nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2014‒08‒25
twenty-one papers chosen by

  1. A golden age before serfdom? The human capital of Central-Eastern and Eastern Europe in the 17th-19th centuries By Jörg Baten; Mikolaj Szoltysek
  2. State History and Economic Development: Evidence from Six Millennia By Borcan, Oana; Olsson, Ola; Putterman, Louis
  3. Inherited wealth over the path of development: Sweden, 1810–2010 By Ohlsson, Henry; Roine, Jesper; Waldenström, Daniel
  4. Sidney Weintraub and American Post Keynesianism: 1938-1970 By E. Roy Weintraub
  5. Too Late but Profitable: Railroads in Colombia during 1920-1950 By Adolfo Meisel R.; María Teresa Ramírez G.; Juliana Jaramillo E.
  6. Employment Industry and Occupational Continuity in Germany: From the Nazi Regime to the Post-War Economic Miracle By Puhani, Patrick A.
  7. “Phantom of the Opera” or “Sex and the City”? – Historical Amenities as Sources of Exogenous Variation By Thomas K. Bauer; Philipp Breidenbach; Christoph M. Schmidt
  8. Varieties of capitalism, varieties of crisis response Bank bailouts in comparative perspective By Schneider, Sebastian
  9. The Diffusion of Development: Along Genetic or Geographic Lines? By Campbell, Douglas L.; Pyun, Ju Hyun
  10. Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry By Tetsuji Okazaki; Chad Syverson; Atsushi Ohyama; Serguey Braguinsky
  11. Abstract of History of Japan's Trade and Industry Policy : Abstract of Tetsuji Okazaki (ed.), History of Japan's Trade and Industry Policy (3) Industry Policy (Japanese) By KAWAMURA Satoshi; TAKEDA Haruhito
  12. Democratisation in Africa: The Role of Self-Enforcing Constitutional Rules By Sophia du Plessis, Ada Jansen and Krige Siebrits
  13. And yet it moves (down) By Maito, Esteban Ezequiel
  14. James Buchanan's theory of federalism: From fiscal equity to the ideal political order By Feld, Lars P.
  15. The Great Depression and the Great Recession: A Comparative Analysis of their Analogies By Peicuti, Cristina
  16. Structural Transformation and Productivity in Latin America* By Cavalcanti Ferreira, Pedro; Silva, Leonardo Fonseca da
  17. Mass warfare and the welfare: State causal mechanisms and effects By Obinger, Herbert; Petersen, Klaus
  18. A Dissection of Trading Capital: Cultural persistence of trade in the aftermath of the fall of the Iron Curtain By Ferdinand Rauch; Matthias Beestermoller
  19. Autobiography By Roth, Alvin E.
  20. Corporate Taxes and Capital Structure: A Long-Term Historical Perspective By Francis A. Longstaff; Ilya A. Strebulaev
  21. The Henry George Theorem in a second-best world By Kristian Behrens; Yoshitsugu Kanemoto; Yasusada Murata

  1. By: Jörg Baten; Mikolaj Szoltysek (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Can the 16th and early 17th centuries in Poland-Lithuania and some other east-central European countries be characterized as a “Golden Age” in human capital? We trace the development of a specific human capital indicator during this period: numeracy. We draw upon new evidence for Poland and Russia from the early 17th century onwards; and for Belarus, Ukraine, and Lithuania from the 18th century onwards; controlling for potential selectivity issues. Poland had quite high levels of numeracy during the early 17th century, but these levels subsequently fell below those of even southern Europe. As in other countries in the area, numeracy levels in Poland were lower than those of western Europe during the 17th, 18th, and early 19th centuries. This finding might support the hypothesis that the second serfdom process, which gained momentum during the 17th century, was one of the core reasons why human capital accumulation was delayed in eastern Europe. The major wars in the region also had devastating effects on numeracy levels. (KEYWORDS: Central-Eastern Europe; historical Demography; Eastern Europe; Human Capital; Numeracy; Age-Heaping; census microdata)
    JEL: J1 Z0
    Date: 2014–08
  2. By: Borcan, Oana (Department of Economics, School of Business, Economics and Law, Göteborg University); Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University); Putterman, Louis (Brown University)
    Abstract: All since the rise of the first civilizations, economic development has been closely intertwined with the evolution of states. In this paper, we contribute to the literature on state history and long-run economic development in four ways. First, we extend and complete the state history index from Bockstette, Chanda and Putterman (2002) by coding the experience with states from the first state origins, 3500 BCE, up until 2000 CE. Second, we explore empirically the relationship between time since transition to agriculture and state age, as well as subsequent state history. Our estimated unconditional correlation implies that a 1000 year earlier transition to agriculture is associated with a 470 years earlier emergence of state institutions. We show how this relationship differs between indigenously- and externally- originated states. Third, we show that the relationship between our extended state history index and current levels of economic development has the shape of an inverted u. The results reflect the fact that countries that were home to the oldest states, such as Iraq, Egypt and China, are poorer today than younger inheritors of their civilizations, such as Germany, Denmark and Japan. This pattern was already in place by 1500 CE and is robust to adjusting for migrations during the colonial era. Finally, we demonstrate a very close relationship between state formation and the adoption of writing.
    Keywords: state history; comparative development
    JEL: N00 O11 O43 O50
    Date: 2014–08–12
  3. By: Ohlsson, Henry (Uppsala Center for Labor Studies); Roine, Jesper (SITE, Stockholm School of Economics); Waldenström, Daniel (Uppsala Center for Labor Studies)
    Abstract: Inherited wealth has attracted much attention recently, much due to the research by Thomas Piketty (Piketty, 2011; 2014). The discussion has mainly revolved around a long-run contrast between Europe and the U.S., even though data on explicit historical inheritance flows are only really available for France and to some extent for the U.K. We study the long-run evolution of inherited wealth in Sweden over the past two hundred years. The trends in Sweden are similar to those in France and the U.K: beginning at a high level in the nineteenth century, falling sharply in the interwar era and staying low thereafter, but tending to increase in recent years. The levels, however, differ greatly. The Swedish flows were only half of those in France and the U.K. before 1900 and also much lower after 1980. The main reason for the low levels in the nineteenth century is that the capital-income ratio is much lower than in “Old Europe”. In fact, the Swedish capital-income ratio was similar to that in the U.S., but the savings and growth rates were much lower in Sweden than in the U.S. Rap-id income growth following industrialization and increasing savings rates were also important fac-tors behind the development of the capital-income ratio and the inheritance flow during the twenti-eth century. The recent differences in inheritance flows have several potential explanations related to the Swedish welfare state and pension system. Sweden was “un-European” during the nineteenth century because the country was so poor, Sweden is “un-European” today because so much wealth formation has taken place within the welfare state and the occupational pension systems.
    Keywords: inheritance; capital accumulation; inverse mortality multiplier
    JEL: D30 J10 N10
    Date: 2014–06–28
  4. By: E. Roy Weintraub
    Abstract: Sidney Weintraub (1914–1983) was an American economist who spent most of his career at the University of Pennsylvania. A distinguished economic theorist (and the author’s father), he was a co ‐ founder of the Journal of Post Keynesian Economics , and the leading figure in the US in the early years of the Post Keynesian movement. This article shows how the early development of American Post Keynesianism, despite claims to the contrary by historians of Post Keynesianism, had no connection to the UK group centered around Joan Robinson in Cambridge.
    Keywords: Sidney Weintraub, Post Keynesian economics, Paul Davidson, wage-price inflation
    JEL: B2 B3 B5
    Date: 2014
  5. By: Adolfo Meisel R.; María Teresa Ramírez G.; Juliana Jaramillo E.
    Abstract: During the 1920s, the Colombian economy experienced the highest rate of growth in its history. The economic reforms of 1923 (the central bank, gold standard, banking legislation, fiscal reorganization), the coffee boom, and the unprecedented influx of foreign capital were the driving forces behind this success. During that decade, the country received 25 million dollars from the United States as compensation for its role in the separation of Panama from Colombia. Those reforms and the growth in coffee exports also allowed for an enormous increase in foreign loans. The value of the loans obtained by 1929 came to 257 million dollars. Those funds were used mainly to build much needed public infrastructure, particularly railroads. Approximately 45% of the foreign loans during that period were invested in railroad construction. Additionally, 16 of the 25 million dollars received as reparation for Panama were invested in railroads. In this paper, we estimate the global rate of return and the internal rates of return on individual railroads. For those calculations, we consider that Colombia ended up paying only around 85% of the loans obtained in the 1920s’s, owing to the effects of the Great Depression and the suspension of foreign debt payments . The rates of return on the railroads constructed and extended in the 1920´s are comparable to those obtained for European countries in the nineteenth century. Classification JEL: N26, N76, O16, O18.
    Date: 2014–08
  6. By: Puhani, Patrick A. (Leibniz University of Hannover)
    Abstract: Using retrospective survey data that covers 1939, 1950, 1960, and 1971, I compare individual-level changes in employment industry and occupational status in Germany from the beginning of World War II to the post-war reconstruction era dubbed the Economic Miracle (Wirtschaftswunder). This comparison reveals that, with only a few exceptions, labor allocation developments remained relatively stable even in the face of huge political and macroeconomic change.
    Keywords: employment, evolution, regime change, revolution, Germany, Arab Spring, Iraq
    JEL: N34 J01
    Date: 2014–08
  7. By: Thomas K. Bauer; Philipp Breidenbach; Christoph M. Schmidt
    Abstract: Using the location of baroque opera houses as a natural experiment, Falck et al. (2011) claim to document a positive causal effect of the supply of cultural goods on today’s regional distribution of talents. This paper raises serious doubts on the validity of the identification strategy underlying these estimates, though. While we are able to replicate the original results, we proceed to show that the same empirical strategy also assigns positive causal effects to the location of historical brothels and breweries. These estimated effects are similar in size and significance to those of historical opera houses. We document that all these estimates reflect the importance of institutions for longrun economic growth, and that the effect of historical amenities on the contemporary local share of high skilled workers disappears upon controlling for regions’ historical importance.
    Keywords: Human capital; historical amenities; regional competiveness
    JEL: R11 H42 J24
    Date: 2014–07
  8. By: Schneider, Sebastian
    Abstract: Given recent history it may be necessary to recall that the so-called Great Recession we have been witnessing for more than five years now was, first and foremost, a crisis of financial markets. One reason for rising debt levels at the outset of the crisis have been massive government expenditures to bail out struggling and even failing banks. Yet, I argue that it falls short of a satisfactory explanation to simply view political action as a rational response to "objective" political and economic problems. Therefore, the fundamental question that underlays this study is: How did different institutional settings influence diverging policy reactions to the financial crisis? To answer this question, this study compares bank bailouts in France, Germany and the United Kingdom. Drawing upon the Varieties of Capitalism literature, I identify four central, national institutions that have influenced political decision-making during the financial crisis: the political system, traditions of market intervention, economic discourse and banking and financial systems. The French president, Nicolas Sarkozy, reverting to France's dirigiste tradition and resorting to a dense elitist network, used bank bailouts to support the French financial industry and to create "national champions". This sort of policy was accompanied by a non-liberal discourse criticising "excessive" financial markets. In Germany, on the other hand, the government deliberated with a broad coalition of political and market actors to create a bailout programme aiming at sustaining bank lending to the industry. However, market actors were criticised on a moral and ethical basis and the ordo-liberal state was considered as a necessary corrective safeguarding true economic freedom. Finally, the UK's "elected dictator", Prime Minister Gordon Brown, used his political power and involved his close political allies to carry out a bailout programme that was predominantly designed to defend the international competitiveness of the British financial industry. Albeit market intervention was inevitable it was announced as being temporarily and leaving as much problem solving as possible to the markets. -- Angesichts der jüngeren Geschichte scheint die Erinnerung notwendig, dass die derzeitige Wirtschaftskrise zunächst als Bankenkrise begann. Zur Beilegung dieser Krise und zur Rettung zahlreicher Kreditinstitute, setzten die Regierungen in Europa und Nordamerika Summen bisher ungeahnten Ausmaßes ein. Diese Bankenrettungsprogramme waren jedoch mehr als nur eine rationale Lösung für bestehende wirtschaftliche Probleme. Wie diese Arbeit zeigt, hatten nationale Institutionen großen Einfluss auf politische Entscheidungen im Rahmen der Bankenrettung. Ein Vergleich zwischen Deutschland, Frankreich und Großbritannien zeigt, welche historisch gewachsenen Institutionen dabei eine entscheidende Rolle spielten und wie sie das taten. Vier zentrale, nationale Institutionen lassen sich mithilfe der Varieties of Capitalism-Literatur identifizieren: Das politische System, des Verhältnis Staat-Markt, der ökonomische Diskurs sowie das Banken- und Finanzsystem. Die deutsche Regierung verhandelte die diversen Bankenrettungen mit einer breiten Koalition politischer und Marktakteure, mit dem Ziel, die Kreditvergabe an die heimische Industrie zu stabilisieren. Begleitet wurde dieses Vorgehen von einem ordo-liberalen Diskus. Die Bankenrettung in Frankreich hingegen wurde durch den Präsidenten dominiert, welcher dabei auf ein Netzwerk aus politischen und Wirtschaftseliten zurückgriff, um "nationale Champions" zu schaffen. Hinzu kam ein kapitalismuskritischer öffentlicher Diskurs. In Großbritannien spielte Premier-Minister Gordon Brown eine beinahe ebenso dominante Rolle. Mit dem vorrangigen Ziel, die Wettbewerbsfähigkeit des Finanzstandortes London zu erhalten, griffen in Groß-Britannien vor allem Marktmechanismen und ein neoliberaler Diskurs.
    Date: 2014
  9. By: Campbell, Douglas L.; Pyun, Ju Hyun
    Abstract: Why are some peoples still poor? Recent research suggests that a society’s “genetic distance”—a measure of the time elapsed since two populations had common ancestry—to the United States is a significant predictor of development even after controlling for an ostensibly exhaustive list of geographic, historical, religious and linguistic variables. We find, by contrast, that the correlation of genetic distance from the US and GDP per capita disappears with the addition of controls for geography including distance from the equator and a dummy for sub-Saharan Africa.
    Keywords: Genetics, Economic Development, Geography, Climatic Similarity
    JEL: O10 O33 O40
    Date: 2014–08
  10. By: Tetsuji Okazaki (University of Tokyo); Chad Syverson (University of Chicago Booth School of Business and NBER); Atsushi Ohyama (Hokkaido University); Serguey Braguinsky (Carnegie Mellon University)
    Abstract: We explore how changes in ownership and managerial control affect the productivity and profitability of producers. Using detailed operational, financial, and ownership data from the Japanese cotton spinning industry at the turn of the last century, we find a more nuanced picture than the straightforward “higher productivity buys lower productivity†story commonly appealed to in the literature. Acquired firms’ production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition, conditional on operating. They were much less profitable, however, due to consistently higher inventory levels and lower capacity utilization—differences which reflected problems in managing the uncertainties of demand. When purchased by more profitable firms, these less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels, consistent with acquiring owner/managers spreading their better demand management abilities across the acquired capital.
    Date: 2014
  11. By: KAWAMURA Satoshi; TAKEDA Haruhito
    Abstract: 1) The second series of the History of Japan's Trade and Industry Policy , comprising 12 books (the first volume with a general overview and the remaining 11 volumes with detailed expositions on the main policy items) were published that not only record objective facts about the drafting process of the policy at the time and the situation of the industry and the economy that required such drafting, but also analyze and evaluate policy for the period 1980 through 2000. 2) However, it is not easy for people to read all 12 books and understand the history of policy. Subsequently, we made an abstract of each book to assist in using it in policy evaluation and policy making. The 12 abstracts describe the main points of the policy clearly and collect policy evaluation, and our hope is that they are utilized as the guide for each book. 3) This PDP is abstract of Tetsuji Okazaki (ed.), History of Japan's Trade and Industry Policy (3) Industrial Policy , Keizai Sangyo Chosakai, 2012.
    Date: 2014–08
  12. By: Sophia du Plessis, Ada Jansen and Krige Siebrits
    Abstract: Following several decades during which violent civil conflict was common in African countries, the period from 1990 onwards was notably marked by a spreading and deepening of adherence to democratic principles. However, it is true to say that many African countries are still experiencing political instability and civil unrest. This raises the question of why these countries cannot attain sustainable conflict resolution. Drawing on economic ideas about contracts and institutions, this paper outlines a conceptual framework for thinking about the role of constitutional rules in achieving political stability, and we elucidate the main requirement for sustainable democratic systems. The gist of the argument is that constitutional rules must become self-enforcing in order to safeguard democratic systems and to avoid relapses into violent civil conflict. We discuss selective examples where constitutions do not adhere to the framework of self-enforcement, making them unable to prevent the recurrence of civil war in these countries
    Keywords: Constitutional rules, self-enforcing constitutions, informal institutions, Democracy, civil war, Africa
    JEL: D7 N4 N9
    Date: 2014
  13. By: Maito, Esteban Ezequiel
    Abstract: The article presents an estimate of the rate of profit in United Kingdom between 1855 and 2009. By isolating some of the countervailing forces specified by Marx of the law of the tendency of the rate of profit to fall, it demonstrates that the law impose despite those countervailing forces, which do not reverse the tendency in the long term. Finally, the article deals with the tendency and economic cycles based on the historical development of the rate of accumulation and the rate of growth of employees. A statistical annex is included at the end.
    Keywords: United Kingdom - Rate of profit - Countervailing forces - Marx - Law of the tendency of the rate of profit to fall
    JEL: B51 E22 P10 P16
    Date: 2014–08
  14. By: Feld, Lars P.
    Abstract: The distinct characteristic in James Buchanan's thinking about federalism in contrast to the traditional theory of fiscal federalism is his view about fiscal competition. In this paper, it is demonstrated that this thinking went through three stages. From the 1950s to the beginning of the 1970s, his analyses were well embedded in the traditional fiscal federalism literature and concerned with equity and efficiency issues. In the Leviathan approach starting from the midseventies, he considered competition between jurisdictions as a means to restrict Leviathan governments. In his interpretation of federalism as an ideal political order, Buchanan binds these perspectives together and adds a procedural view: Federalism enables citizens to exert political control, it raises their interest in politics because one vote has more influence, and it facilitates to act morally within their moral capacity. --
    Keywords: James Buchanan,Fiscal Equity,Fiscal Competition,Federalism as Political Order
    JEL: H77 B31 D78
    Date: 2014
  15. By: Peicuti, Cristina
    Abstract: The decades preceding the Great Depression and the U.S. subprime mortgage crisis have close similarities. Both decades were characterized by rapid growth without major contractions, by an increase in liquidity, a lack of inflation, and a generalized decrease in risk premiums. Additional similarities included significant changes in the financing of real estate by commercial banks along with a consolidation of the banking sector and high hopes that the efficiency of monetary policy would prevent financial crises. These decades were also characterized by the consolidation of the powers of young central banks (the Federal Reserve System in the 1920s and the European Central Bank in the 2000s), by unsuccessful attempts to control market speculation, by their international dimensions, and by the eruption of crises after the failure of a major American financial institution that could have been avoided. Understanding these analogies help us better identify the causes of the subprime mortgage crisis and prevent history from repeating itself to the extent of such large-scale devastating consequences.
    Keywords: financial crisis, Great Depression, credit, subprime mortgage crisis, liquidity,inflation, central bank, commercial bank
    JEL: E51 F01 G15 G21
    Date: 2014–06–10
  16. By: Cavalcanti Ferreira, Pedro; Silva, Leonardo Fonseca da
    Abstract: This article examines the e¤ects of sectorial shifts and structural transformation on therecent productivity path of Latin America. We use a four-sector (agriculture, industry, modernservices and traditional services) general equilibrium model calibrated to the main economies inthe region. The model very closely replicates labor reallocations across sectors and the growthof aggregate labor productivity from 1950 to 2005. Structural transformation explains a sizeableportion of the region s convergence in the rst decades. In most cases, the poor performanceof the traditional services sector is the main cause of the slowdown in productivity growthobserved in the region after the mid-1970s and is a key factor in explaining the divergenceduring this period.
    Date: 2014–08–06
  17. By: Obinger, Herbert; Petersen, Klaus
    Abstract: The question whether and how warfare has influenced the development of advanced Western welfare states is contested. So far, scholarly work either focused on the trade-off between military and social spending or on case studies of individual countries. What is missing, however, is a systematic comparative approach that is informed by an explicit consideration of the underlying causal mechanisms. This paper outlines an agenda for a comparative analysis of the warfare-welfare state nexus. By distinguishing between three different phases (war preparation, warfare, and post-war period) it provides a comprehensive analysis of possible causal mechanisms linking war and the welfare state and provides preliminary empirical evidence for war waging, occupied and neutral countries in the age of mass warfare stretching from ca. the 1860s to the 1960s. -- Die Frage, ob und wie Kriege die Entwicklung von westlichen Wohlfahrtsstaaten beeinflusst haben, ist in der Literatur umstritten. Bislang fokussierte die Forschung entweder auf den Zielkonflikt zwischen Sozial- und Militärausgaben oder untersuchte einzelne Länder. Demgegenüber fehlt bislang ein systematischer Vergleich, der auch die relevanten Kausalmechanismen in den Blick nimmt. Dieses Arbeitspapier skizziert eine Forschungsagenda für eine vergleichende Analyse der Wechselbeziehung zwischen Krieg und Sozialstaat. Unter Berücksichtigung von drei Phasen (Kriegsvorbereitung, Konfliktphase und Nachkriegszeit) werden mögliche Kausalmechanismen vorgestellt, wie militärische Konflikte den Sozialstaat im Zeitalter des Massenkriegs (ca. 1860 - 1960) beeinflusst haben. Schließlich werden erste empirische Befunde für kriegsführende, neutrale und okkupierte Länder präsentiert.
    Date: 2014
  18. By: Ferdinand Rauch; Matthias Beestermoller
    Abstract: We show that the countries of the former Austro-Hungarian monarchy trade significantly more with one another in the aftermath of the collapse of the Iron Curtain than predicted by a standard gravity model.� This trade surplus declines linearly and monotonically over time.� We argue that these findings suggest that decaying cultural forces explain a significant part of trading capital.� We document the rate of decay of these cultural forces.
    Keywords: Trade, Gravity, Culture, Borders, Habsburg Empire, Persistence
    JEL: F14 F15 N33 N34 N94
    Date: 2014–08–13
  19. By: Roth, Alvin E. (Harvard University)
    Abstract: I was born on December 18, 1951 in the New York City borough of Queens. My parents, Ernest and Lillian, were both public high school teachers of a subject that is probably no longer taught, called Secretarial Studies, which focused on typing and taking dictation via two methods of shorthand stenography, Pitman and Gregg. Their students were young women planning to go directly to work as secretaries after high school.
    Keywords: Market Design;
    JEL: C71 D01
    Date: 2013
  20. By: Francis A. Longstaff; Ilya A. Strebulaev
    Abstract: We study the relation between leverage and corporate tax rates using an extensive data set constructed from all corporate income tax returns filed with the IRS from 1926 to 2009. This data set includes financial statement data from millions of private and public corporations of all sizes. We show that corporate leverage has increased significantly over the past century. We find strong evidence that changes in corporate leverage are directly related to changes in corporate tax rates for all but the smallest firms. These results are robust to the inclusion of control variables for the costs of financial distress, corporate liquidity, and capital market and macroeconomic conditions. The adjustment of leverage to changes in corporate tax rates is slower for smaller firms facing financial constraints. We find that the capital structures of the smallest firms are driven much more by external shocks than is the case for larger firms.
    JEL: G32 G38
    Date: 2014–08
  21. By: Kristian Behrens (Université du Québec à Montréal(UQAM)); Yoshitsugu Kanemoto (National Graduate Institute for Policy Studies); Yasusada Murata (National Graduate Institute for Policy Studies)
    Abstract: The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. We extend the HGT to distorted economies where product differentiation and increasing returns are the sources of agglomeration economies and city governments levy property taxes. Without relying on specific functional forms, we derive a second-best HGT that relates the fiscal surplus to the excess burden expressed as an extended Harberger formula.
    Date: 2014–08

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