nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2015‒03‒05
eighteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Historical trade integration: Globalization and the distance puzzle in the long 20th century By Samuel Standaert; Stijn Ronsse; Benjamin Vandermarliere
  2. "The Rise of Money and Class Society: The Contributions of John F. Henry" By Alla Semenova; L. Randall Wray
  3. Historical origins of cultural supply in Italy By Borowiecki, Karol Jan
  4. Inequality, Sustainability and Piketty’s Capital By Nuno Ornelas Martins
  5. Gender Roles and Medical Progress By Stefania Albanesi; Claudia Olivetti
  6. Uruguay y la Primera Globalización. On the accuracy of export performance, 1870-1913 By Nicolás Bonino-Gayoso; Antonio Tena-Junguito; Henry Willebald
  7. 'Unfinished Business': Historic Complementarities, Political Competition and Ethnic Violence in Gujarat By Jha, Saumitra
  8. Dinamiche di lungo periodo della disuguaglianza in Italia settentrionale: una nota di ricerca By Guido Alfani; Matteo Di Tullio
  9. Why is this ‘school’ called neoclassical economics? Classicism and neoclassicism in historical context By Nuno Ornelas Martins
  10. The Boats That Did Not Sail: Asset Price Volatility in a Natural Experiment By Koudijs, Peter
  11. Gender discrimination in 19thc England: evidence from factory children By Sara Horrell; Deborah Oxley
  12. Those Who Know Most: Insider Trading in 18th c. Amsterdam By Koudijs, Peter
  13. Economic Growth and Migration By Jan Ditzen
  14. El nivel educativo de la población en Espana y sus regiones: 1960-2011 By Angel De la Fuente; Rafael Domenech Vilarino
  15. Gandhi's Gift: Lessons for Peaceful Reform from India's Struggle for Democracy By Bhavnani, Rikhil R.; Jha, Saumitra
  16. Networks of Military Alliances, Wars, and International Trade By Jackson, Matthew O.; Nei, Stephen
  17. Chameleons: The Misuse of Theoretical Models in Finance and Economics By Pfleiderer, Paul
  18. Modeling and Forecasting Crude Oil Price Volatility: Evidence from Historical and Recent Data By Thomas Lux; Mawuli Segnon; Rangan Gupta

  1. By: Samuel Standaert; Stijn Ronsse; Benjamin Vandermarliere (-)
    Abstract: This paper studies the structure and the evolution of worldwide trade integration from 1880 up to 1995. Starting from historical trade and GDP data we use a state-space model to construct a bilateral historical trade index. This index is subsequently used to study globalization and the distance puzzle. The increased coverage of this index allows us to expand the period of analysis to include both the first and second globalization waves. We find that the first wave was marked by a strong diversification in the formation of trade links as well as a strong decrease in the effect of distance. The second globalization wave started with a strong decrease in the importance of distance which leveled out in the 1960s. While we do find some evidence of an increase in the importance of distance from the 1960s onwards, this is dwarfed by the strong decrease preceding it.
    Keywords: Trade integration, Globalization, Distance puzzle, State-space
    JEL: F15 C4 F14
    Date: 2014–12
  2. By: Alla Semenova; L. Randall Wray
    Abstract: This paper explores the rise of money and class society in ancient Greece, drawing historical and theoretical parallels to the case of ancient Egypt. In doing so, the paper examines the historical applicability of the chartalist and metallist theories of money. It will be shown that the origins and the evolution of money were closely intertwined with the rise and consolidation of class society and inequality. Money, class society, and inequality came into being simultaneously, so it seems, mutually reinforcing the development of one another. Rather than a medium of exchange in commerce, money emerged as an "egalitarian token" at the time when the substance of social relations was undergoing a fundamental transformation from egalitarian to class societies. In this context, money served to preserve the façade of social and economic harmony and equality, while inequality was growing and solidifying. Rather than "invented" by private traders, money was first issued by ancient Greek states and proto-states as they aimed to establish and consolidate their political and economic power. Rather than a medium of exchange in commerce, money first served as a "means of recompense" administered by the Greek city-states as they strived to implement the civic conception of social justice. While the origins of money are to be found in the origins of inequality, a well-functioning democratic society has the power to subvert the inequality-inducing characteristic of money via the use of money for public purpose, following the principles of Modern Money Theory (MMT). When used according to the principles of MMT, the inequality-inducing characteristic of money could be undermined, while the current trends in rising income and wealth disparities could be contained and reversed.
    Keywords: Nature of Money; Chartalism; Metallism; Origins of Money; Origins of Coinage; Inequality; Class; Ideology; Religious Ideology; State Formation; State Theory of Money; Modern Money Theory
    JEL: B5 B25 B41 E11 E12 E42 E52 E62 E63 H6 N1 N2 P1 P4 P5 Z1
    Date: 2015–02
  3. By: Borowiecki, Karol Jan (Department of Business and Economics)
    Abstract: I investigate the consequences of long-run persistency of a society’s preferences for cultural goods. Historical cultural activity is approximated with the frequency of births of music composers during the Renaissance and is linked with contemporary measures of cultural activity in Italian provinces. Areas with a one percent higher number of composer births nowadays show an up to 0.29% higher supply of classical concerts and 0.16% more opera performances. Classical concerts and opera performances have also rather bigger audiences and obtain greater revenues in provinces that have been culturally active in the past. Today, those provinces also exhibit a somewhat lower supply of other forms of entertainment (e.g., sport events), thereby implying a tantalising divergence in societies’ cultural preferences which is attributable to events rooted in the past. It is also shown that the geography of composer births is remarkably persistent over a period of seven centuries.
    Keywords: Economic development; Culture; Institutions; Path dependence; Endogenous preferences
    JEL: N33 N34 O10 Z10
    Date: 2015–02–25
  4. By: Nuno Ornelas Martins (Centro de Estudos em Gestão e Economia da Universidade Católica Portuguesa)
    Abstract: In the present article I address the implications of Thomas Piketty’s book Capital in the Twenty-First Century for our understanding of inequality and sustainability. I argue that although Piketty’s contribution is a significant one which has the potential to lead economic analysis in a more fruitful direction, its potential is constrained by its reliance on marginalist theory. The difficulties in addressing adequately the themes of inequality and sustainability spring from the assumptions employed in marginalist theory, which have been proven inconsistent in several debates throughout the history of economic thought. Once the constraints posed by marginalist theory are removed from Piketty’s contribution, its potential becomes much greater when addressing inequality, and has also important implications for such topics as sustainability, justice, and the environment.
    Keywords: Inequality, Sustainability, Cambridge Controversies, Capitalism
    JEL: B41 I31
    Date: 2014–12
  5. By: Stefania Albanesi (Federal Reserve Bank of New York); Claudia Olivetti (Boston University and NBER)
    Abstract: Maternal mortality was the second largest cause of death for women in childbearing years up until the mid-1930s in the United States. For each death, twenty times as many mothers were estimated to suffer pregnancy related conditions, often leading to severe and prolonged disablement. Poor maternal health made it particularly hard for mothers to engage in market work. Between 1930 and 1960 there was a remarkable reduction in maternal mortality and morbidity. We argue that these medical advances, by enabling women to reconcile work and motherhood, were essential for the joint rise in married women's labor force participation and fertility over this period. We also show that the diffusion of infant formula played an important auxiliary role.
    Keywords: maternal mortality, female labor force participation, fertility, baby boom, human capital
    JEL: I15 J13 J22 N30
    Date: 2015–02
  6. By: Nicolás Bonino-Gayoso (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Antonio Tena-Junguito (Universidad Carlos III (Madrid). Departamento de Ciencias Sociales); Henry Willebald (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: In order to understand Uruguayan long-run economic evolution it becomes crucial to interpret its export performance during the First Globalization. The lack of accuracy of official figures, especially official prices used, calls for an adjustment of Uruguayan exports series. We have used empirical evidence to test the accuracy of quantities and values of exports’ records, first, according to import partners’ records and, second, according to international market prices. Results show a general undervaluation of official export values during the period along with severe distortions in the registers caused by transit trade. We reconstructed new Uruguayan export f.o.b values and export price index, which present an export evolution more unstable and less dynamic than the one showed by its neighbor Argentina.
    Keywords: bilateral trade, accuracy indices, exports, uruguay, first globalization
    JEL: F14 N76
    Date: 2015–02
  7. By: Jha, Saumitra (Stanford University)
    Abstract: I examine how the historical legacies of inter-ethnic complementarity and competition interact with contemporary electoral competition in shaping patterns of ethnic violence. Using local comparisons within Gujarat, a single Indian state known for both its non-violent local traditions and for widespread ethnic pogroms in 2002, I provide evidence that where political competition was focused upon towns where ethnic groups have historically competed, there was a rise in the propensity for ethnic rioting and increased electoral support for the incumbent party complicit in the violence. However, where political competition was focused in towns that historically enjoyed inter-ethnic complementarities, there were fewer ethnic riots, and these towns also voted against the incumbent. These historic legacies proved to be important predictors of the identity of the winner even in very close electoral races. I argue that these results reflect the role local inter-ethnic economic relations can play in altering the nature and the benefits of political campaigns that encourage ethnic violence.
    JEL: F10 N25 O18 Z12
    Date: 2014–02
  8. By: Guido Alfani; Matteo Di Tullio
    Abstract: This research note presents and compares some first findings obtained by the project EINITE-Economic Inequality across Italy and Europe, 1300-1800. The main aim of the project is to investigate long-term trends in economic inequality in Italy and in Europe. Here we compare previously published data for Piedmont with some early findings for Lombardy and Veneto, in order to provide a broad picture of northern Italian inequality. The period we cover is particularly long (13thÐearly 19th centuries) for Piedmont, while for Lombardy and Veneto a somewhat shorter period is considered (15thÐ18th centuries). We provide an in-depth analysis of the archival sources usable to study long-term changes in economic inequality in northern Italy, and we provide some key measures of inequality over time (Gini indexes, top percentiles). We find evidence of a tendency for Italian inequality to increase almost everywhere and almost continuously over time, since about 1400 or 1450, confirming what has been suggested by previous studies that focused on Piedmont and Tuscany.
    Keywords: Economic inequality; wealth concentration; poverty; wealth; middle ages; early modern period; northern Italy; Republic of Venice; Sabaudian State; State of Milan; Piedmont; Lombardy; Veneto
  9. By: Nuno Ornelas Martins (Centro de Estudos em Gestão e Economia da Universidade Católica Portuguesa)
    Abstract: This article addresses the origins of the term “neoclassical” economics, and the subsequent use of the term. It is argued that the present use of the term “neoclassical” economics is different from its original meaning when it was first introduced by Thorstein Veblen, who used it to denote a methodological inconsistency between vision and method, as Tony Lawson argues. I also argue here that the original meaning of the term, and its present use, are both contradictory with the original meaning of “classical political economy”. In fact, if we follow the original meaning of the term “classical political economy”, as a surplus approach concerned with the reproduction and distribution of the economic surplus, we find that many of those who are critical of “neoclassical economics” are actually in line with the classical perspective, to the extent that they also develop a surplus approach.
    Keywords: Classical, Neoclassical, closed system, surplus, marginalism
    JEL: B41
    Date: 2015–01
  10. By: Koudijs, Peter (Stanford University)
    Abstract: What explains short term fluctuations of stock prices? This paper exploits a natural experiment from the 18th century in which information flows were regularly interrupted for exogenous reasons. English shares were traded on the Amsterdam exchange and news came in on sailing boats that were often delayed because of adverse weather conditions. The paper documents that prices responded strongly to boat arrivals, but that there was considerable volatility in the absence of news. Results suggest that this was largely the result of the revelation of (long-lived) private information and the (transitory) impact of uninformed liquidity trades on intermediaries' risk premia.
    JEL: G14 N20
    Date: 2014–08
  11. By: Sara Horrell; Deborah Oxley
    Abstract: Gender bias against girls in nineteenth-century England has received much interest but establishing its existence has proved difficult.  We utilise data on heights of 16,402 children working in northern textile factories in 1837 to examine whether gender bias was evident.  Current interpretations argue against any difference.  Here our comparisons with modern height standards reveal greater deprivation for girls than for boys.  But this result cannot be taken at face value.  We query whether modern standards require adjustment to account for the later timing of puberty in historical populations and develop an alternative.  Gender discrimination remains, although its absence amongst younger children precludes an indictment of culturally-founded gender bias.  The height data must remain mute on the source of this discrimination but we utilise additional information to examine some hypotheses: occupational sorting, differential susceptibility to disease, poorer nutrition for girls, disproportionate stunting from the effects of nutritional deprivation, and type and amount of work undertaken, specifically labour additional to paid work in the domestic sphere.  Of these, we favour housework as the main culprit, factory girls undertook more physical labour than factory boys and this was reflected in disproportionate stunting.  The 'double burden' was, and remains, a form of gender discrimination.
    Date: 2015–03–03
  12. By: Koudijs, Peter (Stanford University)
    Abstract: This paper studies how private information is incorporated into prices, using a unique setting from the 18th century that, in many dimensions, is simpler and closer to stylized models of price discovery than modern-day markets. Specifically, the paper looks at a number of English securities that were traded in both London and Amsterdam. Relevant information about these securities originated in London and was sent to Amsterdam on board of official mail packet boats. Anecdotal evidence suggests that these ships carried both public news and private information. They sailed only twice a week, and in adverse weather could not sail at all. The paper exploits periods of exogenous market segmentation to identify the impact of private information. The evidence is consistent with a Kyle (1985) model in which informed agents trade strategically. Most importantly, the speed of information revelation in Amsterdam depended on how long insiders expected it would take for the private signal to become public. As a result of this strategic behavior, private information was only slowly revealed to the market as a whole. This price discovery was economically important: private signals had almost as much impact on prices as public information shocks.
    JEL: D82 F36 G14 N20
    Date: 2014–09
  13. By: Jan Ditzen (Heriot-Watt University)
    Abstract: The literature on growth theory lacks a precise sense of why there are interactions and dependencies between countries. Correspondingly, the spatial econometrics literature on growth empirics accounts for endogenous cross-country interactions, but lacks crucial insights from economic theory as to how such linkages should be precisely modeled. I address this weakness, by proposing a new economic model as a combination of an endogenous Romer-style growth model and a New Economic Geography model. The model admits two distinct sources of interactions between countries: mobility of high skilled workers and inter-country trade. Both of these sources develop from the New Economic Geography models, while the engine of the growth process is adapted from the endogenous growth literature. Motivated by higher wages, highly skilled workers migrate to the richer country, and there they work in the R&D sector. This in turn contributes towards economic growth in the richer country, and leads to divergence between the two countries. Trade in the manufactured good increases the difference between the two countries further. In its focus on both migration of highly skilled labour and its conclusion of divergence, the model captures the phenomenon of the Great Divergence in the 19th century. It is also consistent with evidence of club convergence in the 20th century. The implications of the model are verified by simulation.
    Keywords: Economic growth, New Economic Geography, Cross-country interactions, Convergence, Migration, Trade
    JEL: O41 F22 F43 O31 N10
    Date: 2014
  14. By: Angel De la Fuente; Rafael Domenech Vilarino
    Abstract: En este trabajo se construyen series anuales del nivel educativo de la poblacion para Espana y sus regiones durante el periodo 1960-2011 utilizando la informacion que proporcionan los censos de poblacion. Estas series actualizan y mejoran las elaboradas en de la Fuente y Domenech (2006).
    Keywords: anos de escolarizacion, convergencia, productividad, desempleo, educacion, regiones espanolas
    JEL: I20 R10 O40
    Date: 2015–02
  15. By: Bhavnani, Rikhil R. (University of WI); Jha, Saumitra (Stanford University)
    Abstract: In this overview article, we summarize recent research in progress that examines the potential and limitations of non-violent civil disobedience through the lens of the evolution of an iconic success: India's struggle for democratic self-rule. We present a theoretical framework that highlights two key twin challenges faced by non-violent movements in ethnically diverse countries. The first is the challenge of mass mobilization across ethnic lines. The second challenge lies in overcoming the enhanced temptations faced by members of large mobilized groups to turn violent, whether to secure short-term gains from mob action or in response to manipulation by agents who stand to gain from political violence. We show how these challenges appear to match general patterns from cross-campaign data. Motivated by these patterns, we discuss how these challenges were overcome during the Indian Independence Struggle. We argue that the first challenge--that of forging a mass movement [was accomplished through the brokering of a deal that took advantage of external shocks] in this case, the Great Depression--to align the incentives of disparate ethnic and social groups towards mass mobilization in favour of democracy and land reform. The second key challenge--that of keeping the mass movement peaceful was accomplished through organizational innovations introduced by Mohandas Gandhi in his reforms of the constitution of the Congress movement in 1919-20. These organizational innovations took the Congress movement from one dominated by a rich elite to one organized on the principle of self-sacrifice, selecting future leaders who could then be trusted to maintain non-violent discipline in pursuit of the extension of broad rights and public policy objectives. We conclude by arguing that a key, but hitherto mostly neglected, aspect of 'Gandhi's Gift'--the example of non-violence applied to India's independence struggle-lies in understanding these organizational innovations.
    Date: 2014–03
  16. By: Jackson, Matthew O. (Stanford University and Santa Fe Institute); Nei, Stephen (Stanford University)
    Abstract: We investigate the role of networks of military alliances in preventing or encouraging wars between groups of countries. A country is vulnerable to attack if some allied group of countries can defeat the defending country and its (remaining) allies based on their collective military strengths. We show that there do not exist any networks which contain no vulnerable countries and that are stable against the pairwise addition of a new alliance as well as against the unilateral deletion of any existing alliance. We then show that economic benefits from international trade provide incentives to form alliances in ways that restore stability and prevent wars, both by increasing the density of alliances so that countries are less vulnerable and by removing the incentives of countries to attack their allies. In closing, we examine historical data on interstate wars and trade, noting that a dramatic (more than ten-fold) drop in the rate of interstate wars since 1950 is paralleled by the advent of nuclear weapons and an unprecedented growth in trade over the same period, matched with a similar densification and stabilization of alliances, consistent with the model.
    JEL: D74 D85 F10
    Date: 2014–05
  17. By: Pfleiderer, Paul (Stanford University)
    Abstract: In this essay I discuss how theoretical models in finance and economics are used in ways that make them "chameleons" and how chameleons devalue the intellectual currency and muddy policy debates. A model becomes a chameleon when it is built on assumptions with dubious connections to the real world but nevertheless has conclusions that are uncritically (or not critically enough) applied to understanding our economy. I discuss how chameleons are created and nurtured by the mistaken notion that one should not judge a model by its assumptions, by the unfounded argument that models should have equal standing until definitive empirical tests are conducted, and by misplaced appeals to "as-if" arguments, mathematical elegance, subtlety, references to assumptions that are "standard in the literature," and the need for tractability.
    Date: 2014–03
  18. By: Thomas Lux (Department of Economics, University of Kiel, Kiel, Germany); Mawuli Segnon (Department of Economics, University of Kiel, Germany); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This paper uses the Markov-switching multifractal (MSM) model and generalized autoregressive conditional heteroscedasticity (GARCH)-type models to forecast oil price volatility over the time periods from January 02, 1875 to December 31, 1895 and from January 03, 1977 to March 24, 2014. Based on six dierent loss functions and by means of the superior predictive ability (SPA) test, we evaluate and compare their forecasting performance at short and long horizons. The empirical results indicate that none of our volatility models can uniformly outperform other models across all six different loss functions. However, the new MSM model comes out as the model that most often across forecasting horizons and subsamples cannot be outperformed by other models, with long memory GARCH-type models coming out second best.
    Keywords: Crude oil prices, GARCH, Multifractal processes, SPA test
    JEL: C52 C53 C22
    Date: 2015–03

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