New Economics Papers
on Business, Economic and Financial History
Issue of 2014‒07‒21
nineteen papers chosen by

  1. Ancient statistics and the rise of demography. A historiography of demographic debate on Roman Italy By Saskia C. Hin
  2. Chasing the B: A Bibliographic Account of Economics’ Relation to its Past, 1991-2011 By Yann Giraud; Pedro Garcia Duarte
  3. Property Rights and Democratic Values in pre-Classical Greece By Economou, Emmanouil Marios Lazaros; Kyriazis, Nicholas
  4. The Wind of Change: Maritime Technology, Trade and Economic Development By Luigi Pascali
  5. Railroads and Economic Growth: A Trade Policy Approach By Pérez-Cervantes Fernando
  6. Highway to Hitler By Nico Voigtländer; Hans-Joachim Voth
  7. A Young Tree Dead? The Story of Economics in Australia and New Zealand By William Coleman
  8. Growth, de-regulation and rent-seeking in post-war British Economy By Shanti Chakravarty; Dimitrios Thomakos; Konstantinos Nikolo
  9. The Future Global Food Situation and Its Financial Implications for US Agriculture: Is This Time Different? By Freshwater, David
  10. Discounting the Distant Future By J. Doyne Farmer; John Geanakoplos; Jaume Masoliver; Miquel Montero; Josep Perello
  11. Typhoid Fever, Water Quality, and Human Capital Formation By Brian Beach; Joseph Ferrie; Martin Saavedra; Werner Troesken
  12. Spinoff and Clustering: a return to the Marshallian district By Lucia Cusmano; Andrea Morrison; Enrico Pandolfo
  13. Baby Boomer caregivers in the workforce: Do they fare better or worse than their predecessors? By Josephine Jacobs; Courtney Van Houtven; Audrey Laporte; Peter Coyte
  14. Privatisation of Banks in Mexico and the Tequila Crisis By Shanti Chakravarty; Jonathan Williams
  15. Methods in governance research: a review of research approaches By Lawrence Sáez
  16. Reflections on the Foundations of Development Policy Analysis By James Roumasset
  17. The Effect of Federal Government Size on Private Economic Performance in Canada: 1870–2011 By J. Stephen Ferris; Marcel-Cristian Voia
  18. Railroad expansion and entrepreneurship: Evidence from Meiji Japan By John Tang
  19. La riqueza del narcotráfico y la desigualdad en Colombia: 1976-2012 By Ricardo ROCHA GARCIA

  1. By: Saskia C. Hin (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: At the 70th ‘anniversary’ of Münzer’s death, ancient history ‘celebrates’ a more than twice long history of debate on population matters in the Roman Republic and early Empire. More than 170 years of discussion have hitherto not led to any conclusive answer on the basic question against what background of demographic dynamics political, historical and economic developments in Roman Italy ought to be understood. Taking off in the 1840s, the start of demographic debate on Roman history coincided with the rise of statistics and interest in demography across Europe. This paper places the study of ancient population statistics into its wider historiographic context. It draws attention to contemporary thought on the relationship between population, nation and economy, and to the influence of this thought on key contributions to the debate on ancient Roman Italy. As perceptions of citizens as soldiers and of censuses as military devices were strengthened under late 19th century nationalism, the role of censuses as means to secure state finances was marginalized in academic debate. Comparative evidence on the nature and aims of censuses, however, reveals how central state needs or desires to generate tax income have been to the institution of censuses across time and place. A review of census taking throughout history thus adds to earlier arguments made to build a case for the eclipsed perspective that the Roman censuses may have counted citizens sui iuris – or those liable to taxation.
    JEL: J1 Z0
    Date: 2014–07
  2. By: Yann Giraud; Pedro Garcia Duarte (Université de Cergy-Pontoise, THEMA; University of sao Paulo, Economics Department)
    Abstract: Some historians argue that the history of economic thought (HET) is useful and important to economists and that historians should remain in economics departments. Others believe that historians’ initiatives toward economists are doomed in advance to failure and that they should instead ally themselves with historians and sociologists of science located in humanities departments. Generally, the contributions that are devoted to reviewing the state of HET take a firm side for either one of these two positions and therefore have a prescriptive view on how history should be written. By contrast, our paper proposes a descriptive account of the kind of contributions to HET that have been published in major economics journals over the past two decades. To avoid definitional issues over HET, we use the B category of the JEL classification to retrieve and analyze the relevant literature. We show that, though contributions to HET are still found in top economics journals, the rate of publication of such papers has become increasingly uneven and the methods and narrative styles they adopt are increasingly remote from that advocated in the sub-disciplinary literature. For this reason, historians who are still willing to address the economics’ community should be more interested in expanding the frontiers of their field rather than in trying to anticipate their targeted readers’ preferences.
    Keywords: history of economics, economics journals, American Economic Review, Journal of Economic Literature, Journal of Economic Perspectives, Economic Journal
    JEL: B20 A14 B40 B29
    Date: 2014
  3. By: Economou, Emmanouil Marios Lazaros; Kyriazis, Nicholas
    Abstract: In the present essay we introduce the concept of macroculture as a complex of mutually supporting values, norms and beliefs in various areas of human activity, like religion, war, politics, sports etc. in a model. Then, we analyse how some macrocultures that are favorable or the “precondition” for the emergence of democracy and institutions develop, in particular property rights that foster economic development. We analyze this for an extended period that covers Later Bronze Age to Archaic Greece (approximately 1250-510 BC), as being the historical case where such a macroculture favorable to democracy and stable property rights first emerged. We argue that the nature of the Greek polytheist religion (12 gods) depicts a proto-democratic side of the ancient Greek society. We then provide a comparison of the Greek case, in relation to the other, mainly oriental societies, as far as the level of participation in decision making procedures of these societies is concerned. Our main findings indicate that during the last period of the Mycenaean world, as well as during the Geometric and Archaic age periods, the emergence of various elements of macroculture, in religion, warfare, sports and city-state environment evolved into similar proto-democratic values, leading thus to the establishment of democracy as a political phenomenon in Classical Greece, with Athens being the most well-known historical case.
    Keywords: Macroculture, Democracy, Property rights, Ancient Greece.
    JEL: K11 N44 Z12 Z13
    Date: 2014–06–06
  4. By: Luigi Pascali
    Abstract: The 1870-1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the steamship produced an asymmetric change in trade distances among countries. Before the invention of the steamship, trade routes depended on wind patterns. The introduction of the steamship in the shipping industry reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and a completely novel set of data on shipping times, trade, and development that spans the great majority of the world between 1850 and 1900, I find that 1) the adoption of the steamship was the major reason for the first wave of trade globalization, 2) only a small number of countries that were characterized by more inclusive institutions benefited from globalization, and 3) globalization exerted a negative effect on both urbanization rates and economic development in most other countries.
    Keywords: steamship, gravity, globalization
    JEL: F1 F15 F43 O43
    Date: 2014–06
  5. By: Pérez-Cervantes Fernando
    Abstract: What was the impact of railroads in the output of the United States during the 19th century and how can a New Trade model help answer this question? In order to respond I follow three steps. First, I construct a new digital railroad data set and pair it with geographic and topographic features of the U.S. territory to estimate travel times between every pair of U.S. counties for every year between 1840 and 1900. Second, I use these results, together with a Ricardian model of trade and U.S. county output data from the 19th century, to estimate county gains from trade using a fixed-point algorithm. Third, I estimate ounterfactuals with the railroads built up to a certain year. My estimates suggest that there was a lot of migration anticipating railroad construction and not the other way around. However, leaving all factors of production fixed, if the railroads were made suddenly unavailable in 1890 there would have been a 9.6% reduction in output, but in 1900, after the financial crisis, the impact would have been less than 9 %.
    Keywords: Railroads, Trade, Gravity Models.
    JEL: F10 F14 N71
    Date: 2014–06
  6. By: Nico Voigtländer; Hans-Joachim Voth
    Abstract: Can infrastructure investment win "hearts and minds"? We analyze a famous case in the early stages of dictatorship – the building of the motorway network in Nazi Germany. The Autobahn was one of the most important projects of the Hitler government. It was intended to reduce unemployment, and was widely used for propaganda purposes. We examine its role in increasing support for the NS regime by analyzing new data on motorway construction and the 1934 plebiscite, which gave Hitler greater powers as head of state. Our results suggest that road building was highly effective, reducing opposition to the nascent Nazi regime.
    Keywords: political economy, infrastructure spending, establishment of dictatorships, pork-barrel politics, Nazi regime
    JEL: H54 P16 N44 N94
    Date: 2014–05
  7. By: William Coleman
    Abstract: The key problem of economics in Australia and New Zealand is its marginality. The history of its economics will, then, be at bottom an account of the confrontation of that marginality. Thus any story of economic thought in Australia and New Zealand will necessarily tell of the attempt to plant and cultivate in uncleared ground the long developed vine of older societies. It will relate how the cultivators perforce pondered whether adapting the growth to local conditions would be more or less rewarding than simply perfecting their cultivation of the imported stem, and introducing its ever purer varieties. It will reveal that the adaptation of imported varieties to idiosyncratic condition was in the event limited, though not wholly without significance; and even leaving some trace of cross-fertilisation of the wider world. For all that, the story, I contend, will conclude today with the local strains being submerged by the benefits and snares of globalization. The history of economics in Australia and New Zealand has been written before, both in detail and synoptically, with considerable scholarship and some panache (Goodwin 1966, Groenewegen and McFarlane 1990, La Nauze 1949, King 2007, Cornish 2008, Blythe 2008, Hight 1939). The present history seeks to add through its focus on the predicament of any economics that rationally and usefully bears the adjective 'Australian'.
    Date: 2013–12
  8. By: Shanti Chakravarty (Bangor University, UK); Dimitrios Thomakos (University of Peloponnese); Konstantinos Nikolo (Bangor University, UK)
    Abstract: There is a view that the financial sector of the post-war British economy was in need of reform that was postponed to the detriment of growth for 30 years until liberalisation started in full earnest after the election of 1979. There is another side of the story in this comparison. The first three decades of the post war period witnessed a decline in the share of wages accruing to the top percentile of earners. The trend was reversed around 1979, without any commensurate rise in output per person employed. The average growth rate of GDP in the second period was no greater than that in the first period because cyclical fluctuations were deeper. The de-regulation of the financial system allowed for recycling the wealth of the rich to contribute to housing inflation and rent seeking opportunities, creating an illusion of prosperity.
    Keywords: Financial liberalisation; Productivity trends, Growth
    JEL: N14 N24 P34 Z19
    Date: 2013–12
  9. By: Freshwater, David
    Abstract: Farmland values have increased rapidly over the last decade in response to high incomes for crop farmers and inordinately low interest rates. Farmers have responded to these conditions by bidding up the price of good cropland. In addition, the long period of increasing land values, since the last farm financial crisis in the 1980s, has generated interest by outside investors who see farmland as a safe haven that offers a relatively high annual rate of appreciation. The result is a period of high demand for an essentially fixed supply. The last time this situation occurred was in the late 1970s and early 1980s, and it was followed by a major downward revaluation of farmland values when interest rates spiked and demand stagnated. The paper suggests that a repeat of these events is likely this time as well. Even though farmers do not appear vulnerable to a “balance sheet crisis” as they were in the 1980s, the history of American agriculture is cycles of boom and bust. In addition, there is some reason to believe that changes in the drivers of production , specifically the importance of proprietary seed and pesticide technologies are shifting economic rents away from landowners toward input suppliers.
    Keywords: farm financial crisis, farmland prices, farm income, farm input prices, Farm Credit System, Agricultural and Food Policy, Agricultural Finance, Land Economics/Use, Q14, Q18, Q16, Q15,
    Date: 2013–11–04
  10. By: J. Doyne Farmer (Mathematical Institute and Institute for New Economic Thinking, Oxford & Martin School, University of Oxford); John Geanakoplos (Cowles Foundation, Yale University); Jaume Masoliver (Departament de Fisica Fonamental, Universitat de Barcelona); Miquel Montero (Departament de Fisica Fonamental, Universitat de Barcelona); Josep Perello (Departament de Fisica Fonamental, Universitat de Barcelona)
    Abstract: If the historical average annual real interest rate is m > 0, and if the world is stationary, should consumption in the distant future be discounted at the rate of m per year? Suppose the annual real interest rate r(t) reverts to m according to the Ornstein Uhlenbeck (OU) continuous time process dr(t) = alpha[m - r(t)]dt + kdw(t), where w is a standard Wiener process. Then we prove that the long run rate of interest is r_infinity = m-k^2/2alpha^2. This confirms the Weitzman-Gollier principle that the volatility and the persistence of interest rates lower long run discounting. We fit the OU model to historical data across 14 countries covering 87 to 318 years and estimate the average short rate m and the long run rate r_infinity for each country. The data corroborate that, when doing cost benefit analysis, the long run rate of discount should be taken to be substantially less than the average short run rate observed over a very long history.
    Keywords: Discounting, Environment, Interest rates, Inflation, Ornstein-Uhlenbeck process
    JEL: C1 G12 Q5
    Date: 2014–07
  11. By: Brian Beach; Joseph Ferrie; Martin Saavedra; Werner Troesken
    Abstract: Investment in water purification technologies led to large mortality declines by helping eradicate typhoid fever and other waterborne diseases. This paper seeks to understand how these technologies affected human capital formation. We use typhoid fatality rates during early life as a proxy for water quality. To carry out the analysis, city-level data are merged with a unique dataset linking individuals between the 1900 and 1940 censuses. Parametric and semi-parametric estimates suggest that eradicating early-life exposure to typhoid fever would have increased earnings in later life by 1% and increased educational attainment by one month. Instrumenting for typhoid fever using the typhoid rates from cities that lie upstream produces similar results. A simple cost-benefit analysis indicates that the increase in earnings from eradicating typhoid fever was more than sufficient to offset the costs of eradication.
    JEL: I0 J0 N0
    Date: 2014–07
  12. By: Lucia Cusmano; Andrea Morrison; Enrico Pandolfo
    Abstract: The origin and growth of industrial clusters have attracted the attention of scholars and policy makers since the early era of industrialisation. The seminal work by Alfred Marshall has represented the foundation for a rich strand of literature, whose late expansion and refinement were inspired by the experiences of localised development in emerging regions. This is the case of Italian industrial districts, which have emerged as a territorial model of industrial agglomeration, decentralised production and flexible specialisation. Recently, the traditional explananda of the emergence of clusters have been reconsidered. The evidence about the growth of clusters in areas that did not have obvious natural advantages, nor the first comers’ benefits of early agglomeration economies, has inspired a different conceptualisation, which draws consistently from the evolutionary perspective on industrial dynamics. Klepper (2001, 2010) shows that more successful firms have higher spin-off rates and their spin-offs tend to outperform competitors. Organizational reproduction and heredity are thus identified as the primary forces underlying clustering. The present paper investigates the emergence and evolution of an Italian industrial district, the Sassuolo tile district, one of the largest and most successful ceramic districts in the world, and a paradigmatic example of Italian Marshallian district. Overall, our findings confirm that organizational reproduction and heredity represent primary mechanisms of clustering. However, our results also show that spin-offs do not perform better than non-spin-offs. It appears that, in dense industrial environments and social networks, competitive advantages can also be acquired or built through other channels.
    Date: 2014–07
  13. By: Josephine Jacobs; Courtney Van Houtven; Audrey Laporte; Peter Coyte
    Abstract: Since the 1960's there have been substantial increases in women's labor force attachment. Meanwhile, increases in life expectancy and a shifting focus to care in community settings have increased the odds of becoming a caregiver. In light of these changes and the unpaid leave policies introduced in the 1990s to reduce this role strain, it is important to assess whether the labor market outcomes of caregivers have changed over time. We explored the impact of caregiving on women's labor force outcomes and whether this effect was different for women in the Baby Boomer generation versus women born in the pre-World War II years. Using data from the American National Longitudinal Surveys of Young Women and Mature Women, we followed two cohorts of pre-retirement aged women at similar points in their careers. We used pooled and fixed-effects regressions and found that intensive informal caregiving was negatively associated with labor force participation for both pre-Baby Boomers and Baby Boomers. Further, the caregiving effects were not significantly different across cohorts. Caregiving was not significantly associated with the hours worked or wages. This study provides a first step in establishing that caregiving labor market penalties have persisted over time, despite the introduction of offsetting policies.
    Keywords: Informal caregiving, unpaid caregiving, labor force participation, cohort, gender, United States
    JEL: J22 J1 I11
    Date: 2014–01
  14. By: Shanti Chakravarty (Bangor University, UK); Jonathan Williams (Bangor University, UK)
    Abstract: The Mexican programme of bank privatisation in the early 1990s was dictated not just by a desire for distancing government from the running of the economy but also by the need to raise money by selling public assets in favour of a particular fiscal stance. The conflict of objectives entailed in this liberalisation process contributed to the subsequent financial crisis entailing the re-nationalisation of banks after a short period of three years at a cost to the exchequer which was five times greater than the money raised at privatisation.
    Keywords: Mexico; Privatisation; Financial Liberalisation; Banking
    JEL: G21 G28
    Date: 2013–11
  15. By: Lawrence Sáez
    Abstract: The extant literature relating to the relationship between governance and inclusive growth does not appear to have reached convergence towards a preferred methodological approach. This paper attempts to review the strengths and shortcomings of different methodological approaches to the study of the relationship between governance and inclusive growth. The paper offers some recommendations on possible new directions in the study of the relationship between good governance and inclusive growth.
    Date: 2013
  16. By: James Roumasset (University of Hawai‘i at Manoa & University of Hawai’i Economic Research Organization)
    Abstract: There is a persistent tendency in economic development circles to jump to policy conclusions without entertaining more fundamental explanations of empirical patterns. After reviewing several examples in the field of agricultural development, I provide an alternative paradigm for understanding behavior and organization. Despite the increased sophistication and vast access to data, modern theories and empirical methods have yet to focus adequately on developing fundamental methods for advancing policy analysis through the nature, causes and consequences paradigm. This assessment points to promising avenues for future research. Two such areas singled out for further attention are black hole economics and the coevolution of specialization and economic development.
    Keywords: Farmer behavior, agricultural organization, development policy, new institutional economics, specialization, black-hole economics
    JEL: O12 O13 B41 B52
    Date: 2014–07
  17. By: J. Stephen Ferris (Department of Economics, Carleton University); Marcel-Cristian Voia (Department of Economics, Carleton University)
    Abstract: This paper re-examines the relation between private economic performance and federal government size in Canada over the long 1870-2011 time period. The particular focus is on whether the effect of government size on private output has an inverted U shape with a tipping point. Its innovation is to use nonparametric techniques to assess whether the quadratic form most often employed is the appropriate parametric form for undertaking significance tests and whether that relationship is stable across the period. The empirical work does find a nonlinear relationship with a tipping point but finds the quadratic form applicable only to the early 1870-1936 time period. The latter period is more consistent with a linear form embodying a constant rather than increasing output cost to further increases in government size. The latter implies that policy based on the hypothesis that federal government size is currently excessive is premature.
    Keywords: Government Size, nonlinear time series, tipping point, endogeneity correction.
    JEL: H21 H23 C22 C26
    Date: 2014–03–24
  18. By: John Tang
    Abstract: Railroads in Meiji Japan are credited with facilitating factor mobility as well as access to human and financial capital, but the impact on firms is unclear. Using a newly developed firm-level dataset and a difference-in-differences model that exploits the temporal and spatial variation of railroad expansion, I assess the relationship between railways and firm activity across Japan. Results indicate that railroad expansion corresponded with increased firm activity, particularly in manufacturing, although this effect is mitigated in less populous regions. These findings are consistent with industrial agglomeration in areas with larger markets and earlier development among both new and existing establishments.
    JEL: L26 N75 O53
    Date: 2013
  19. By: Ricardo ROCHA GARCIA
    Abstract: Buscando comprender la trascendencia económica del narcotráfico sobre la concentración del ingreso en Colombia se estima la magnitud de la repatriación de riqueza del narcotráfico (W) desde la mitad de la década de los setenta, considerando las utilidades repatriables (UR) y su absorción a través de flujos de capitales encubiertos (FCE), a través del contrabando, la sobre/subfacturación del comercio y la inversión extranjera originada en paraísos fiscales. Las UR se calculan contablemente utilizando la información disponible de producción, precios y decomisos y supuestos documentados, mientras que los FCE contrastan cifras oficiales con registros del resto del mundo y estimativos según fundamentales. Así la W explicaría el repunte en la desigualdad del ingreso, controlando por el crecimiento de la economía, y daría alcance a otras manifestaciones del deterioro de la equidad que han sido atribuidas al narcotráfico. Un nexo de calado regional, considerando que allí la desigualdad se encuentra asociada con al crecimiento económico y a las incautaciones de bienes al narcotráfico. Un reto para las políticas públicas a juzgar por su inadecuado diseño y ambiguos resultados, tras el propósito de contener la riqueza de origen criminal y promover la economía legal.
    Keywords: Narcotráfico, flujos de capitales encubiertos, desigualdad, lavado de activos, contrabando, sobrefacturación
    JEL: O17 D63
    Date: 2014–07–03

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