nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2013‒09‒24
fourteen papers chosen by
Bernardo Batiz-Lazo
Bangor University

  1. Long-Term Barriers to Economic Development By Enrico Spolaore; Romain Wacziarg
  2. Bowling for Fascism: Social Capital and the Rise of the Nazi Party in Weimar Germany: 1919-33 By Satyanath, Shanker; Voigtländer, Nico; Voth, Hans-Joachim
  3. The Long-Run Effects of the Scramble for Africa By Michalopoulos, Stelios; Papaioannou, Elias
  4. Land tenure inequality, harvests, and rural conflict ; evidence from Southern Spain in the 1930s. By Jordi Domènech Feliu
  5. What separates us? Sources of resistance to globalization By Head, Keith; Mayer, Thierry
  6. Agglomeration Economies in Classical Music By Borowiecki, Karol J.
  7. Capital is Back: Wealth-Income Ratios in Rich Countries, 1700-2010 By Piketty, Thomas; Zucman, Gabriel
  8. Is there a Diffusion of Military Regimes in Sub-Saharan Africa? Empirical Evidence in the Period 1972-2007 By Caruso, Raul; Petrarca , Ilaria; Ricciuti, Roberto
  9. Why do governments default, and why don't they default more often? By Buiter, Willem H.; Rahbari, Ebrahim
  10. Standards, Learning and Growth in Britain 1901-2009 By Cristopher Spencer; Paul Temple
  11. Structural Change in Distribution Markets in Peripheral Europe: Spanish Food Retailing, 1950-2007 By Maixe-Altes, J. Carles; Castro Balaguer, Rafael
  12. Melting-pots and salad bowls: the current debate on electricity market design for RES integration By Arthur HENRIOT; Jean-Michel GLACHANT
  13. Tax bracket creep and its effects on income distribution By Heer, Burkhard; Süssmuth, Bernd
  14. Asset Price Bubbles: A Selective Survey By Anna Scherbina

  1. By: Enrico Spolaore; Romain Wacziarg
    Abstract: What obstacles prevent the most productive technologies from spreading to less developed economies from the world's technological frontier? In this paper, we seek to shed light on this question by quantifying the geographic and human barriers to the transmission of technologies. We argue that the intergenerational transmission of human traits, particularly culturally transmitted traits, has led to divergence between populations over the course of history. In turn, this divergence has introduced barriers to the diffusion of technologies across societies. We provide measures of historical and genealogical distances between populations, and document how such distances, relative to the world's technological frontier, act as barriers to the diffusion of development and of specific innovations. We provide an interpretation of these results in the context of an emerging literature seeking to understand variation in economic development as the result of factors rooted deep in history.
    Keywords: Long-run growth, genetic distance, intergenerational transmission, diffusion of innovations
    JEL: O11 O33 O40 O57
    Date: 2013
  2. By: Satyanath, Shanker; Voigtländer, Nico; Voth, Hans-Joachim
    Abstract: Social capital – a dense network of associations facilitating cooperation within a community – typically leads to positive political and economic outcomes, as demonstrated by a large literature following Putnam. A growing literature emphasizes the potentially “dark side” of social capital. This paper examines the role of social capital in the downfall of democracy in interwar Germany by analyzing Nazi party entry rates in a cross-section of towns and cities. Before the Nazi Party’s triumphs at the ballot box, it built an extensive organizational structure, becoming a mass movement with nearly a million members by early 1933. We show that dense networks of civic associations such as bowling clubs, animal breeder associations, or choirs facilitated the rise of the Nazi Party. The effects are large: Towns with one standard deviation higher association density saw at least one-third faster growth in the strength of the Nazi Party. IV results based on 19th century measures of social capital reinforce our conclusions. In addition, all types of associations – veteran associations and non-military clubs, “bridging” and “bonding” associations – positively predict NS party entry. These results suggest that social capital in Weimar Germany aided the rise of the Nazi movement that ultimately destroyed Germany’s first democracy.
    Keywords: democracy; extremism; social capital
    JEL: N44 P16
    Date: 2013–08
  3. By: Michalopoulos, Stelios (Brown University and NBER); Papaioannou, Elias (London Business School, NBER and CEPR)
    Abstract: We examine the long-run consequences of the scramble for Africa among European powers in the late 19th century and uncover the following empirical regularities. First, utilizing information on the spatial distribution of African ethnicities before colonization, we show that apart from the land mass and water area of an ethnicity’s historical homeland, no other geographic, economic, and historical trait, including proxies of pre-colonial conflict, predicts partitioning by the national borders. Second, we exploit a detailed geo-referenced database that records various types of conflict across African regions and show that civil conflict is concentrated in the historical homeland of partitioned ethnicities. We also document that violence against civilians (child soldiering, village burning, abductions, rapes) and territorial changes between rebel groups, militias, and government forces are more prevalent in the homelands of split groups. These results are robust to a rich set of local controls, the inclusion of country fixed effects and ethnic-family fixed effects. The uncovered evidence brings in the foreground the violent repercussions of an important aspect of European colonization, that of ethnic partitioning.
    Keywords: Africa, Borders, Ethnicities, Conflict, Development,
    Date: 2013
  4. By: Jordi Domènech Feliu
    Abstract: This paper analyses rural conflict in one of the most volatile areas of interwar Europe, the latifundia regions of the South of Spain. The historical and economics literature argues that rural conflict was a bottom-up, spontaneous response of landless peasants to unemployment, bad harvests, land ownership inequality, changes in property rights, and the lack of enforcement of pro-worker legislation. A second generation of historical studies has focused on democratization and concomitant changes in collective bargaining and labor market institutions. Was conflict caused by structural factors like poverty, inequality or unemployment or was conflict an endogenous response to political change? This paper analyzes the pattern of conflict in in three Andalusian provinces (Córdoba, Jaén and Seville) in the early 1930s to argue that the timing and geographical distribution of conflict is consistent with a wave of mobilization linked to greater political opportunities favored by lower repression, pro-worker institutional change, and labor market intervention. Time-series and cross-sectional variation in levels of rural conflict suggest conflict was not a spontaneous response to dismal living standards and inequality. Rather, it emerged in large, fast growing towns of Andalusia and was mediated by the strategic interaction of authorities and experienced rural unions. The instances of rural conflict analyzed here suggest it is very difficult for new democratic governments in agrarian societies to stave rural conflict off with labor-friendly intervention. It is often argued that conflict precedes political and institutional change, but it is shown here that conflict can emerge abruptly as a response to those changes.
    Keywords: Inequality, Rural conflict, Unemployment, Interwar Europe, Spanish Civil War (1931-1936)
    JEL: J43 J52 N34 N54 O13 Q15
    Date: 2013–09
  5. By: Head, Keith; Mayer, Thierry
    Abstract: With increasing sophistication, economists have been estimating gravity equations for five decades. Robust evidence shows that borders and distance impede trade by much more than tariffs or transports costs can explain. We therefore advocate investigation of other sources of resistance, despite the greater difficulty involved in measuring and modeling them. From our selective review of recent findings, a unifying explanation emerges. A legacy of historical isolation and confl ict forged a world economy in which neither tastes nor information are homogeneously distributed. Cultural difference and inadequate information manifest themselves most strongly at national borders and over distance.
    Keywords: borders; distance; globalization; gravity; history; trade
    JEL: F1
    Date: 2013–08
  6. By: Borowiecki, Karol J. (Department of Business and Economics)
    Abstract: This study investigates agglomeration effects for classical music production in a wide range of cities for a global sample of composers born between 1750 and 1899. Theory suggests a trade-off between agglomeration economies (peer effects) and diseconomies (peer crowding). I test this hypothesis using historical data on composers and employ a unique instrumental variable – a measure of birth centrality, calculated as the average distance between a composer’s birthplace and the birthplace of his peers. I find a strong causal impact of peer group size on the number of important compositions written in a given year. Consistent with theory, the productivity gain eventually decreases and is characterized by an inverted U-shaped relationship. These results are robust to a large series of tests, including checks for quality of peers, city characteristics, various measures of composers’ productivity, and across different estimations in which also time-varying birth centrality measures are used as instrumental variables.
    Keywords: Agglomeration economies; density effects; peer effects; productivity; urban history; cities; composer
    JEL: D24 J24 N90 R12 Z11
    Date: 2013–09–16
  7. By: Piketty, Thomas; Zucman, Gabriel
    Abstract: How do aggregate wealth-to-income ratios evolve in the long run and why? We address this question using 1970-2010 national balance sheets recently compiled in the top eight developed economies. For the U.S., U.K., Germany, and France, we are able to extend our analysis as far back as 1700. We find in every country a gradual rise of wealth-income ratios in recent decades, from about 200-300% in 1970 to 400-600% in 2010. In effect, today's ratios appear to be returning to the high values observed in Europe in the eighteenth and nineteenth centuries (600-700%). This can be explained by a long run asset price recovery (itself driven by changes in capital policies since the world wars) and by the slowdown of productivity and population growth, in line with the β=s/g Harrod-Domar-Solow formula. That is, for a given net saving rate s= 10%, the long run wealth-income ratio β is about 300% if g= 3% and 600% if g= 1.5%. Our results have important implications for capital taxation and regulation and shed new light on the changing nature of wealth, the shape of the production function, and the rise of capital shares.
    Keywords: Capital; Income; Saving; Wealth
    JEL: E21 E22 E25
    Date: 2013–08
  8. By: Caruso, Raul (Catholic University of the Sacred Hearth); Petrarca , Ilaria (University of Verona); Ricciuti, Roberto (University of Verona)
    Abstract: We show the existence of a diffusion process of military dictatorships in Sub-Saharan Africa from 1972 through 2007, using panel data probit estimation and a Markov chain transition model. This process is shortly-lived, since we observe an overall trend that reduces the number of military regimes. With regard to economic correlates, we also find that Manufacturing share of GDP, Primary share of GDP positively affect the probability of military dictatorship, and Openness to trade, whereas the British colonial origin are negatively associated.
    Keywords: Military rule; Africa; Diffusion of government institutions.
    JEL: D74 F50 H11
    Date: 2013–09–11
  9. By: Buiter, Willem H.; Rahbari, Ebrahim
    Abstract: This paper considers the economic and political drivers of sovereign default, focusing on countries rich enough to render sovereign default a ‘won’t pay’ rather than a ‘can’t pay’ phenomenon. Unlike many private contracts, sovereign debt contracts rely almost exclusively on self-enforcement rather than on third-party enforcement. Among the social costs of sovereign default are contagion and concentration risk, both within and outside the jurisdiction of the sovereign, and ‘rule of law externalities’. We consider illiquidity as a separate trigger for sovereign default and emphasize the role of lenders of last resort for the sovereign. Not only do political economy factors drive sovereign insolvency, they also influence the debt sustainability analyses performed by national and international agencies. We consider it likely that the absence of sovereign defaults in the advanced economies since the (West) German defaults of 1948 and 1953 until the Greek defaults of 2012 was a historical aberration that is unlikely to be a reliable guide to the future.
    Keywords: fiscal sustainability; intertemporal budget constraint; political economy.; solvency; sovereign default; strategic default
    JEL: E62 E63 F34 F41 G01 G18 H26 H63
    Date: 2013–05
  10. By: Cristopher Spencer (Loughborough University); Paul Temple (University of Surrey)
    Abstract: This paper considers the model of voluntary, consensus based standardization as developed through the British Standards Institution (BSI) and its contribution to learning and productivity growth. It discusses the contribution of professional engineers to the model's introduction, its extension at home and imitation overseas, arguing that by 1931 the BSI catalogue of standards represented a considerable stock of codified knowledge whose growth reflected underlying aggregate technological advance. To validate this claim we incorporate a measure of the BSI catalogue of standards into an econometric model of productivity growth in Britain. However, caution is required in the interpretation of this finding.
    JEL: O11 O33 O47 L52 C22
    Date: 2013–09
  11. By: Maixe-Altes, J. Carles; Castro Balaguer, Rafael
    Abstract: The processes of structural change and modernisation in the food distribution industry have been submitted to different economic and institutional frameworks in European countries. Two essential factors have affected these changes: on one hand, the role of technical, financial and organisational innovations and on the other, institutional factors. The weight of both has varied depending on the historical circumstances of the countries in consideration and their level of development. This paper discusses with the framework of the “latecomers”. In these countries, the factor of innovation has been produced in terms of appropriation, whether this is technological or organisational, usually influenced by foreign models or through direct foreign investment. The impact of these innovations has been highly conditioned by inflexible institutional surroundings. Considering the Spanish food trade in the last sixty years is a good way of dealing with the processes of structural change in Mediterranean Europe. This paper helps one understand the role taken by countries which introduced factors of innovation and growth in less favourable surroundings than those of developed Europe.
    Keywords: Distributive trades, food trade, structural change, innovation, Spain, latecomer
    JEL: L8 L81 N7 N8 N84
    Date: 2013–08
  12. By: Arthur HENRIOT; Jean-Michel GLACHANT
    Abstract: This paper discusses a series of Numbers regarding the economic integration of intermittent renewables into European electricity markets. This debate has gained in importance following the large-scale deployment of wind farms and photovoltaic panels. As intermittent renewables constitute a significant share of the installed generation capacity, they cannot be kept isolated from the electricity markets. We argue that RES integration is first and foremost an Number of economic efficiency, and we review the main debates and frameworks that have emerged in the literature. We first consider to what extent intermittent resources should be treated the same way as dispatchable resources. We then analyse the different tools that have been proposed to ensure the required flexibility will be delivered: finer temporal granularity and new price boundaries, integration of a complex set of balancing markets, and introduction of tailor-made capacity remuneration mechanisms. Finally we introduce the topic of space redistribution, confronting cross-continental markets integration to the emergence of a mosaic of local markets.
    Keywords: Electricity market design, large-scale renewables, intermittency
    Date: 2013–07
  13. By: Heer, Burkhard; Süssmuth, Bernd
    Abstract: We quantitatively analyze the way inflation alters the inequality of the income distribution in the U.S. economy. The main mechanism emphasized in this paper is the bracket creep effect according to which inflation pushes income into higher tax brackets. Governments adjust the nominal income tax brackets slowly and incompletely due to the rise in prices. In the U.S. postwar history, this typically happens less often than once every other tax year. In the first part of the paper, we study time series from the U.S. economy. As our central result we find that irrespective of the level of inflation more frequent income tax schedule adjustments make the relationship between inflation and income inequality more transitory in nature. In the second part of the paper, we develop a general equilibrium monetary model with income heterogeneity that is in line with our time series evidence. We find that a longer duration between two successive adjustments of the tax schedule reduces employment, savings, and output. --
    Keywords: Bracket Creep,Progressive Income Taxation,Inflation,Income Distribution
    JEL: D31 E31 E44 E52 E62
    Date: 2013
  14. By: Anna Scherbina
    Abstract: Why do asset price bubbles continue to appear in various markets? This paper provides an overview of recent literature on bubbles, with significant attention given to behavioral models and rational models with frictions. Unlike the standard rational models, the new literature is able to model the common characteristics of historical bubble episodes and offer insights for how bubbles are initiated and sustained, the reasons they burst, and why arbitrage forces do not routinely step in to squash them. The latest U.S. real estate bubble is described in the context of this literature.
    Keywords: Asset prices;Business cycles;Investment;Economic models;Bubbles, Limits to Arbitrage, Financial Crisis.
    Date: 2013–02–21

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