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on Business, Economic and Financial History |
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Issue of 2013‒09‒26
twenty papers chosen by |
| 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. |
| JEL: | O1 O11 O33 O43 O57 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19361&r=his |
| By: | Nicholas Crafts (Dept of Economics, University of Warwick); Kevin H. O'Rourke (All Souls College, Oxford) |
| Abstract: | This paper surveys the experience of economic growth in the 20th century with a focus on technological change at the frontier together with issues related to success and failure in catch-up growth. A detailed account of growth performance based on historical national accounts data is given and is accompanied by a review of growth accounting evidence on the sources of economic growth. The key features of our analysis of divergence in growth outcomes are an emphasis on the importance of ‘directed’ technical change, of institutional quality, and of geography. We provide brief case studies of the experience of individual countries to illustrate these points. |
| Keywords: | catch-up growth; divergence; growth accounting; technical change. |
| JEL: | N10 O33 O43 O47 |
| Date: | 2013–09–12 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:esohwp:_117&r=his |
| By: | Gupta, Bishnupriya (Department of Economics, University of Warwick) |
| Abstract: | Industrial investment in Colonial India was segregated by the export oriented industries, such as tea and jute that relied on British firms and the import substituting cotton textile industry that was dominated by Indian firms. The literature emphasizes discrimination against Indian capital. Instead informational factors played an important role. British entrepreneurs knew the export markets and the Indian entrepreneurs were familiar with the local markets. The divergent flows of entrepreneurship can be explained by the comparative advantage enjoyed by social groups in information and the role of social networks in determining entry and creating separate spheres of industrial investment. JEL classification: JEL codes: |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1019&r=his |
| By: | Banerjee, Rupsha |
| Abstract: | Technology and society share a close relationship, as the adoption of new technologies has consequences across value systems and institutions in society. Historically, the emergence of agriculture and subsequent technologies played an important role in shaping social relations. This paper examines the Green Revolution that took place in India during the late 1960s and 70s from the perspectives offered by different development paradigms of technical change in developing countries. The high yielding variety seeds of wheat and rice that were then introduced significantly enhanced domestic food production, which was far from adequate after independence... |
| Keywords: | Green Revolution, India, C. Subramaniam, development paradigms, Agricultural and Food Policy, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:gewi13:156208&r=his |
| By: | Rodríguez-Pose, Andrés; von Berlepsch, Viola |
| Abstract: | Have Irish, German or Italian settlers arriving in the US at the turn of the 20th century left an institutional trace which determines economic development differences to this day? Does the national origin of migrants matter for long-term development? This paper explores whether the distinct geographical settlement patterns of European migrants according to national origin affected economic development across US counties. It uses micro-data from the 1880 and 1910 censuses in order to identify where migrants from different nationalities settled and then regresses these patterns on current levels of economic development, using both OLS and instrumental variable approaches. The analysis controls for a number of factors which would have determined both the attractiveness of different US counties at the time of migration, as well as current levels of development. The results indicate that while there is a strong and positive impact associated with overall migration, the national origin of migrants does not make a difference for the current levels of economic development of US counties. |
| Keywords: | Counties; Economic Development; Ethnic/National Origin; Institutions; Migration; USA |
| JEL: | F22 N91 O15 R23 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9444&r=his |
| By: | Eduardo Sanz-Arcega (University of Zaragoza, Zaragoza, Spain) |
| Abstract: | The controversial relationship between the political system and economic growth induced Bhagwati to coin the concept of cruel dilemma to illustrate the tension that may exist between the economic freedoms and the political homonyms. Thus, and since then, the economic-institutional empirical literature has tried to outline the effect of democracy on the sustained increase in income, with disparate results. However, the very absence of an undisputed conclusion also from the perspective of the history of economic ideas has led, to the best of our knowledge, to the fact that the preference for a political system or another to achieve economic prosperity may turn into an axiologically based argument. This fact would, therefore, endorse the incorporation to the emphasis of the discussion of a double analysis, factual and theoretical-economic –owing to the classical postulates on which the central doctrinal body of the discipline is founded–, whose conjunction with the crucial importance of institutions for economic growth seemed to hide, ultimately, a simple idea. Namely: the indissolubility, on a long-term basis, between economic success and democracy. |
| Keywords: | Cruel dilemma, economic liberties, political liberties, democracy, institutions, economic growth |
| JEL: | E02 N3 K0 O1 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:ahe:dtaehe:1308&r=his |
| By: | Crafts, Nicholas (Department of Economics, University of Warwick); Mills, Terence (Loughborough University) |
| Abstract: | We report estimates of the fiscal multiplier for interwar Britain based on quarterly data, time-series econometrics, and ‘defense news’. We find that the government expenditure multiplier was in the range 0.3 to 0.8, much lower than previous estimates. The scope for a Keynesian solution to recession was less than is generally supposed. We find that rearmament gave a smaller boost to real GDP than previously claimed. Rearmament may, however, have had a larger impact than a temporary public works program of similar magnitude if private investment anticipated the need to add capacity to cope with future defense spending. JEL classification: defense news ; multiplier ; public works ; rearmament JEL codes: E62 ; N14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1018&r=his |
| By: | Svensson, Roger (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Although the leaf-thin bracteates are the most fragile coins in monetary history, they were the main coin type for almost two centuries in large parts of medieval Europe. The usefulness of the bracteates can be linked to the contemporary monetary taxation policy. Medieval coins were frequently withdrawn by the coin issuer and re-minted, where people had to pay an exchange fee. Bracteates had several favourable characteristics for such a policy: 1) Low production costs; and 2) various pictures could be displayed given their relatively large diameter, making it easy to distinguish between valid and invalid types. The fragility was not a big problem, since the bracteates would not circulate for a long period. When monetization increased and it became more difficult to handle re-coinage (around 1300), the bracteates lost their function as the principal coin. However, for a further two centuries (1300–1500) they were used as small change to larger denominations. |
| Keywords: | Bracteates; Medieval coins; Re-coinage; Short-lived coinage system; Monetization; Monetary taxation policy; Small change |
| JEL: | E31 E42 E52 N13 |
| Date: | 2013–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0973&r=his |
| By: | Peter C.B. Phillips (Cowles Foundation, Yale University); Shu-Ping Shi (Australian National University); Jun Yu (Singapore Management University) |
| Abstract: | Recent work on econometric detection mechanisms has shown the effectiveness of recursive procedures in identifying and dating financial bubbles. These procedures are useful as warning alerts in surveillance strategies conducted by central banks and fiscal regulators with real time data. Use of these methods over long historical periods presents a more serious econometric challenge due to the complexity of the nonlinear structure and break mechanisms that are inherent in multiple bubble phenomena within the same sample period. To meet this challenge the present paper develops a new recursive flexible window method that is better suited for practical implementation with long historical time series. The method is a generalized version of the sup ADF test of Phillips, Wu and Yu (2011, PWY) and delivers a consistent date-stamping strategy for the origination and termination of multiple bubbles. Simulations show that the test significantly improves discriminatory power and leads to distinct power gains when multiple bubbles occur. An empirical application of the methodology is conducted on S&P 500 stock market data over a long historical period from January 1871 to December 2010. The new approach successfully identifies the well-known historical episodes of exuberance and collapse over this period, whereas the strategy of PWY and a related CUSUM dating procedure locate far fewer episodes in the same sample range. |
| Keywords: | Date-stamping strategy, Flexible window, Generalized sup ADF test, Multiple bubbles, Rational bubble, Periodically collapsing bubbles, Sup ADF test |
| JEL: | C15 C22 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1914&r=his |
| By: | Henri Gilles (Chercheur Indépendant - Aucune); Jean-Pascal Guironnet (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie); Antoine Parent (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - École Nationale des Travaux Publics de l'État [ENTPE] - Université Lumière - Lyon II, IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Institut d'Études Politiques [IEP] - Lyon - PRES Université de Lyon - Fondation Nationale des Sciences Politiques [FNSP]) |
| Abstract: | This article delivers the first comprehensive analysis of the new database, 'Mémoire des hommes', which gathers more than 1 Million French soldiers officially recognized as dead for France during WW1. Crossing this source with the 1911 census, we evaluate the potential numbers of recruits by French regional department. From this, a model identifies the factors affecting the number of dead. While demographic factors are the principal determinants, adding economic, political and locally significant factors reduces the unexplained variance between regions and significantly improves the explanation of the disparity in the number of dead by region. |
| Keywords: | War ; Demography ; Count Models ; Cliometrics |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00860571&r=his |
| By: | Burgess, Robin; Jedwab, Remi; Miguel, Edward; Morjaria, Ameet; Padró i Miquel, Gerard |
| Abstract: | Ethnic favoritism is seen as antithetical to development. This paper provides credible quantification of the extent of ethnic favoritism using data on road building in Kenyan districts across the 1963-2011 period. Guided by a model it then examines whether the transition in and out of democracy under the same president constrains or exacerbates ethnic favoritism. Across the 1963 to 2011 period, we find strong evidence of ethnic favoritism: districts that share the ethnicity of the president receive twice as much expenditure on roads and have four times the length of paved roads built. This favoritism disappears during periods of democracy. |
| JEL: | D72 L92 O55 R48 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9627&r=his |
| By: | Nicholas Crafts (University of Warwick); Nikolaus Wolf (Humboldt University Berlin) |
| Abstract: | We examine the geography of cotton textiles in Britain in 1838 to test claims about why the industry came to be so heavily concentrated in Lancashire. Our analysis considers both first and second nature aspects of geography including the availability of water power, humidity, coal prices, market access and sunk costs. We show that some of these characteristics have substantial explanatory power. Moreover, we exploit the change from water to steam power to show that the persistent effect of first nature characteristics on industry location can be explained by a combination of sunk costs and agglomeration effects. |
| Keywords: | agglomeration; cotton textiles; geography; industry location |
| JEL: | N63 N93 R12 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0045&r=his |
| By: | Giovanni Giusti; Charles Noussair; Joachim Voth |
| Abstract: | Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features investors in the South Sea Company faced in 1720. Several factors have been proposed as potentially contributing to one of the greatest periods of asset overvaluation in history: an intricate debt-for-equity swap, deferred payment for these shares, and the possibility of default on the deferred payments. We consider which aspect might have had the most impact in creating the South Sea bubble. The results of the experiment suggest that the company’s attempt to exchange its shares for government debt was the single biggest contributor to the stock price explosion, because of the manner in which the swap affected fundamental value. Issuing new shares with only partial payments required, in conjunction with the debt-equity swap, also had a significant effect on the size of the bubble. Limited contract enforcement, on the other hand, does not appear to have contributed significantly. |
| Keywords: | Financial bubbles, experiments, South Sea bubble, risk-shifting, government debt, equity issuance |
| JEL: | G01 G12 G14 N23 C92 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1381&r=his |
| By: | Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Martin G. Kocher (University of Munich, University of Gothenburg and CESifo Munich) |
| Abstract: | Take-it or leave-it offers are probably as old as mankind. Our objective here is, first, to provide a, probably subjectively-colored, recollection of the initial ultimatum game experiment, its motivation and the immediate responses. Second, we discuss important extensions of the standard ultimatum bargaining game in a unified framework, and, third, we offer a survey of the experimental ultimatum bargaining literature containing papers published since the turn of the century. The paper argues that the ultimatum game is an extremely versatile tool for research in bargaining and on social preferences. Finally, we provide examples for open research questions and directions for future studies. |
| Keywords: | ultimatum bargaining, experiment, social preferences |
| JEL: | C91 |
| Date: | 2013–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-035&r=his |
| By: | Barry Eichengreen |
| Abstract: | Many economists are accustomed to thinking about Federal Reserve policy in terms of the institution’s dual mandate, which refers to price stability and high employment, and in which the exchange rate and other international variables matter only insofar as they influence inflation and the output gap – which is to say, not very much. This conventional view is heavily shaped by the distinctive circumstances of the last three decades, when the influence of international considerations on Fed policy has been limited. I discuss how the Federal Reserve paid significant attention to international considerations in its first two decades, followed by relative inattention to such factors in the two-plus decades that followed, then back to renewed attention to international aspects of monetary policy in the 1960s, before the recent period of benign neglect of the international dimension. This longer perspective is a reminder that just because the Fed has not attached priority to international aspects of monetary policy in the recent past is no guarantee that it will not do so in the future. |
| JEL: | E4 N1 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19405&r=his |
| By: | Federico Etro (University of Venice, Ca� Foscari, Italy); Silvia Marchesi (University of Milan, Bicocca, Italy); Laura Pagani (University of Milan, Bicocca, Italy) |
| Abstract: | We analyze the labor market for painters in Baroque Rome using unique panel data on primary sales of portraits, still lifes, genre paintings, landscapes and figurative paintings. In line with the traditional artistic hierarchy of genres, average price differentials between them were high. The matched painter-patron nature of the dataset allows us to evaluate the extent to which price heterogeneity is related to unobservable characteristics of painters and patrons. We find that the market allocated artists between artistic genres to the point of equalizing the marginal return of each genre. We explain residual price differences at the employer level in terms of incentive mechanisms to induce effort in the production of artistic quality and compensating wage differentials. |
| Keywords: | Inter-industry wage differentials, Matched employer-employee data, Occupational choice, Art market |
| JEL: | C23 D8 J3 Z11 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:cue:wpaper:awp-03-2013&r=his |
| By: | K. Vela Velupillai |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpas:1301&r=his |
| By: | William R. White |
| Abstract: | In recent decades, the declarations of “independent” central banks and the conduct of monetary policy have been assigned an ever increasing role in the pursuit of economic and financial stability. This is curious since there is, in practice, no body of scientific knowledge (evidence based beliefs) solid enough to have ensured agreement among central banks on the best way to conduct monetary policy. Moreover, beliefs pertaining to every aspect of monetary policy have also changed markedly and repeatedly. This paper documents how the objectives of monetary policy, the optimal exchange rate framework, beliefs about the transmission mechanism, the mechanism of political oversight, and many other aspects of domestic monetary frameworks have all been subject to great flux over the last fifty years. ; The paper also suggests ways in which the current economic and financial crisis seems likely to affect the conduct of monetary policy in the future. One possibility is that it might lead to yet another fundamental reexamination of our beliefs about how best to conduct monetary policy in an increasingly globalized world. The role played by money and credit, the interactions between price stability and financial stability, the possible medium term risks generated by “ultra easy” monetary policies, and the facilitating role played by the international monetary (non) system all need urgent attention. The paper concludes that, absent the degree of knowledge required about its effects, monetary policy is currently being relied on too heavily in the pursuit of “strong, balanced and sustainable growth.” |
| Keywords: | National security |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:155&r=his |
| By: | Balázs Égert |
| Abstract: | This paper analyses the original Reinhart-Rogoff dataset, made public by Herndon et al. (2013), on the basis of descriptive statistics and formal econometric testing. First, based on the public debt thresholds(30%, 60% and 90%) proposed by Reinhart and Rogoff (2010), descriptive statistics reveal that real GDP growth slows considerably as the central government debt-to-GDP ratio goes beyond the 30% threshold and that no further slowdown can be observed in the data as the debt-to-GDP ratio rises above 60% and 90% during the periods 1790-2009 and 1946-2009. For the United States (1946-2009), the negative nonlinear finding completely disappears for any level of public debt, once reverse causality and influential outliers are accounted for. Looking at general (and central) government debt during the more recent period of 1960-2009 suggests that economic slowdown occurs when public debt moves above 60% or 90% of GDP. But it seems more appropriate to determine nonlinearity and the associated debt threshold endogenously. Therefore, in a second stage, we put the Reinhart-Rogoff dataset to a formal econometric test by employing nonlinear threshold models. Overall, our estimation results indicate that the nonlinear relation from debt to growth is not very robust. Taken with a pinch of salt, our results suggest, however, that there may be a tipping point at around 20% of GDP, beyond which central government debt has a negative influence on growth. Further (and greater) thresholds may exist but their magnitude is highly uncertain. For general government debt (1960-2009), the threshold beyond which negative growth effects kick in is considerably higher at about 50%. Finally, individual country estimates reveal a large amount of cross-country heterogeneity. For some countries including the United States, a nonlinear negative link can be detected at about 30% of GDP. For others, the thresholds are surrounded by a great amount of uncertainty or no nonlinearities can be established. This instability may be a result of threshold effects changing over time within countries and depending on economic conditions, not captured in our estimations. Overall, our results can be seen as a formal econometric confirmation that the 90% public debt threshold is not in the data. But our results also seem to suggest that public debt might have a negative effect on economic performance kicking in at already fairly moderate public debt levels. Furthermore, the absence of threshold effects or low estimated thresholds may not preclude the emergence of further threshold effects, especially as public debt levels are rising to unprecedentedly high levels. |
| Keywords: | public debt; economic growth; nonlinearity; threshold effects |
| JEL: | E6 F3 F4 N4 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2013-23&r=his |
| By: | Rossi, Barbara |
| Abstract: | The main goal of this article is to provide an answer to the question: "Does anything forecast exchange rates, and if so, which variables?". It is well known that exchange rate fluctuations are very difficult to predict using economic models, and that a random walk forecasts exchange rates better than any economic model (the Meese and Rogoff puzzle). However, the recent literature has identified a series of fundamentals/methodologies that claim to have resolved the puzzle. This article provides a critical review of the recent literature on exchange rate forecasting and illustrates the new methodologies and fundamentals that have been recently proposed in an up-to-date, thorough empirical analysis. Overall, our analysis of the literature and the data suggests that the answer to the question: "Are exchange rates predictable?" is, "It depends" on the choice of predictor, forecast horizon, sample period, model, and forecast evaluation method. Predictability is most apparent when one or more of the following hold: the predictors are Taylor rule or net foreign assets, the model is linear, and a small number of parameters are estimated. The toughest benchmark is the random walk without drift. |
| Keywords: | Exchange Rates; Forecast Evaluation; Forecasting; Instability |
| JEL: | C5 F3 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9575&r=his |