New Economics Papers
on Business, Economic and Financial History
Issue of 2014‒01‒24
seventeen papers chosen by

  1. Recovery from Financial Crises: Evidence from 100 Episodes By Carmen M. Reinhart; Kenneth S. Rogoff
  2. Where Was the Wealth of the Nation? Measuring Swedish Capital for the 19th and 20th Centuries By Lindmark, Magnus; Andersson, Lars Fredrik
  3. Capitalist transformation without political participation: German capitalism in the first half of the 19th century By Wegner, Gerhard
  4. Coal and the European Industrial Revolution By Alan Fernihough; Kevin Hjortshøj O'Rourke
  5. Two Centuries of International Migration By Ferrie, Joseph; Hatton, Timothy J.
  6. Milton Friedman: Constructing an Anti-Keynes By Craig Freedman; Geoff C. Harcourt; Peter Kriesler; John Nevilet
  7. Observations on the Centennial of the Federal Reserve System The Philadelphia Fed Policy Forum: "The History of Central Banking in the United States," December 6, 2013 By Plosser, Charles I.
  8. The Evolution of Bank Supervision: Evidence from U.S. States By Mitchener, Kris James
  9. Lange's 1938 Model: Dynamics and the "Optimum propensity to consume" By Michaël Assous; Roberto Lampa
  10. State Capacity and Economic Development: A Network Approach By Daron Acemoglu; Camilo García-Jimeno; James A. Robinson
  11. The determinants of public spending: a survey in a methodological perspective By Facchini, Francois
  12. On the stationarity of per capita carbon dioxide emissions over a century By Maria Christisou; Theodore Panagiotidis; Abhijit Sharma
  13. Why Has U.S. Policy Uncertainty Risen Since 1960? By Scott R. Baker; Nicholas Bloom; Brandice Canes-Wrone; Steven J. Davis; Jonathan A. Rodden
  14. Survival strategies of single women in the Bruges countryside, 1814. By Sofie De Langhe; Isabelle Devos; Christa Matthys
  15. The Origins of Stock Market Fluctuations By Daniel L. Greenwald; Martin Lettau; Sydney C. Ludvigson
  16. Universal Child Care, Maternal Employment, and Children's Long-Run Outcomes: Evidence from the U.S. Lanham Act of 1940 By Herbst, Chris M.
  17. Continuity or rupture ? An analysis of some aspects of social philosophy in the works of J.S.Mill, Alfred Marshall and J.M.Keynes By Laura Valladão de Mattos

  1. By: Carmen M. Reinhart; Kenneth S. Rogoff
    Abstract: We examine the evolution of real per capita GDP around 100 systemic banking crises. Part of the costs of these crises owes to the protracted nature of recovery. On average, it takes about eight years to reach the pre-crisis level of income; the median is about 6 ½ years. Five to six years after the onset of crisis, only Germany and the US (out of 12 systemic cases) have reached their 2007-2008 peaks in real income. Forty-five percent of the episodes recorded double dips. Postwar business cycles are not the relevant comparator for the recent crises in advanced economies.
    JEL: E32 E44 F44 G01 N10 N20
    Date: 2014–01
  2. By: Lindmark, Magnus (CERE, Umeå University); Andersson, Lars Fredrik (CERE, Umeå University)
    Abstract: This report presents estimates of the Swedish national wealth from 1830 to 2010. This contributes to economic historical research on structural change and growth, while it also supplements debates on the composition of wealth and incomes across countries. The report also includes for the first time a historical estimate of the Consumer Rate Interest CRI and an estimate of wealth based on surveys and insurance data. The report includes an extensive description and documentation of the historical estimates. The main findings are that the proportion of intangible capital grew before modern economic growth was achieved in Sweden during the 1890’s. Secondly, we show that the proportion of natural assets fell prior to and during the industrialization, while the share of produced capital has fluctuated, but has remained fairly stable over the period as a whole.
    Keywords: capital stocks; national wealth; Historical national accounts; Sweden; Economic history
    JEL: N00
    Date: 2014–01–13
  3. By: Wegner, Gerhard
    Abstract: The paper analyzes the political economy of capitalist transformation in Germany during the first half of the 19th century. Current approaches in institutional economics stress the dependency of economic and political institutions in 'open access orders', which makes economic freedom without political freedom unsustainable. However, the emergence of capitalism in the German states after 1806 gives an example that economic freedom can precede political freedom, which implies that the political power of the 'dominant coalition' remains intact for a longer period of time. The paper argues that the German transformation towards modern capitalism was in stigated by competition among the European states; it was conducive to the monopolization of the coercive power of the state. This competition drove a wedge between the interests of the monarch and his supporting dominant coalition (landed gentry). Accordingly, the monarch had to find a bargain which established capitalist institutions in order to promote economic growth without compromising the interests of the landed gentry. Namely the public administration in Prussia which was deeply influenced by Adam Smith's ideas organized that bargain; it established economic freedom in various sectors but took the economic interests of the landed gentry into account. At the same time, public administration and the legal system gained more independence from the monarch. In various aspects the sweeping institutional change was Pareto-superior for groups, which made capitalism also acceptable for the elite group. Later institutional improvements have relaxed still existing constraints so that high industrialization which brought the German economy to the top of international markets could take place. --
    Date: 2013
  4. By: Alan Fernihough; Kevin Hjortshøj O'Rourke
    Abstract: We examine the importance of geographical proximity to coal as a factor underpinning comparative European economic development during the Industrial Revolution. Our analysis exploits geographical variation in city and coalfield locations, alongside temporal variation in the availability of coal-powered technologies, to quantify the effect of coal availability on historic city population sizes. Since we suspect that our coal measure could be endogenous, we use a geologically derived measure as an instrumental variable: proximity to rock strata from the Carboniferous era. Consistent with traditional historical accounts of the Industrial Revolution, we find that coal had a strong influence on city population size from 1800 onward. Counterfactual estimates of city population sizes indicate that our estimated coal effect explains at least 60% of the growth in European city populations from 1750 to 1900. This result is robust to a number of alternative modelling assumptions regarding missing historical population data, spatially lagged effects, and the exclusion of the United Kingdom from the estimation sample.
    JEL: J10 N13 N53 O13 O14
    Date: 2014–01
  5. By: Ferrie, Joseph (Northwestern University); Hatton, Timothy J. (University of Essex)
    Abstract: This is a draft chapter for B. R. Chiswick and P. W. Miller (eds.) Handbook on the Economics of International Migration. It provides an overview of trends and developments in international migration since the industrial revolution. We focus principally on long-distance migration to rich destination countries, the settler economies in the nineteenth century and later the OECD. The chapter describes the structure, direction and determinants of migration flows and the assimilation experience of migrants. It also examines the impact of migration on destination and source countries, and explores the political economy behind the evolution of immigration policy. We provide an historical context for current debates on immigration and immigration policy and we conclude by speculating on future trends.
    Keywords: international migration history, development of immigration policy
    JEL: F22 N30 N40
    Date: 2013–12
  6. By: Craig Freedman (Department of Economics, Macquirie University); Geoff C. Harcourt (School of Economics, Australian School of Business, the University of New South WalesAuthor-Name: Craig Freedman); Peter Kriesler (School of Economics, Australian School of Business, the University of New South WalesAuthor-Name: Craig Freedman); John Nevilet (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: The paper considers Keynes’s major contributions before "The General Theory", namely "A Tract on Monetary Reform" and "A Treatise on Money", and shows that they were close to the views which Friedman would later develop. However, "The General Theory of Employment, Interest and Money" represented a major challenge to the orthodoxy of the time, and it was to this that Friedman radically objected. We identify the main areas in which Keynes departed from the mainstream theory of the time, and show how Friedman attempted to undermine each of Keynes’s major contributions and the extent to which he was successful. Friedman regarded Keynes’s contributions as detrimental to, and a definitive step backward for, the economics profession.
    Keywords: Friedman, Keynes, History of macroeconomics, Macroeconomic policy
    JEL: B22 B31 E6
    Date: 2013–12
  7. By: Plosser, Charles I. (Federal Reserve Bank of Philadelphia)
    Abstract: Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia, The Philadelphia Fed Policy Forum, "The History of Central Banking in the United States," Philadelphia, PA
    Keywords: Centennial
    Date: 2013–12–06
  8. By: Mitchener, Kris James (University of Warwick)
    Abstract: We use a novel data set spanning 1820-1910 to examine the origins of bank supervision and assess factors leading to the creation of formal bank supervisory institutions across U.S. states. We show that it took more than a century for the widespread adoption of independent supervisory institutions tasked with maintaining the safety and soundness of banks. State legislatures initially pursued cheaper regulatory alternatives, such as double liability laws; however, banking distress at the state level as well as the structural shift from note-issuing to deposit-taking commercial banks propelled policymakers to adopt costly and permanent supervisory institutions.
    Keywords: bank supervision, U.S. States
    Date: 2014
  9. By: Michaël Assous (GREDEG CNRS; University of Paris 1); Roberto Lampa (CONICET (National Scientific and Technical Research Council); University of Buenos Aires, Argentina)
    Abstract: Oskar Lange’s 1938 article “The Rate of Interest and the Optimum Propensity to Consume”, is usually associated with the original IS-LM approach of the late 1930s. However, Lange’s article was not only an attempt to illuminate Keynes’s main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange’s article can help illuminating critical aspects of this project: in particular, Lange’s idea that a synthesis between Kaldor’s and Kalecki’s theories and that of Schumpeter, might have been possible and that it represented (in intentions) a “modern” and consistent reconstruction of the Marxist theory of the business cycle. Section 1 clarifies Lange’s early reflection on dynamics. Section 2 centers on Lange’s 1938 static model and indicates the effects of a change of saving on investment. Section 3 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.
    Keywords: Lange, Kalecki, Marxian theory of the business cycle, marginal propensity to save, non-linearity
    JEL: B22 B24 E32 E12
    Date: 2014–01
  10. By: Daron Acemoglu; Camilo García-Jimeno; James A. Robinson
    Abstract: We study the direct and spillover effects of local state capacity using the network of Colombian municipalities. We model the determination of local and national state capacity as a network game in which each municipality, anticipating the choices and spillovers created by other municipalities and the decisions of the national government, invests in local state capacity and the national government chooses the presence of the national state across municipalities to maximize its own payoff. We then estimate the parameters of this model using reduced-form instrumental variables techniques and structurally (using GMM, simulated GMM or maximum likelihood). To do so we exploit both the structure of the network of municipalities, which determines which municipalities create spillovers on others, and the historical roots of local state capacity as the source of exogenous variation. These historical instruments are related to the presence of colonial royal roads and local presence of the colonial state in the 18th century, factors which we argue are unrelated to current provision of public goods and prosperity except through their impact on their own and neighbors’ local state capacity. Our estimates of the effects of state presence on prosperity are large and also indicate that state capacity decisions are strategic complements across municipalities. As a result, we find that bringing all municipalities below median state capacity to the median, without taking into account equilibrium responses of other municipalities, would increase the median fraction of the population above poverty from 57% to 60%. Approximately 57% of this is due to direct effects and 43% to spillovers. However, if we take the equilibrium response of other municipalities into account, the median would instead increase to 68%, a sizable change driven by equilibrium network effects.
    JEL: H4 H7 P16
    Date: 2014–01
  11. By: Facchini, Francois
    Abstract: SURVEY: This article shows that applied econometric is not a way of selecting, from among a plethora of possible explanations of public spending evolution. It lists 19 explanations and 73 explanatory variables and provides evidence of the great confusion in this field and the relative emptiness of quantitative economics. Then it sustains the Mayer’s idea that “given all the weakness of econometric techniques, other ways of testing, such as appeals to qualitative economic history, should not be treated as archaic”.
    Keywords: public spending, applied econometric and causality
    JEL: H10 H50
    Date: 2014–01–17
  12. By: Maria Christisou (Department of Economics, University of Macedonia); Theodore Panagiotidis (Department of Economics, University of Macedonia); Abhijit Sharma (Bradford University School of Management)
    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: 2013–12
  13. By: Scott R. Baker; Nicholas Bloom; Brandice Canes-Wrone; Steven J. Davis; Jonathan A. Rodden
    Abstract: There appears to be a strong upward drift in policy-related economic uncertainty after 1960. We consider two classes of explanations for this rise. The first stresses growth in government spending, taxes, and regulation. A second stresses increased political polarization and its implications for the policy-making process and policy choices. While the evidence is inconclusive, it suggests that both factors play a role in driving the secular increase in policy uncertainty over the last half century.
    JEL: D7 E02 E6 H11
    Date: 2014–01
  14. By: Sofie De Langhe (Department of History, Ghent University); Isabelle Devos (Department of History, Ghent University); Christa Matthys (Max Planck Institute for Demographic Research, Rostock)
    Abstract: This paper explores the employment opportunities and subsistence strategies of single women in the countryside around Bruges on the basis of the census of 1814. This source enables us to provide an overview of the professions and household situations of more than 5000 single women above the age of 30. At that age, women exceeded the mean age of marriage and presumably had to develop very specific subsistence strategies. The census of 1814 allows us to look at the registered occupations for older single women in two different social agro-systems (polder and inland Flanders), but it also provides us with material to look more into depth at single women without a registered occupation. While these women were officially ‘without occupation’, they most probably did work. Information on household structures allows us to get an insight into the living arrangements and the activities of these women. From this perspective, the paper contributes to two important discussions, that is on the living conditions of single women, and those of rural women. While women in the city have attracted the most scholarly attention, the living conditions of rural women remain largely unexplored. Length: 16 pages
    JEL: J16 J43 N33
    Date: 2013–12
  15. By: Daniel L. Greenwald; Martin Lettau; Sydney C. Ludvigson
    Abstract: Three mutually uncorrelated economic shocks that we measure empirically explain 85% of the quarterly variation in real stock market wealth since 1952. We use a model to show that they are the observable empirical counterparts to three latent primitive shocks: a total factor productivity shock, a risk aversion shock that is unrelated to aggregate consumption and labor income, and a factors share shock that shifts the rewards of production between workers and shareholders. On a quarterly basis, risk aversion shocks explain roughly 75% of variation in the log difference of stock market wealth, but the near-permanent factors share shocks plays an increasingly important role as the time horizon extends. We find that more than 100% of the increase since 1980 in the deterministically detrended log real value of the stock market, or a rise of 65%, is attributable to the cumulative effects of the factors share shock, which persistently redistributed rewards away from workers and toward shareholders over this period. Indeed, without these shocks, today's stock market would be about 10% lower than it was in 1980. By contrast, technological progress that rewards both workers and shareholders plays a smaller role in historical stock market fluctuations at all horizons. Finally, the risk aversion shocks we identify, which are uncorrelated with consumption or its second moments, largely explain the long-horizon predictability of excess stock market returns found in data. These findings are hard to reconcile with models in which time-varying risk premia arise from habits or stochastic consumption volatility.
    JEL: G0 G12
    Date: 2014–01
  16. By: Herbst, Chris M. (Arizona State University)
    Abstract: This paper provides a comprehensive analysis of the Lanham Act of 1940, a heavily-subsidized and universal child care program that was administered throughout the U.S. during World War II. I begin by estimating the impact of the Lanham Act on maternal employment using 1940 and 1950 Census data in a difference-in-difference-in-differences framework. The evidence suggests that mothers' paid work increased substantially following the introduction of the child care program. I then study the implications of the Lanham Act for children's long-run outcomes related to educational attainment, family formation, and labor market participation. Using Census data from 1970 to 1990, I assess well-being in a lifecycle framework by tracking cohorts of treated individuals throughout their prime working years. Results from difference-in-differences models suggest that the Lanham Act had strong and persistent positive effects on well-being, equivalent to a 0.36 standard deviation increase in a summary index of adult outcomes. In addition, a supplementary analysis of distributional effects shows that the benefits of the Lanham Act accrued largely to the most economically disadvantaged adults. Together, these findings shed light on the design of contemporary child care systems that balance the twin goals of increasing parental employment and enhancing child well-being.
    Keywords: universal child care, maternal employment, long-run outcomes
    JEL: J13
    Date: 2013–12
  17. By: Laura Valladão de Mattos
    Abstract: It is argued in this paper that it’s possible to speak of a ‘tradition’ in the field of social and economic philosophy uniting the works of J.S.Mill, Alfred Marshall and John Maynard Keynes. This ‘tradition’ can be characterized by the following concepts: (a) by the rejection of the acquisitive values of capitalism; (b) by the idea that capitalism would be incapable of spontaneously solving the problems of distribution of wealth and poverty; (c) by the idea that, for the sake of the preservation of liberty, diversity and economic efficiency, individual initiative should be free to act wherever it engenders good results, but that the State should intervene whenever the free initiative fails, acting in the good of collectivity; (d) by the belief that it would be possible to make capitalism significantly better by the way of small and gradual changes.
    Keywords: J.S.Mill; Alfred Marshall; J.M.Keynes; social and economic philosophy; social change
    JEL: B12 B13 B2
    Date: 2013–12–20

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