New Economics Papers
on Business, Economic and Financial History
Issue of 2013‒08‒31
nineteen papers chosen by

  1. Understanding Rating Addiction: US Courts and the Origins of Rating Agencies' Regulatory License (1900-1940) By Marc Flandreau; Joanna Kinga Slawatyniec
  2. The Life of a Mariner in Eighteenth-Century Bristol: A Case Study of Higher-Value Probate Inventories By Yoshihiko Okabe
  3. "Development and Management of Manchurian Economy under the Japan Empire" By Tetsuji Okazaki
  4. Ibn Jaldún: Pensamiento Económico En El S. XIV By Puente-Ajovin, Miguel
  5. Industrial Growth and Structural Change: Brazil in a Long-Run Perspective By Dante Aldrighi; Renato P. Colistete
  6. Market Forces Shaping Human Capital in Eighteenth Century London By Moshe Justman; Karine van der Beek
  7. Assessing the historical role of credit: business cycles, financial crises and the legacy of Charles S. Peirce By Oscar Jordà
  8. A Tale of Two Countries and Two Booms, Canada and the United States in the 1920s and the 2000s: The Roles of Monetary and Financial Stability Policies By Ehsan U. Choudhri; Lawrence L. Schembri
  9. The evolution of the Dutch dairy industry and the rise of cooperatives.A research note By Koen Frenken
  10. The long-run relationship between the Japanese credit and money multipliers By Mototsugu Fukushige
  11. Institutions and prosperity By Colin Jennings
  12. Local Economic Development, Agglomeration Economies and the Big Push: 100 Years of Evidence from the Tennessee Valley Authority By Patrick Kline; Enrico Moretti
  13. The Implications of Educational and Methodological Background for The Career Success of Nobel Laureates: Looking at Major Awards By Ho Fai Chan; Benno Torgler
  14. Threshold models of technological transitions By Paolo Zeppini; Koen Frenken; Roland Kupers
  15. The Racial and Ethnic Composition of Local Government Employees in Large Metro Areas, 1960-2010 By Todd Gardner
  16. On the Stationarity of per Capita Carbon Dioxide Emissions over a Century By Maria Christidou; Theodore Panagiotidis; Abhijit Sharma
  17. Awards Before and After the Nobel Prize: A Matthew Effect and/or a Ticket to one's own Funeral? By Ho Fai Chan; Laura Gleeson; Benno Torgler
  18. Do SBA Loans Create Jobs? By Brown, J. David; Earle, John S.
  19. Tout se transforme. Vraiment tout ? By Immanuel Wallerstein

  1. By: Marc Flandreau (Graduate Institute for International Studies and Development); Joanna Kinga Slawatyniec (Graduate Institute for International Studies and Development)
    Abstract: This paper does challenge the "regulatory license" view that reliance by regulators on the output of rating agencies in the 1930s "caused" the agencies to become a central part of the fabric of the US financial system. We argue that long before the 1930s, courts began using ratings as financial community produced norms of prudence. This created "a legal license" problem, very analogous to the "regulatory license" problem and gave rise to conflicts of interest not unlike those that have been discussed in the context of the subprime crisis. Rating agencies may have had a responsibility in the Great Depression of the 1930s.
    Date: 2013–08
  2. By: Yoshihiko Okabe (Faculty of Economics, Kobe Gakuin University)
    Abstract: Anyone studying the eighteenth-century probate inventories of Bristol soon notices that the largest occupation group was mariner. However, as an occupation, mariner is exceedingly difficult to define and understand. The purpose of this paper is to reveal what the job of a mariner was by examining the real lives of wealthy mariners and the people who supported the maritime economy of Bristol in the eighteenth century. There were many ewage duef inventories in which the deceased or their family described themselves as mariners. Even though there were 1,486 of these inventories in the BRO for the eighteenth century, there are only 25 marinersf inventories in the higher-value range of more than ’50. Because there were no other names of higher- status marine occupations, except captain, the word emarinerf was used not only by sailors, but also by people with significant personal property, meaning master mariners. Thus, the word emarinerf covered a very wide of range of social statuses. From the four case studies of these mariners from probate inventories in Ecclesiastical Cause Papers, we can see their real lives. They all had many goods and chattels, as well as money owing. All the mariners selected in this paper spent their everyday lives surrounded by many consumer goods. Although one was more enthusiastic than the others, all of them were interested in improving their quality of life through consumer items such as tea and kitchenware. Two inventories included navigation equipment, proof and symbols of a master mariner. The credits show that James Owens had wide range of business, and also Thomas Smithfs inventory shows commercial relationships with business partners, indicating that they were not wage workers but wealthy traders.
    Keywords: Probate inventories, Bristol, mariner, eighteenth century, economic history
    JEL: N33 N63 N93
    Date: 2013–08
  3. By: Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract:    In 1932, the Kwantung Army occupied Manchuria, the northeast part of China, and founded a puppet state, Manchukuo. The Kwantung Army and the Manchukuo government intended to develop heavy and chemical industries as well as munitions industries there, but they did not have a solid program for it in the first place. Indeed, the process of Manchurian development in the 1930s and 1940s was full of trial and error. At first, many "special corporations" were founded under the supervision of the Manchukuo government, but they were not coordinated systematically. Furthermore, the targets of "Five Years Plan of Industrial Development" decided in 1937 were not coordinated. Given that, a new system of coordination was introduced. That is, a large holding company, the Manchurian Heavy Industries Development Co.(MHID) was founded with Yoshisuke Ayukawa as the president, and it was intended that special corporations would be coordinated under the MHID. It is a remarkable trial of a new coordination system, where a major part of a national economy was coordinated within the one huge private conglomerate. However, finally in 1939, under the condition that import from Japan was restricted and there was no prospect of capital import from foreign countries, the Kwantung Army and the Manchukuo government decided to introduce an alternative system of coordination, namely, the state-led system of planning and control. This was similar to the system that had already started to work in Japan. In this sense, the system of full-scale planning and control was imported from Japan to Manchuria, not from Manchuria to Japan.
    Date: 2013–08
  4. By: Puente-Ajovin, Miguel
    Abstract: Ibn Khadun, un historiador musulmán que decidió revisar de manera analítica los fundamentos de la historia, acaba describiendo ciertos componentes del proceso económico que deben ser tenidos en cuenta como parte de la historia del pensamiento económico. En esta disertación doy un exhaustivo repaso a las teorías derivadas de su análisis económico, que van desde los fundamentos de la división del trabajo a las causas del ciclo económico. Ibn Khadun, a Muslim historian who decided to review analytically the basics of the history, culminate his work describing certain components of the economic process that must be taken into account as part of the history of economic thought. In this dissertation I give a comprehensive review of the theories derived from his economic analysis, from the basics of the division of labour to the causes of the economic cycle.
    Keywords: Ibn Jaldún, Ibn Khaldun, pensamiento económico, S. XIV, análisis económico
    JEL: B0 B10 B11
    Date: 2013–08
  5. By: Dante Aldrighi; Renato P. Colistete
    Abstract: This paper presents a long-run analysis of industrial growth and structural change in Brazil, from the coffee export economy in the nineteenth century to the present day. We focus on Brazil’s high economic growth in most of the twentieth century and the disruption caused by the collapse of debt-led growth in the early 1980s. We then examine the recent trends in economic growth and structural change, with a sectoral analysis of output, employment and productivity growth. Employing new data and estimates, we identify a sharp break with the earlier period of high outuput and productivity growth in Brazil’s manufacturing industry before the 1980s. From the 1990s, the relatively successful process of learning and technological advance by manufacturing firms that took place since the early industrialization has lost strength and Brazil’s productivity growth has declined and stagnated.
    Keywords: Industrial Growth; Structural Change; Brazil
    JEL: N66 O14 L60
    Date: 2013–08–21
  6. By: Moshe Justman (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; and Department of Economics, Ben Gurion University); Karine van der Beek (Department of Economics, Ben Gurion University)
    Abstract: We draw on quantitative and descriptive data from Robert Campbell’s widely cited manual for prospective apprentices, The London Tradesman (1747), to demonstrate the responsiveness of apprenticeship in mid-eighteenth century London to market forces of supply and demand. We regress apprenticeship premiums on journeymen’s wages, set-up costs, and a selection of employment conditions and requirements across 178 trades, and find a significant elasticity of 0.4 with respect to wages and 0.25 with respect to set-up costs. We interpret this as supporting an economic model that views premiums as bounded from above by the expected benefits of acquiring the skills of the trade (Lane, 1996); bounded from below by the expected net training costs to the master, taking into account the possibility of the apprentice terminating his service prematurely (Wallis, 2008); and reflecting the relative bargaining power of master and parent. This supports the thesis that apprenticeship played an important role in adapting the English workforce to the skill requirements of the Industrial Revolution. Moreover, by demonstrating the internal and external consistency of Campbell’s observations, our findings support their further use as a unique, invaluable source of detailed, trade-specific wage data from the early years of the Industrial Revolution.
    Keywords: Apprenticeship, Industrial Revolution, tradesmen’s wages, London, eighteenth century, Robert Campbell
    JEL: N33
    Date: 2013–08
  7. By: Oscar Jordà
    Abstract: This paper provides a historical overview on financial crises and their origins. The objective is to discuss a few of the modern statistical methods that can be used to evaluate predictors of these rare events. The problem involves prediction of binary events and therefore fits modern statistical learning, signal processing theory, and classification methods. The discussion also emphasizes the need to supplement statistics and computational techniques with economics. A forecast’s success in this environment hinges on the economic consequences of the actions taken as a result of the forecast, rather than on typical statistical metrics of prediction accuracy.
    Keywords: Financial crises ; Statistical methods ; Credit ; Business cycles
    Date: 2013
  8. By: Ehsan U. Choudhri (Carleton University, Canada); Lawrence L. Schembri (Bank of Canada, Canada)
    Abstract: The paper examines the experience of Canada and the United States in the run-up to the two biggest financial crises in global history, in the 1920s and 2000s, and the roles of their monetary and financial stability policies. Comparing the Canadian and the U.S. experiences over the two periods is instructive because Canadian monetary policy was somewhat more conservative than U.S. monetary policy and there were important institutional differences in the two periods: Canada did not have a central bank in the 1920’s and followed different financial stability policies in the 2000’s. We present evidence that suggests two conclusions. Firstly, a more moderate Canadian monetary policy in the two booms affected Canada’s relative macroeconomic performance during the booms; in particular, the extent of the economic expansion was less. Secondly, this difference, however, by itself, does not explain why Canada fared better in the recent crisis, but not in the Great Depression. Indeed, the comparative evidence suggests that it was the difference in the effectiveness of financial stability policies, primarily financial regulation supervision with respect to banks and housing finance, that explains the better Canadian performance during the recent crisis. In contrast, in the 1920s, both countries lacked the financial policies to control excess credit growth and both suffered as a consequence. In addition, both countries made policy mistakes in aftermath of the stock market crash and credit collapses; in particular, Canada pursued inflexible interest and exchange rate policies that aggravated the economic downturn.
    Date: 2013–08
  9. By: Koen Frenken
    Abstract: Economic historians tend to explain the rise of the cooperative form in agriculture from the advantage of cooperative over private factories in reducing transaction costs with suppliers. This study provides a first test of this thesis using data on 1130 dairy factories in The Netherlands. Indeed, we find that cooperative factories performed significantly better than private factories. The persistence of private factories in certain regions can be explained by first-mover advantages.
    Keywords: cooperatives, first mover advantage, transaction costs, survival analysis, industry lifecycle, dairy industry
    Date: 2013–08
  10. By: Mototsugu Fukushige (Graduate School of Economics, Osaka University)
    Abstract: The standard argument is that while money creation and credit creation have different channels, they provide the same theoretical size of multipliers. However, there is usually some difference in practice. Consequently, in this paper we investigate the long-run relationship between the credit and money multipliers in Japan.
    Keywords: Money Supply, Money Stock, Money Multiplier, Credit Multiplier
    JEL: E51 E41 E42
    Date: 2013–08
  11. By: Colin Jennings (Department of Economics, University of Strathclyde)
    Abstract: This article reviews 'Pillars of Prosperity' by Timothy Besley and Torsten Persson and 'Why Nations Fail' by Daron Acemoglu and James Robinson. Both books are focussed on the role of institutions in determining the wealth of nations and the review compares and contrasts the different approaches contained in the two texts. The review also attempts to locate the texts within the broader literature in development and political economics and to link them to other recent work in these areas.
    Keywords: Institutions, Prosperity
    JEL: D7 N4 O1 O5 P5
    Date: 2013–08
  12. By: Patrick Kline (Department of Economics, University of California, Berkeley, USA); Enrico Moretti (Department of Economics, University of California, Berkeley, USA)
    Abstract: We study the long run effects of one of the most ambitious regional development programs in U.S. history: the Tennessee Valley Authority (TVA). Using as controls authorities that were proposed but never approved by Congress, we find that the TVA led to large gains in agricultural employment that were eventually reversed when the program’s subsidies ended. Gains in manufacturing employment, by contrast, continued to intensify well after federal transfers had lapsed – a pattern consistent with the presence of agglomeration economies in manufacturing. Because manufacturing paid higher wages than agriculture, this shift raised aggregate income in the TVA region for an extended period of time. Economists have long cautioned that the local gains created by place based policies may be offset by losses elsewhere. We develop a structured approach to assessing the TVA’s aggregate consequences that is applicable to other place based policies. In our model, the TVA affects the national economy both directly through infrastructure improvements and indirectly through agglomeration economies. The model’s estimates suggest that the TVA’s direct investments yielded a significant increase in national manufacturing productivity, with benefits exceeding the program’s costs. However, the program’s indirect effects appear to have been limited: agglomeration gains in the TVA region were offset by losses in the rest of the country. Spillovers in manufacturing appear to be the rare example of a localized market failure that cancels out in the aggregate.
    JEL: R11 J20 N92 O40
    Date: 2013–07
  13. By: Ho Fai Chan; Benno Torgler
    Abstract: Nobel laureates have achieved the highest recognition in academia, reaching the boundaries of human knowledge and understanding. Owing to past research, we have a good understanding of the career patterns behind their performance. Yet, we have only limited understanding of the factors driving their recognition with respect to major institutionalized scientific honours. We therefore look at the award life cycle achievements of the 1901 to 2000 Nobel laureates in physics, chemistry and physiology or medicine. The results show that Nobelists with a theoretical orientation are achieving more awards than laureates with an empirical orientation. Moreover, it seems their educational background shapes their future recognition. Researchers educated in Great Britain and the US tend to generate more awards than other Nobelists although there are career pattern differences. Among those, laureates educated at Cambridge or Harvard are more successful in Chemistry, those from Columbia and Cambridge excel in Physics, while Columbia educated laureates dominate in Physiology or Medicine.
    Keywords: Nobel Prize; Nobel Laureates; Awards; Recognition; Educational Background; Theory; Empirics; Chemistry; Physics; Physiology or Medicine
    JEL: M52 J33 Z13
    Date: 2013–06
  14. By: Paolo Zeppini; Koen Frenken; Roland Kupers
    Abstract: We present a systematic review of seven threshold models of technological transitions from physics, biology, economics and sociology. The very same phenomenon of a technological transition can be explained by very different logics, ranging from economic explanations based on price, performance and increasing returns to alternative explanations based on word-of-mouth recommendation, convergence of expectations, or social mimicking behaviour. Our review serves as a menu for future modelling exercises that can take one or more elementary transition models as a basis, and extend these model to fit more specific sectoral, technological or territorial contexts.
    Keywords: threshold models, technological transitions
    Date: 2013–08
  15. By: Todd Gardner
    Abstract: This study uses census microdata from 1960 to 2010 to look at how the racial and ethnic composition of local government employees has reflected the diversity of the general population in the 100 largest metro areas over the last half century. Historically, one route to upward social mobility has been employment in local government. This study uses microdata that predates key immigration and civil rights legislation of the 1960s through to the present to examine changes in the racial and ethnic composition of local government employees and in the general population. For this study, local government employees have been divided into high- and low-wage occupations. These data indicate that local workforces have grown more diverse over time, though representation across different racial and ethnic groups and geographic areas is uneven. African-Americans were underrepresented in high-wage local government employment and overrepresented in low-wage jobs in the early years of this study, particularly in the South, but have since become proportionally represented in high-wage jobs on a national level. In contrast, the most recent data indicate that Hispanic and other races are underrepresented in this employment group, particularly in the West. Though the numbers of Hispanic and Asian high-wage local government employees are increasing, it appears that it will take several years for those groups to achieve proportional representation throughout the United States.
    Keywords: local government employment, race, ethnicity
    Date: 2013–08
  16. By: Maria Christidou (University of Macedonia, Greece); Theodore Panagiotidis (University of Macedonia, Greece); Abhijit Sharma (School of Management, University of Bradford, UK)
    Abstract: This paper examines the stationarity of carbon dioxide (CO2) emissions per capita for a set of 36 countries covering the period 1870-2006. We employ recently developed unit root and stationarity tests that allow for the mean reverting process to be nonlinear and take into account cross sectional dependence. By grouping countries according to their geographical proximity the importance of cross sectional dependence in panel unit root and stationarity tests is revealed. Using a recently developed nonlinear panel unit root test, we nd strong evidence that the per capita carbon dioxide emissions over the last one hundred and fty years are stationary. Our nonlinear specication captures the dynamics of the emissions time series data more eectively and we obtain evidence supporting stationarity for all country groups under study.
    Keywords: convergence, nonlinear unit roots, panel unit roots, heterogeneous panels, cross-section dependence
    JEL: C32 C33 Q28 Q54
    Date: 2013–08
  17. By: Ho Fai Chan; Laura Gleeson; Benno Torgler
    Abstract: This study explores whether awards breed further awards and what happens after a researcher receives the Nobel Prize. We therefore collected data on all the 1901 to 1980 Nobel laureates in physics, chemistry and medicine or physiology, looking at the number of awards received each year for 50 years before and after obtaining the Nobel Prize. The results indicate an increasing rate of awards before the Nobel Prize, reaching the summit precisely in the year of the Nobel Prize. After this pinnacle year, awards drop sharply. Such a result is also confirmed when looking at the three different disciplines separately and when conducting a random-effects negative binomial regression model. Moreover, Nobel laureates in medicine or physiology generate more awards shortly before and after the Nobel Prize while laureates in Chemistry attract more awards as time progresses.
    Keywords: Nobel prize; Nobel laureates; Matthew effect; awards; recognition
    JEL: M52 J33 Z13
    Date: 2013–05
  18. By: Brown, J. David (U.S. Census Bureau); Earle, John S. (George Mason University)
    Abstract: Small Business Administration (SBA) loans have long been one of the most significant policy interventions in the U.S. affecting firm behavior, but little is known about their outcomes. This paper estimates the effects on employment using a list of all SBA loans linked to annual data on all U.S. employers from 1976 to 2010. Our methods combine firm fixed-effect regressions with matching on exact firm age, industry, year, and pre-loan size, and on propensity scores as a function of four years of employment history and other variables. The results imply positive average effects on loan recipient employment of about 25 percent, or 3 jobs at the mean. Including loan amount, we find little or no impact of loan receipt per se, but an increase of about 5.4 jobs for each million dollars of loans. Similar results for high-growth counties and industries suggest the estimates are not driven by differential demand conditions across firms. Exploiting variation in the distance of controls from recipient firms, we find only very small displacement effects. In all these cases, the results pass "placebo" and "pre-program" specification tests. Other specifications using only matching or only regression imply somewhat higher effects, but they fail these tests. The estimates facilitate calculations of total job creation by the SBA and of the cost per job created.
    Keywords: small business finance, entrepreneurship, employment, program evaluation
    JEL: D04 G21 G28 H32 H81 J23 L52
    Date: 2013–08
  19. By: Immanuel Wallerstein (Sociology Department - Yale University)
    Abstract: Le système-monde actuel, qui est une économie-monde capitaliste, est entré dans une crise structurelle, et ne peut d'aucune façon y survivre. Pour le comprendre, nous devons examiner (1) comment le système-monde moderne a effectivement fonctionné, (2) pourquoi il ne peut pas fonctionner plus longtemps de cette manière et est donc entré dans une phase de transition, (3) ce qui se produit dans une transition systémique, et (4) quelles sont les sorties possibles de cette transition.
    Keywords: économie; économie-monde; système-monde; histoire; capitalisme; résistance; transition
    Date: 2013–05–15

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