale challenge which had a wider international backdrop, but which was successfully extirpated; then, the case of Portugal in the sixteenth century, where piracy threatened simultaneously on too many fronts, and was not successfully swept aside; and the case of Britain in the eighteenth, where piracy again presented itself as a global problem, but efforts to counter it were more far-ranging, handled by a specially commissioned sub-state agency, sanctioned with new purposeful legislation, and where the fight was met with greater success. -- Seit 1994 kann weltweit ein explosionsartiger Anstieg von Seepiraterie festgestellt werden. Während dies einerseits auf verbesserte Datensammlung zurückgeführt werden kann, gibt es andererseits eindeutig auch ein vermehrtes Auftreten von Piraterie, insbesondere in Weltregionen mit gescheiterten oder schwachen Staaten (Somalia, Papua Neu Guinea und Sierra Leone). In manchen Gebieten (Südostasien) stellt diese jedoch bereits eine lange andauernde Gefahrenquelle dar. Es ist unklar, ob moderne Nationalstaaten ausreichend ausgestattet sind um diesem Problem zu begegnen, und es scheint, dass im Kampf gegen den gegenwärtigen Ausbruch der Seeräuberei internationale Organisationen die führende Rolle übernehmen sollten (NATO, UNO, EU). Wie dem auch sei, trotz einiger früher Erfolge von EU NAVFOR ATALANTA müssen noch beachtliche rechtliche Hürden überwunden werden, die sich aus der Wiederbelebung von über 400 Jahren ungenutzten rechtlichen Normen ergeben, wie einige beispielhafte Fälle zeigen, z.B. der der MS Taipan, der im Oktober 2010 am Amtsgericht Hamburg begann. Als Historiker sollte man sich die Frage stellen, wie europäische Herrscher in der Vergangenheit dem Problem der Seeräuberei begegneten und diese unterdrückten, zum Beispiel in der Zeit von 1480 bis 1725, der mein besonderes Interesse gilt. Mittel zur Durchsetzung strengerer Strafen, erhöhte Kontrollen von Seewegen durch die Marine und eine Änderung der offiziellen Einstellung gegenüber der Gefahr die Piraterie für das Wohlergehen von Staaten darstellt, sind Lehren, die heutige politische Entscheidungsträger in Betracht ziehen sollten. Nicht alle historischen Versuche Piraterie zu bekämpfen waren erfolgreich und im Folgenden sollen drei Fallstudien besprochen werden: die Angriffe der sogenannten Viktualienbrüder auf die Wendischen Städte der Hanse in den letzten fünfzehn Jahren des vierzehnten Jahrhunderts, die trotz ihrer vergleichsweise kleinen Herausforderung einen wichtigen internationalen Hintergrund hatten, und die erfolgreich zurückgeschlagen wurden; danach die Fallstudie Portugals im sechzehnten Jahrhundert, wo Piraterie gleichzeitig an mehreren Fronten eine ernstzunehmende Gefahr darstellte, und die nicht erfolgreich bekämpft werden konnte; und die Fallstudie Britanniens im achtzehnten Jahrhundert, wo Seeräuberei erneut ein globales Problem darstellte, dem jedoch mit weitreichenden Maßnahmen und einer speziell eingerichteten staatlichen Agentur, der Britischen Navy, entgegengetreten wurde, Seeräuberei wurde dabei mit neuer, zielgerichteter Gesetzgebung bestraft und der Kampf war von größerem Erfolg gekrönt.
    Date: 2013
  9. By: Elise Huillery (Département d'économie)
    Abstract: Was colonization costly for France? Did French taxpayers contribute to colonies' development? This paper reveals that French West Africa's colonization took only 0.29 percent of French annual expenditures, including 0.24 percent for military and central administration and 0.05 percent for French West Africa's development. For West Africans, the contribution from French taxpayers was almost negligible: mainland France provided about two percent of French West Africa's revenue. In fact, colonization was a considerable burden for African taxpayers since French civil servants' salaries absorbed a disproportionate share of local expenditures.
    Date: 2013
  10. By: Murat Ungor
    Abstract: This study, without providing a complete picture of the country’s economic development, aims to bring about a better understanding of the convergence experience of Turkey. We explore some aspects of the convergence process of Turkey and provide some international comparisons tracking the changes in both nominal and real per capita income figures. With respect to the per capita income, Turkey is closer to Brazil than to Korea. From the 1960s until now, Korea is closing the gap in per capita income that separates the country from the richest countries of the world. On the other hand, Brazil and Turkey lost ground in the last two-three decades of the 20th century. After the lost decades, Turkey had high growth rates during 2002-2007. We perform a growth accounting exercise and discuss the importance of productivity growth in Turkey’s long-run growth. Lastly, we carry out an exercise, in which we decompose the growth rate of nominal per capita income into the growth rates of real GDP and population in Turkey; the rate of inflation in the U.S.; and the appreciation of the Turkish Lira. We present several alternative scenarios for the time-path of per capita income in Turkey
    Keywords: Turkey, comparative studies of countries, convergence, growth accounting
    JEL: N10 O11 O40 O47 O57
    Date: 2013
  11. By: Rychly, Ludek
    Keywords: labour administration, labour inspection, technical cooperation, capacity building, role of ILO, administration du travail, inspection du travail, coopération technique, renforcement des capacités, rôle de l'OIT, administración del trabajo, inspección del trabajo, cooperación técnica, desarrollo de la capacidad, papel de la OIT
    Date: 2013
  12. By: James B. Ang
    Abstract: We demonstrate that existing differences in financial development between countries can be explained by the cumulative variations in their levels of state experience since 1 AD. This dimension of early historical development has not been considered so far in studies that analyze the determinants of financial development. The estimation allows for all major theories established in the literature as possible explanations for the disparity of financial development across the globe. Significance of state antiquity is robust to the use of alternative indicators of financial development, the consideration of different lengths and periods of statehood, and controlling for a range of variables or country characteristics. Our results highlight the important role of statehood in propelling financial system development, and thus provide some support to the view that historically determined differences in the early-start developmental advantage provide the basis for explaining the fundamental sources of variations in financial development between countries today.
    Keywords: State antiquity; Financial development
    JEL: H70 O10 O40
    Date: 2013–07
  13. By: Markus Lampe (Universidad Carlos III Madrid); Paul Sharp (University of Southern Denmark)
    Abstract: We consider an example of the impact of a new good on producers of close substitutes: the invention of margarine and its rapid introduction into the British market from the mid-1870s. This presented a challenge to the traditional suppliers of that market, butter producers from different European countries. We argue that the capacity to react quickly to the appearance of this cheap substitute by improving quality and establishing product differentiation was critical for the fortunes of butter producers. We illustrate this by discussing the different reactions to margarine and quality upgrading in Ireland, Denmark and the Netherlands. A statistical analysis using monthly data for Britain from 1881-87 confirms that margarine had a greater impact on the price of poor quality butter than that of high quality butter, presumably because it was a stronger substitute.
    Keywords: Butter, margarine, dairies, new products, quality changes
    JEL: L66 N53 O31
    Date: 2013–07
  14. By: Yolanda K. Kodrzycki; Ana Patricia Muñoz
    Abstract: This paper provides a review of the literature on U.S. central city growth and distress during the second half of the twentieth century. It finds that city growth tended to be higher in metropolitan areas with favorable weather, higher growth, and greater human capital, while distress was strongly correlated with city-level manufacturing legacy. The article affirms that distress has been highly persistent, but that some cities have achieved resurgence through a combination of strong leadership, collaboration across sectors and institutions, clear and broad-based strategies, and significant infrastructure investments. Finally, the article explores measurement issues by comparing two methodologies used to identify poorly performing central cities: comparisons across a comprehensive national cross-section of cities and comparisons within smaller samples of similar cities. It finds that these approaches have produced similar assessments of a city’s status, except in some cases where the city’s progress has been uneven across time or with respect to alternative criteria.
    Keywords: Metropolitan areas ; Metropolitan areas - Statistics ; Cities and towns ; Economic policy
    Date: 2013
  15. By: Sambit Bhattacharyya; Jeffrey G. Williamson
    Abstract: This paper studies the distributional impact of commodity price shocks over the both the short and very long run. Using a GARCH model, we find that Australia experienced more volatility than many commodity exporting developing countries over the periods 1865-1940 and 1960-2007. A single equation error correction model suggests that commodity price shocks increase the income share of the top 1, 0.05, and 0.01 percents in the short run. The very top end of the income distribution benefits from commodity booms disproportionately more than the rest of the society. The short run effect is mainly driven by wool and mining and not agricultural commodities. A sustained increase in the price of renewables (wool) reduces inequality whreas the same for non-renewable resources (minerals) increases inequality. We expect that the initial distribution of land and mineral resources explains the asymmetric result.
    Keywords: commodity price shocks; commodity exporters; top incomes; inequality
    JEL: F14 F43 N17 O13
    Date: 2013
  16. By: Ruben Durante (Département d'économie); Paolo Pinotti; Andrea Tesei
    Abstract: We investigate the long-term impact of early exposure to Berlusconi’s commercial TV network, Mediaset, on voting behavior and civic engagement in Italy. To do so, we exploit differences in Mediaset signal reception across Italian municipalities due to the network’s staggered introduction over the national territory and to idiosyncratic geomorphological factors. We find that municipalities exposed to Mediaset prior to 1985 exhibit greater electoral support for Berlusconi’s party in 1994, when he first ran for office, relative to municipalities that were exposed only later on. This difference, estimated between 1 and 2 percentage points, is extremely robust and tends to persist in the following four elections. This effect can hardly be attributed to differential exposure to partisan news bias since, prior to 1985, content on Mediaset channels was dominated by light-entertainment programs and no news programs were broadcast until 1991, by which time the network was accessible to the entire population. Instead, we present evidence that early exposure to commercial TV was associated with a substantial decline in social capital consistent with the diffusion of a culture of individualism and civic disengagement that favored the political success of Berlusconi.
    Keywords: mass media, voting, civic engagement
    JEL: L82 D72 Z13
    Date: 2013–06
  17. By: Mizuno, Nobuhiro
    Abstract: Alliances between national governments and rural elites are observed in post-colonial Africa. In such alliances, the national governments preserve rural-elite authority formed during the colonial era and cede their resources and prerogatives to the rural elites. This paper develops a model of bargaining between a national government and a rural elite, in which the bargaining power of the national government is endogenously explained by the ability of the rural elite to compel obedience from rural residents. Since indirect colonial rule is a significant source of the rural-elite control over residents, the result implies that cross-regional variations in colonial policies lead to variations in the feature of post-colonial alliances between African national governments and rural elites.
    Keywords: Africa; Colonialism; Politics
    JEL: H11 H20 N47 P16 Q13
    Date: 2013–08–01
  18. By: Kross, Karmo
    Abstract: The aim of this paper is to clarify the kind of capitalist society that is emerging in South Korea. To keep the conceptual analysis focused, the paper addresses the questions of how and why the structural and institutional socio-economic and political arrangements have changed during South Korea's catch-up process and what others could learn from it. Using a historical-comparative approach, the paper shows how the economic policy and welfare protection of the developmental welfare capitalism in East Asia in general and in South Korea in particular have changed during the differ-ent stages of the economic catch-up process. In addition, it points out the major chal-lenges that the model faces in the future. It appears that the socio-economic and po-litical arrangements of the era reflect the level of economic development and starting conditions, on the one hand, and the balance of power between labour, capital and the political establishment, on the other hand. The biggest challenge to the democra-tised and export oriented East Asian developmental welfare capitalism is the urgency to find quick but sustainable solutions to the accumulated social problems in the con-text of worldwide economic recession and intensified globalisation. --
    Keywords: Newly Industrialising Countries,Varieties of Capitalism,Welfare Capitalism,Welfare Developmentalism
    Date: 2013
  19. By: Jakob de Haan; Razvan Vlahu
    Abstract: This paper reviews the empirical literature on the corporate governance of banks. We start by highlighting the main differences between banks and non-financial firms and focus on three characteristics which make banks special: (i) regulation, (ii) the capital structure of banks, and (iii) the complexity and opacity of their business and structure. Next, we discuss the characteristics of corporate governance in banks and how they differ from the governance of non-financial firms. We then review the evidence on three governance mechanisms: (i) boards, (ii) ownership structures, and (iii) executive compensation. Our review suggests that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions, such as the positive (negative) association between board independence (size) and performance, do not hold for banks. Also, existing work provides less than conclusive results regarding the relation between different governance mechanisms and various measures for banks’ performance. We discuss potential explanations for these mixed results.
    Keywords: banking; governance; boards; bank ownership; executive remuneration
    JEL: G21 G34 G35
    Date: 2013–07

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