New Economics Papers
on Business, Economic and Financial History
Issue of 2014‒04‒29
fourteen papers chosen by

  1. Can general purpose technology theory explain economic growth? Electrical Power as a case study By Cristiano Andrea Ristuccia; Solomos Solomou
  2. Education Promoted Secularization By Becker, Sascha O.; Nagler, Markus; Woessmann, Ludger
  3. Diversifying External Linkages: The Exercise of Irish Economic Sovereignty in Long-Term Perspective By Frank Barry
  4. Myths of the Great War By Harrison, Mark
  5. Property in Print: Copyright Law and the American Magazine Industry By Haveman, Heather A.; Kluttz, Daniel N.
  6. Mortality Decline, Impatience and Aggregate Wealth Accumulation with Risk-Sensitive Preferences By Antoine Bommier
  7. Taxation of Real Estate in Sweden from 1862 to 2010 By Stenkula, Mikael
  8. Drifts, Volatilities, and Impulse Responses Over the Last Century By Amir-Ahmadi, Pooyan; Matthes, Christian; Wang, Mu-Chun
  9. The Effect of Regional Entrepreneurship Culture on Economic Development - Evidence for Germany By Michael Fritsch; Michael Wyrwich
  10. Capitalist dynamics fictional expectations and the openness of the future By Beckert, Jens
  11. What Inventory Behavior Tells Us About How Business Cycles Have Changed By Lubik, Thomas A.; Sarte, Pierre-Daniel G.; Schwartzman, Felipe
  12. Understanding Long-run Price Dispersion By Hakan Yilmazkuday; Mario J. Crucini
  13. Indeterminacy and Learning: An Analysis of Monetary Policy in the Great Inflation By Lubik, Thomas A.; Matthes, Christian
  14. International university–industry collaboration and development of high-tech industries in China, 1980s-2000s By Jin, Hua

  1. By: Cristiano Andrea Ristuccia; Solomos Solomou
    Abstract: Does the concept of General Purpose Technologies help explain periods of faster and slower productivity advance in economies? The paper develops a new comparative data set on the usage of electricity in the manufacturing sectors of the USA, Britain, France, Germany and Japan and proceeds to evaluate the hypothesis of a productivity bonus as postulated by many existing GPT models. Using the case of the diffusion of electrical power in the early twentieth century this paper shows that there was no generalized productivity boost from electrical power diffusion as postulated by many existing GPT models. The productivity gains from this GPT varied widely across economies and industries, suggesting that the power of GPTs to predict aggregate or sectoral growth is limited.
    Keywords: General Purpose Technologies, Economic Growth, Economic History,Productivity, Long Swings
    JEL: N11 N12 N13 N14 N60 O40
    Date: 2014–04–16
  2. By: Becker, Sascha O. (University of Warwick and CAGE); Nagler, Markus (University of Munich); Woessmann, Ludger (University of Munich)
    Abstract: Why did substantial parts of Europe abandon the institutionalized churches around 1900? Empirical studies using modern data mostly contradict the traditional view that education was a leading source of the seismic social phenomenon of secularization. We construct a unique panel dataset of advanced-school enrollment and Protestant church attendance in German cities between 1890 and 1930. Our cross-sectional estimates replicate a positive association. By contrast, in panel models where fixed effects account for time-invariant unobserved heterogeneity, education – but not income or urbanization – is negatively related to church attendance. In panel models with lagged explanatory variables, educational expansion precedes reduced church attendance.
    Keywords: Secularization, education, history, Germany
    Date: 2014
  3. By: Frank Barry (Institute for International Integration Studies, Trinity College Dublin)
    Abstract: Political independence is usually associated with an attempt to reduce economic dependency on the dominant or former colonial power. For most of the early period since Irish independence the attempt to reduce exposure to the UK was implemented through tariff protection and restrictions on foreign ownership, though Ireland and the UK maintained (and continue to maintain) a common travel area agreement. Inward orientation eventually ran out of steam, culminating in sustained emigration and deep recession in the 1950s. The genesis in the mid-1950s of Ireland's low corporation tax regime facilitated later trade liberalisation and diversified the economy away from the UK. Full convergence on UK and broader Western European living standards was eventually achieved in the 1990s. From 1979 the UK would diverge from most of the rest of Western Europe on exchange-rate policy and Ireland was forced to choose between irreconcilable options. The resulting difficulties can be ascribed to design flaws in the European monetary project and Ireland's failure to recognise the constraints that the new regime imposed.
    Keywords: Ireland, Economic History, Economic Development, European Integration, Foreign Direct Investment, Protectionism, Single Currency
    JEL: F5 O52 N94
    Date: 2014–04
  4. By: Harrison, Mark (University of Warwick and CAGE)
    Abstract: We review some “myths” of the Great War of 1914 to 1918: that the war broke out inadvertently, that the western front saw needless slaughter, that the Allies used the food weapon to strangle Germany, and that the peace treaty that ended the war caused the rise of Hitler and the still greater war that followed.
    Keywords: economic mobilization, hyperinflation, interdependence, rational calculation, strategic interaction, reparations, war of attrition.
    Date: 2014
  5. By: Haveman, Heather A.; Kluttz, Daniel N.
    Abstract: We study copyright law and its relationship with cultural conceptions of authorship and technicalconstraints on the economics of publishing in the US. Because American copyright law was first developed in the eighteenth and nineteenth centuries, we focus on that time period. And because magazines were the primary forum for literary expression in America during this time, we study the magazine industry. Both technical and cultural factors created opportunities for magazines and imposed constraints on them, but most effects of copyright law were mediated by cultural, not technical, factors. Lack of copyright protection for foreign authors allowed magazines reprint foreign authors’ work for free. However, copyright law was not used by magazines to protect domestic work: very few claimed copyright over the original material they published and none of those claims were adjudicated by courts. Therefore, magazines reprinted work from domestic sources, including other magazines. Nevertheless, copyright law had constitutive effects on the literary market: it spurred the emergence of a cultural conception of the author-as-paid-professional; in turn, this cultural shift fostered the market for literature, as magazines began to pay authors for their work and compete intensely over the work of the most popular authors.
    Keywords: Social and Behavioral Sciences
    Date: 2014–02–21
  6. By: Antoine Bommier (ETH Zurich, Switzerland)
    Abstract: The paper discusses the impact of longevity extension on aggregate wealth accumulation, accounting for changes in individual behaviors as well as changes in population age structure. It departs from the stan- dard literature by adopting risk-sensitive preferences. Human impatience is then closely related to mortality rates and aggregate wealth accumula- tion appears to be much more sensitive to demographic factors than usually found. Illustrations are provided using historical mortality data from dif- ferent countries.
    Keywords: longevity; life-cycle savings; wealth accumulation; risk-sensitive pref- erences; risk aversion.
    JEL: J1 E21 D91
    Date: 2014–04
  7. By: Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper surveys the development and role of the real estate tax in Sweden between 1862 and 2010. The possibility to tax real estate has been used at both the local and state level throughout history. Its importance is difficult to assess directly due to limited data availability and the specific construction of the local tax system after 1920. The real estate tax was supposed to provide the municipalities with a stable tax base, but its importance in this role seems to have diminished over time. After the tax reform of 1990–1991 real estate tax was levied exclusively at the national level. At most, this tax contributed to no more than five percent of total central government tax revenues, and the amount raised occasionally exceeded 1 percent of GDP. In 2008, part of the tax was transformed to a “local fee”.
    Keywords: Real estate tax; Property tax; Tax reforms
    JEL: H20 N43 N44
    Date: 2014–04–14
  8. By: Amir-Ahmadi, Pooyan (Goethe University Frankfurt); Matthes, Christian (Federal Reserve Bank of Richmond); Wang, Mu-Chun (University of Hamburg)
    Abstract: How much have the dynamics of U.S. time series and in particular the transmission of innovations to monetary policy instruments changed over the last century? The answers to these questions that this paper gives are "a lot" and "probably less than you think," respectively. We use vector autoregressions with time-varying parameters and stochastic volatility to tackle these questions. In our analysis we use variables that both influenced monetary policy and in turn were influenced by monetary policy itself, including bond market data (the difference between long-term and short-term nominal interest rates) and the growth rate of money.
    Keywords: Bayesian VAR; Time variation; U.S. monetary policy
    JEL: C50 E31 N12
    Date: 2014–04–07
  9. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Michael Wyrwich (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We use the historical self-employment rate as an indicator of a regional culture of entrepreneurship and link this measure to economic growth in recent periods. The results indicate that German regions with a high level of entrepreneurship in the mid- 1920s have higher start-up rates about 80 years later. Furthermore, we find that the effect of current start-up activity on regional employment is significantly higher in regions with a pronounced entrepreneurial culture. We conclude that a regional culture of entrepreneurship is an important resource for regional growth.
    Keywords: Entrepreneurship, economic development, self-employment, new business formation, entrepreneurship culture, institutions
    JEL: L26 R11 O11
    Date: 2014–04–17
  10. By: Beckert, Jens
    Abstract: Capitalism is an economic and social order oriented toward the future. In this paper, I describe the unfolding of the temporal order of capitalism and relate it to the restless dynamism of capitalism we have observed since the Industrial Revolution. Since the future is open, actors are confronted with the uncertainty of the outcomes of their decisions. What can expectations be under conditions of uncertainty? To answer this question, I introduce the notion of fictional expectations which can be used to describe decisions made under conditions of an open and uncertain future. In the paper's penultimate section, I apply the concept of fictional expectations to the analysis of four crucial processes of capitalism: money and credit, investments, innovation, and consumption. The main thrust of the paper is that in order to understand economic action in capitalism, actors' perceptions of the future need to take center stage. Not only history matters, but also the future matters. -- Der Kapitalismus als wirtschaftliche und soziale Ordnung orientiert sich an der Zukunft. In diesem Artikel beschreibe ich die Entwicklung der zeitlichen Ordnung des Kapitalismus und setze sie zu dem unaufhaltsamen wirtschaftlichen Wandel seit der industriellen Revolution in Beziehung. Da die Zukunft offen ist, sind Akteure mit der Ungewissheit von Handlungsresultaten konfrontiert. Was sind Erwartungen unter Bedingungen von Ungewissheit? Zur Beantwortung dieser Frage führe ich das Konzept der fiktionalen Erwartungen ein, mit dem sich Entscheidungen unter Bedingungen einer offenen und ungewissen Zukunft beschreiben lassen. Im vorletzten Teil nutze ich das Konzept der fiktionalen Erwartungen zur Untersuchung von vier zentralen Aspekten kapitalistischer Wirtschaft: Geld und Kredit, Investitionen, Innovationen und Konsum. Die wichtigste Überlegung der Ausführungen ist, dass die Analyse wirtschaftlichen Handelns im Kapitalismus die Berücksichtigung der Wahrnehmung der Zukunft verlangt. Nicht nur history matters, sondern die Zukunft ist ebenso wichtig.
    Date: 2014
  11. By: Lubik, Thomas A. (Federal Reserve Bank of Richmond); Sarte, Pierre-Daniel G. (Federal Reserve Bank of Richmond); Schwartzman, Felipe (Federal Reserve Bank of Richmond)
    Abstract: Beginning in the mid-1980s, the nature of U.S. business cycles changed in important ways, as made evident by distinctive shifts in the comovement and relative volatilities of key economic aggregates. These include labor productivity, hours, output, and inventories. Unlike the widely documented change in absolute volatility over that period, known as the Great Moderation, these shifts in comovement and relative volatilities persist into the Great Recession. To understand these changes, we exploit the fact that inventory data are informative about sources of business cycles. Specifically, they provide additional information relative to aggregate investment regarding firms' intertemporal decisions. In this paper, we show that the "investment wedge" estimated with inventories, unlike previous measures, correlates well with established independent measures of credit market frictions. Furthermore, contrary to previous findings, our generalized investment wedge informed by inventory behavior plays a key role in explaining the shifts in U.S. business cycles observed after the mid-1980s.
    Keywords: Business Cycles; Inventories; Investment Wedge; Financial Frictions
    JEL: E32 E44
    Date: 2014–03–01
  12. By: Hakan Yilmazkuday (Department of Economics, Florida International University); Mario J. Crucini (Department of Economics, Vanderbilt University)
    Abstract: A unique panel of retail prices spanning 123 cities in 79 countries from 1990 to 2005 is used to uncover the novel properties of long-run international price dispersion. At the PPP level, almost all of price dispersion is attributed to unskilled wage dispersion. At the level of individual goods and services, the average contribution of these wages is signi?cantly reduced, ref?ecting that good-speci?c sources of price dispersion, such as trade costs and good-specifi?c markups, tend to average out across goods. At the LOP level, borders and distance contribute about equally to price dispersion that is rising in the distribution share.
    Keywords: Real exchange rates; Purchasing Power Parity; Law of One Price; Dynamic panel
    JEL: E31 F31 D40
    Date: 2014–04
  13. By: Lubik, Thomas A. (Federal Reserve Bank of Richmond); Matthes, Christian (Federal Reserve Bank of Richmond)
    Abstract: We argue in this paper that the Great Inflation of the 1970s can be understood as the result of equilibrium indeterminacy in which loose monetary policy engendered excess volatility in macroeconomic aggregates and prices. We show, however, that the Federal Reserve inadvertently pursued policies that were not anti-inflationary enough because it did not fully understand the economic environment it was operating in. Specifically, it had imperfect knowledge about the structure of the U.S. economy and it was subject to data misperceptions. The real-time data flow at that time did not capture the true state of the economy, as large subsequent revisions showed. It is the combination of learning about the economy and, more importantly, the use of data riddled with measurement error that resulted in policies, which the Federal Reserve believed to be optimal, but when implemented led to equilibrium indeterminacy in the economy.
    Keywords: Federal Reserve; Great Moderation; Bayesian Estimation; Least Squares Learning
    JEL: C11 C32 E52
    Date: 2014–01–31
  14. By: Jin, Hua
    Abstract: In this study, we explore collaboration between universities and industrial entities in the development of Chinese high-tech industries from the 1980s to the 2000s. For developing countries, the creation and cultivation of high-tech industries can be the key to economic development in a globalized era. Since the 1980s, China has served as an example of one of these developing countries. In attempting to create and develop high-tech industries in China, the Chinese government has long promoted university-industry collaboration. As a result, the Chinese government has been widely considered as the catalyst behind the development of university-industry collaboration. However, our analysis demonstrates that there are multiple proponents that have advocated multiple paths to successful university-industry collaboration in China.
    Date: 2014–04

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