New Economics Papers
on Business, Economic and Financial History
Issue of 2013‒10‒05
nineteen papers chosen by

  1. A Monthly Stock Exchange Index for Ireland, 1864‐1930 By Richard S.Grossman; Ronan C. Lyons; Kevin Hjortshøj O’Rourke; Madalina A. Ursu
  2. Appendix to "Precocious Albion: a New Interpretation of the British Industrial Revolution" By Morgan Kelly; Joel Mokyr; Cormac Ó Gráda
  3. Patrones de segmentación del consumo de productos lácteos en España, 1958-2006 By Fernando Collantes
  4. "Gender Equality and the Welfare state. Debates on Marriage Law Reform in Sweden at the Beginning of the 20th Century" (in Japanese) By Christina Carlsson Wetterberg; Shunji Ishihara
  5. Knowledge Society in the 21st Century By Jürgen Rüttgers
  6. Antes de la política hidráulica. La gestión del agua bajo el Estado liberal en España (1833-1866) By Salvador Calatayud
  7. Gifts of Mars: Warfare and Europe's early rise to riches By Nico Voigtländer; Joachim Voth
  8. Testing for Multiple Bubbles 1: Historical Episodes of Exuberance and Collapse in the S&P 500 By Peter C. B. Phillips; Shu-Ping Shi; Jun Yu
  9. Reassessing the Tehsis of the Monetary History By David Laidler
  10. Are Government Spending Multipliers State Dependent? Evidence from U.S. and Canadian Historical Data By Valerie Ramey; Sarah Zubairy; Michael Owyang
  11. Famine, Finance, and Adjustment to Environmental Shock: Microcredit and the Great Famine in Ireland By Goodspeed, Tyler
  12. Theocracy By Metin M. Cosgel; Thomas J. Miceli
  13. A quantitative look at the Italian banking system: evidence from a new dataset since 1861 By Riccardo De Bonis; Fabio Farabullini; Miria Rocchelli; Alessandra Salvio; Andrea Silvestrini
  14. The Fiscal Regime of an Expanding State: Political Economy of Ottoman Taxation By Metin M. Cosgel
  15. Independent Invention in Italy during the Liberal Age, 1861-1913 By Alessandro Nuvolari; Michelangelo Vasta
  16. External Influence as an Indicator of Scholarly Importance By Ho Fai Chan; Bruno S. Frey; Jana Gallus; Markus Schaffner; Benno Torgler; Stephen Whyte
  17. Teoría de las Áreas Monetarias Óptimas: Una revisión de la literatura desde una perspectiva europea By Martínez Romera, José Pablo
  18. Italy: Report on the Observance of Standards and Codes By International Monetary Fund. Monetary and Capital Markets Department
  19. Complexity Economics: A Different Framework for Economic Thought By W. Brian Arthur

  1. By: Richard S.Grossman (Department of Economics, Wesleyan University); Ronan C. Lyons (Trinity College, Dublin & Balliol College, Oxford); Kevin Hjortshøj O’Rourke (All Souls College, Oxford & CEPR & NBER & IIIS, Trinity College Dublin); Madalina A. Ursu (London School of Economics)
    Abstract: Information on the performance of equities during the latter part of the globalized long nineteenth century is scarce, particularly for smaller European economies such as Ireland. Using a dataset of over 35,000 price‐year observations from the Investor’s Monthly Manual, this paper constructs new monthly Irish stock market price indices for the period 1864-1930, encompassing periods of significant economic and political turmoil in Irish history. In addition to a total market index covering all 118 equity securities issued by 94 companies, sector-specific indices are presented for railways, financial services companies, and miscellaneous industrial and retail companies. Weighted by market capitalization, nominal equity prices were largely static in the 1860s, before increasing by almost 60% in nominal terms between 1870 and 1878. Between 1878 and 1879, equity prices fell by one sixth in the space of a year, after which there was a secular rise in equity prices for two decades, with equity prices in 1899 twice what they had been in 1864. Between the turn of the century and the outbreak of the Great War, though, prices fell by 25%, a pattern that stands in stark contrast to returns on the London exchange, which were greater during 1894-1913 than during the preceding two decades. The period from 1914 until 1929 saw a number of boom-bust cycles, concurrent with war and other political events affecting Ireland, including its independence movement. Railway equities, which had trebled between the mid-1860s and the turn of the century, fell sharply during the 1910s and 1920s. In contrast, financial equity prices – which were just 20% higher in 1920 than in 1864 – rose strongly during the 1920s. Overall, the average annual gain in equity prices over the period was just 0.9%, well below levels associated with an equity premium puzzle.
    Keywords: Irish stock exchange, Investor’s Monthly Manual, long-run stock returns, 19th Century, 20th Century, Ireland
    JEL: E3 G12 N23 N24
    Date: 2013–10
  2. By: Morgan Kelly (University College Dublin); Joel Mokyr (Northwestern University); Cormac Ó Gráda (University College Dublin)
    Abstract: See WP13/11
    Keywords: Industrial Revolution, Human Capital, Economic Growth
    Date: 2013–09–27
  3. By: Fernando Collantes
    Abstract: This article reconstructs the evolution of disparities in the consumption of dairy products in Spain from the late 1950s to the early twentyfirst century. At the start of the period, there were strong regional disparities, as well as a clear pattern of social hierarchization in the consumption of milk and milk derivatives. These gaps were (totally or substantially) narrowed during the phase of great expansion in consumption that took place until the 1980s. From then on, a new regime of consumption began to take shape and its segmentation pattern consisted mainly of a social re-hierarchization in the consumption of the newest and most dynamic products (refrigerated derivatives) and a significant generational factor in the contraction of milk consumption.
    Keywords: food consumption, Spain, milk, dairy products, food regimes
    JEL: N34 N54 I39 Q11 R22
    Date: 2013–10
  4. By: Christina Carlsson Wetterberg (Department of Humanities, Education and Social Science, Örebro University, Sweden); Shunji Ishihara (Faculty of Economics, University of Tokyo)
    Abstract: In the beginning of the 20th century marriage legislation was reformed in all the Nordic countries. Male privileges were abolished and equality was declared. Marriage was constructed as a union between two independent individuals that could be dissolved if both wanted to. It was not until the 1960s that a similar legislation was beginning to take shape in the rest of Europe. The article starts by looking into this common Nordic marriage law reform but focus later on the Swedish reform processes and debates. The analysis is guided by three main questions: why did the reform come about, which meaning/meanings were given to the concept of equality in the debates and which role did women's organisation play in the process. The paper starts with putting the question of marriage in a wider context, discussing the reform in relation to the specific Nordic path towards a modern society. The following analysis of the Swedish debates shows that the question of marriage was closely interwoven with other contemporary political debates around social conditions, population policy, and eugenics. Establishing equality between husband and wife was one important aim behind the reform, but this aim was combined with, or even seen as a prerequisite for another, namely to strengthen the family as an institution. One of the most complex questions was how to give married women who had no property or income of their own a more free and independent position. How to reach equality in a society characterized by gender difference? This was a central and difficult question for the women's organisations. Their principal approach to women's emancipation differed, but when it came to marriage reform they cooperated to influence the new legislation. In the final analysis women's organisations understandings of equality is discussed in relation to how the concept was approached in the general political debate. One of the central conclusions is that it is necessary to put concepts like equality and feminism in its historical context and another that this Swedish and Nordic marriage legislation was as much about women's rights as about the well of the nation.
    Date: 2013–09
  5. By: Jürgen Rüttgers (Former Minister of Education, Science, Research and Technology in the government of Chancellor Helmut Kohl. Former Prime Minister of North Rhine Westphalia. Former Prime Minister Honorary Professor of Ben-Gurion University of the Negev Honorary Professor of the Maastricht School of Management)
    Date: 2013–09
  6. By: Salvador Calatayud
    Abstract: The regulation of the use of water in Spain went through a profound transformation during the first decades of the liberal State. Liberalism introduced institutional changes which affected all those aspects related to the use and administration of water resources. Water property rights were established and water was declared, for its most part, a public property. Priorities on the water resource use were fixed. Common organizational ways were introduced in all communities dedicated to irrigation. In this respect, the State set a wide margin of autonomy in the water management, although it kept the supervision and the rights of the Administration to intercede in the life within those communities. All irrigation systems were forced to have written regulations and those internal rules were homogenized. And, finally, the State interceded in the conflicts raised in a great amount of canals, especially in the newly created ones or in those whose construction had been interrupted during the crisis of the old regime. The outcome was a new institutional framework, developed at the same time that the Administration of the new State became established. During thirty years partial regulations were promulgated and the state's capacity to apply them was put to test. This process culminated in 1866 with the unification of these rules in a Water Law which would regulate this natural resource during more than a century.
    Keywords: Water management, Rural History, State building
    JEL: D70 N13 N53 Q25
    Date: 2013–10
  7. By: Nico Voigtländer; Joachim Voth
    Abstract: Today, per capita income differences around the globe are large – varying by as much as a factor of 35 across countries (Hall and Jones 1999). These differentials mostly reflect the "Great Divergence" (Sam Huntingon) – the fact that Western Europe and former European colonies grew rapidly after 1800, while other countries grew much later or stagnated. What is less well-known is that a "First Divergence" preceded the Great Divergence: Western Europe surged ahead of the rest of the world long before technological growth became rapid. Europe in 1500 was already twice as rich on a per capita basis as Africa, and one-third richer than most of Asia (Maddison 2007). In this essay, we explain how Europe's tumultuous politics and deadly penchant for warfare translated into a sustained advantage in per capita incomes.
    Date: 2013–09
  8. By: Peter C. B. Phillips (Yale University); Shu-Ping Shi (The Australian National University); Jun Yu (Sim Kee Boon Institute for Financial Economics, Singapore Management University)
    Abstract: Recent work on econometric detection mechanisms has shown the e¤ectiveness of recur- sive procedures in identifying and dating ?nancial bubbles. These procedures are useful as warning alerts in surveillance strategies conducted by central banks and ?scal 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 mecha- nisms that are inherent in multiple bubble phenomena within the same sample period. To meet this challenge the present paper develops a new recursive ?exible 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 de- livers a consistent date-stamping strategy for the origination and termination of multiple bubbles. Simulations show that the test signi?cantly 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 identi?es 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: 2013–07
  9. By: David Laidler (University of Western Ontario)
    Abstract: The economic crisis that began in 2007 and still lingers has invited comparison with the Great Depression of the 1930s. It has also generated renewed interest in Milton Friedman and Anna Schwartz’s explanation of the latter as mainly the consequence of the Fed’s failure as a lender of last resort at its onset, and the ineptitude of its policies thereafter. This explanation is reassessed in the light of events since 2007, and it is argued that its plausibility emerges enhanced, even though policy debates in recent years have paid more attention to interest rates and credit markets than to Friedman and Schwartz’s key variable, the quantity of money.
    Keywords: Great Depression; Great Contraction; Great Recession; Keynesianism; Monetarism; Lender of Last Resort; Money; High-powered money; Monetary base; Currency; Bank reserves; Quantitative easing; Open-market operations
    JEL: B22 E32 E51 E58 N2
    Date: 2013
  10. By: Valerie Ramey (University of California, San Diego); Sarah Zubairy (Bank of Canada); Michael Owyang (Federal Reserve Bank of St Louis)
    Abstract: A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple large wars and depressions in the U.S. and Canada. Using several methods for estimating multipliers, we find no evidence that multipliers are greater during periods of high unemployment in the U.S. In every case, they are below unity. We do find evidence of higher multipliers during periods of slack in Canada, with some multipliers above unity.
    Date: 2013
  11. By: Goodspeed, Tyler
    Abstract: The Great Famine of Ireland from 1845-51 ranks as one of the most lethal of all time, claiming approximately one eighth of the country’s population. Utilizing Famine Relief Commission reports to develop a micro-level dataset of blight severity, I find that in the short run, districts more severely infected by blight experienced larger population declines and accumulations of buffer livestock. In the medium and long runs, however, worse affected districts experienced greater substitutions toward other tillage crops and grazing livestock. Using annual reports of the Irish Loan Funds, I further find that access to microfinance credit was an important factor in short- and long-run adjustment to blight. Districts with at least one microfinance fund during the Famine experienced substantially smaller population declines and larger increases in buffer livestock during and immediately after the Famine, and greater medium- and long-run substitutions toward other crops and grazing livestock, than districts without a fund.
    Keywords: microfinance, famine, development, economic history, agriculture, adjustment
    JEL: A1 N0 O1 Q0 Q00
    Date: 2013–07
  12. By: Metin M. Cosgel (University of Connecticut); Thomas J. Miceli (University of Connecticut)
    Abstract: Throughout history, religious and political authorities have had a mysterious attraction to each other. Rulers have established state religions and adopted laws with religious origins, sometimes even claiming to have divine powers. We propose a political economy approach to theocracy, centered on the legitimizing relationship between religious and political authorities. Making standard assumptions about the motivations of these authorities, we identify the factors favoring the emergence of theocracy, such as the organization of the religion market, monotheism vs. polytheism, and strength of the ruler. We use two sets of data to test the implications of the model. We first use a unique data set that includes information on over three hundred polities that have been observed throughout history. The results provide strong empirical support for our arguments about why in some states religious and political authorities have maintained independence, while in others they have integrated into a single entity. To examine these issues in current societies, we use recently available cross-country data on the relationship between religious and political authorities.
    Keywords: theocracy, state, politics, religion, church, legitimacy, loyalty, monotheism, polytheism, democracy, power
    JEL: H10 P5 N4 Z12
    Date: 2013–10
  13. By: Riccardo De Bonis; Fabio Farabullini; Miria Rocchelli; Alessandra Salvio; Andrea Silvestrini
    Abstract: Building on a new dataset on Italian banks and other financial corporations from 1861 to 2011, the novelty of this paper is to examine the patterns of the main items of bank’s balance sheets, such as deposits, capital and reserves, bonds issued, bonds held in portfolio, and loans for a period of 150 years. The long time behaviour of credit maturity, postal savings, State ownership of banks, and bank interest rates is also studied.
    Keywords: Banks, central bank, loans, deposits, interest rates, postal savings
    JEL: C82 G21 N13 N14 Y1
    Date: 2013–09
  14. By: Metin M. Cosgel (University of Connecticut)
    Abstract: An expanding state has to decide how to tax the newly conquered lands, most likely taxed under a different regime. It can either preserve the prevailing system of taxation or change it to conform to its own system. The choice depends on the relative efficiency of the two systems, political constraints, and the political legitimacy of the ruler (formulated here as his ability to collect the tax revenue). This paper examines the problem of how an expanding state would establish a fiscal regime by focusing on the tax system of the Ottoman Empire during its expansion between the fourteenth and sixteenth centuries. After outlining the general structure of the Ottoman system of taxation, it develops a simple theoretical framework to analyze the political economy of an expanding state's choice of a fiscal regime, applies this framework to the Ottoman Empire, and analyzes the interaction between tax rates and bases in a more specific context, namely the system of discriminatory taxation that the Ottomans inherited in the Fertile Crescent.
    Keywords: fiscal regime, taxation, conquest, state, political economy, religion, legitimacy, loyalty, constraints, power
    JEL: D8 H2 J4 L3 M5 N4
    Date: 2013–09
  15. By: Alessandro Nuvolari; Michelangelo Vasta
    Abstract: In this paper we examine the phenomenon of independent invention in Italy during the liberal age (1861-1913). We make use of a new dataset comprising all patents granted in Italy in five benchmark years: 1864-65, 1881, 1891, 1902 and 1911. We carry out the following exercises. First we examine the relative shares of independent, corporate and foreign inventions and their evolution over time and across industries. Second, by exploiting the peculiarities of Italian patent legislation which established a maximum patent length of fifteen years and a flexible renewal scheme which allowed inventors to maintain a patent "alive" for almost any specific duration, we assess the relative quality of independent and corporate patents. Our results indicate that in Italy independent inventors provided an important contribution to technological change but the quality of their patents was significantly lower than that of firms and of foreign patentees.
    Date: 2013–09–30
  16. By: Ho Fai Chan; Bruno S. Frey; Jana Gallus; Markus Schaffner; Benno Torgler; Stephen Whyte
    Abstract: The external influence of scholarly activity has to date been measured primarily in terms of publications and citations, metrics that also dominate the promotion and grant processes. Yet the array of scholarly activities visible to the outside world are far more extensive and recently developed technologies allow broader and more accurate measurement of their influence on the wider societal discourse. Accordingly we analyze the relation between the internal and external influences of 723 top economics scholars using the number of pages indexed by Google and Bing as a measure of their external influence. Although the correlation between internal and external influence is low overall, it is highest among recipients of major key awards such as the Nobel Prize or John Bates Clark medal, and particularly strong for those ranked among the top 100 researchers.
    Keywords: Academia, Scholarly Importance, Role of Economics, Social Importance of Economists, External and Internal Influence, Academic Performance, Awards.
    JEL: A11 A13 Z18 Z19
    Date: 2013–09–18
  17. By: Martínez Romera, José Pablo
    Abstract: El objeto de este artículo es sintetizar la larga historia de la Teoría de las Áreas Monetarias Óptimas, desde las ideas primigenias de mediados del siglo XX hasta los últimos debates surgidos en los albores del siglo XXI, haciendo especial hincapié en las aportaciones del considerado padre de dicha teoría, Robert Mundell. A lo largo de este recorrido cronológico se mantendrá como principal referente geográfico el continente europeo, ya que generalmente se ha considerado el territorio más propicio para unificaciones monetarias, y de hecho en los últimos 15 años ha protagonizando la más ambiciosa de todas: el euro. Asimismo en la Teoría de las Áreas Monetarias Óptimas también pueden encontrarse ciertas claves para entender la crisis en la que la UEM lleva inmersa en los últimos años.
    Keywords: Áreas Monetarias Óptimas; Integración Monetaria y Económica; UEM
    JEL: E42 F15 F33 F36
    Date: 2013–09
  18. By: International Monetary Fund. Monetary and Capital Markets Department
    Date: 2013–09–27
  19. By: W. Brian Arthur
    Abstract: This paper provides a logical framework for complexity economics. Complexity economics builds from the proposition that the economy is not necessarily in equilibrium: economic agents (firms, consumers, investors) constantly change their actions and strategies in response to the outcome they mutually create. This further changes the outcome, which requires them to adjust afresh. Agents thus live in a world where their beliefs and strategies are constantly being “tested” for survival within an outcome or “ecology” these beliefs and strategies together create. Economics has largely avoided this nonequilibrium view in the past, but if we allow it, we see patterns or phenomena not visible to equilibrium analysis. These emerge probabilistically, last for some time and dissipate, and they correspond to complex structures in other fields. We also see the economy not as something given and existing but forming from a constantly developing set of technological innovations, institutions, and arrangements that draw forth further innovations, institutions and arrangements. Complexity economics sees the economy as in motion, perpetually “computing” itself— perpetually constructing itself anew. Where equilibrium economics emphasizes order, determinacy, deduction, and stasis, complexity economics emphasizes contingency, indeterminacy, sense-making, and openness to change. In this framework time, in the sense of real historical time, becomes important, and a solution is no longer necessarily a set of mathematical conditions but a pattern, a set of emergent phenomena, a set of changes that may induce further changes, a set of existing entities creating novel entities. Equilibrium economics is a special case of nonequilibrium and hence complexity economics, therefore complexity economics is economics done in a more general way. It shows us an economy perpetually inventing itself, creating novel structures and possibilities for exploitation, and perpetually open to response.
    Date: 2013–03

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