nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2015‒08‒13
28 papers chosen by

  1. The past, present and future of banking history By Colvin, Christopher L.
  2. To Claim or Not Claim? Friendly Societies In New Zealand, 1879-1884 By Arthur Downing
  3. Biological Well-Being in Late 19th Century Philippines By Jean-Pascal Bassino; Marion Dovis; John Komlos
  4. Eighteenth-century international trade statistics: Sources and methods By Loïc Charles; Guillaume Daudin
  5. Land Access Inequality and Education in Pre-Industrial Spain By Julio Martinez-Galarraga;Francisco Beltrán Tapia
  6. Where are the missing girls? Gender discrimination in mid-19th century Spain. By Francisco J. Beltrán Tapia; Domingo Gallego
  7. On Britain’s Return to the Gold Standard: was there a ‘Pigou-McKenna School’? By Rogério Arthmar; Michael McLure
  8. Identity and Incentives an Economic Interpretation of the Holocaust By Raul Caruso
  9. The Medicaid Program By Thomas Buchmueller; John C. Ham; Lara D. Shore-Sheppard
  10. ‘We Remain What We Are’. North Schleswig German Identities in Children’s Education after 1945 By Tobias Haimin Wung-Sung
  11. Feast or Famine: The Welfare Impact of Food Price Controls in Nazi Germany By Robin Winkler
  12. Please call me John: name choice and the assimilation of immigrants in the United States, 1900-1930 By Pedro Carneiro; Sokbae Lee; Hugo Reis
  13. Death, Bereavement, and Creativity By Graddy, Kathryn
  14. Catching Up: Developing Countries in Pursuit of Growth By Popov, Vladimir
  15. Cereals, Appropriability and Hierarchy By Mayshar, Joram; Moav, Omer; Neeman, Zvika; Pascali, Luigi
  16. People and Machines: A Look at the Evolving Relationship Between Capital and Skill in Manufacturing 1860-1930 Using Immigration Shocks By Lafortune, Jeanne; Tessada, José; Lewis, Ethan Gatewood
  17. Sraffa and the Labour Theory of Value - a note By Anderaos de Araujo, Fabio
  18. Credit, Indebtedness, and Speculation in the Marxian Paradigm: A Critical Analysis By Miguel Ramirez
  19. Evolution and monogamy By Alger, Ingela
  20. The Telegraph and the Bank: On the Interdependence of Global Communications and Capitalism, 1866-1914 By Simone M. Müller; Heidi J S Tworek
  21. Pigou, a Loyal Marshallian? By Karen Knight
  22. Road transport energy consumption in the G7 and BRICS: 1973-2010 By Yi-Xuan Gao; Hua Liao; Paul J. Burke; Yi-Ming Wei
  23. A Peculiar Sample: a reply to Steckel and Ziebarth By Jonathan Pritchett; Herman Freudenberger
  24. A margin call gone wrong: Credit, stock prices, and Germany's Black Friday 1927 By Gissler, Stefan
  25. The Superiority of Economists By Marion Fourcade; Etienne Ollion; Yann Algan
  26. On the search to “recapture the industrial spirit of capitalism”: From patient shareholders to shared governance By Jean-Luc Gaffard; Maurizio Iacopetta
  27. A contribution to the Reinhart and Rogoff debate: not 90 percent but maybe 30 percent By Sokbae Lee*; Hyunmin Park; Myung Hwan Seo; Youngki Shin
  28. Economic theory and forecasting: lessons from the literature By Raffaella Giacomini

  1. By: Colvin, Christopher L.
    Abstract: This essay discusses trends in new banking history scholarship. It does so by conducting bibliometric content analysis of the entire literature involving the history of banks, bankers and banking published in all major academic journals since the year 2000. It places this recent scholarship in its historiographical context, and speculates on the future of the field.
    Keywords: banking history,bibliometrics
    JEL: N20 N21 N22 N23 N24 N25
    Date: 2015
  2. By: Arthur Downing
    Abstract: Friendly societies were voluntary associations offering members sickness and medical insurance. By the end of the nineteenth century they were one of the most important forms of formal sickness and health insurance around the English-speaking world. A number of historians and economists have argued the competitive advantage of the friendly societies lay in their ability to monitor claims and curtail opportunism. This paper tests this claim, using a newly compiled panel dataset of societies operatingin in New Zealand in the 1870s and 1880s. The statistical material compiled by the New Zealand Registrar of friendly societies was of exceptional quality. Critically the Registrar collected information on the age structure of members in a large number of societies over a number of years. This allows us to test the impact of various behavioural and financial variables on claims rates, whilst controlling for the age of the members of a society. Regression analysis shows that branches were able to overcome moral hazard in the sense that members did not mechanistically respond to higher benefits scales by claiming more. However friendly societies faced diseconomies of scale. Larger, growing, and rural branches had higher claims rates, either because members responded a more fragile system of monitoring, or because they felt less of a sense of obligation to their society. Moreover an increase in the wealth of a society was associated with an increase in sickness claims. This suggests that members adjusted their behaviour in response to society’s ability to pay, and/or that societies sanctioned more claims when times were good. These two results indicate that members often worked through ill health but were able to claim if a society’s finances were in good health.
    Keywords: Mutual aid, Moral hazard, institutions for collective action, friendly societies
    Date: 2015–07–09
  3. By: Jean-Pascal Bassino; Marion Dovis; John Komlos
    Abstract: This paper investigates the biological standard of living toward the end of Spanish rule. We investigate levels, trends, and determinants of physical stature from the birth cohorts of the 1860s to the 1890s using data on 23,000 Filipino soldiers enlisted by the U.S. military between 1901 and 1913. We use truncated regression technique for estimating average height and use province level information for investigating the determinants of biological wellbeing. The results indicate a decline of more than 1.5 cm cm (0.6 inches) in the height of soldiers born between the early 1870s and the late 1880s. The decline in heights at the end of the 19th century occurred at a time when there was an expansion of commercial activity in cash crop production for export. Heights did not regain the level of the 1870s until the late 1930s and early 1940s. We also find that at 159.3 cm (62.7 inches), the average height of soldiers born in the mid-1870s was very short even for the time. The low biological standard of living in late 19th century was not due to the tropical disease environment alone since taller men were found in the same period in other parts of Asia.
    JEL: I10 N35 O10
    Date: 2015–07
  4. By: Loïc Charles (Institut National d'études Démographiques (INED)); Guillaume Daudin (OFCE)
    Abstract: Trade statistics provide unique sets of data on early modern economies.They can help explore their economic geography. They are of interest for econ-omists interested in economic development and early globalization. They are crucial to understand the Industrial Revolution. Still, they have been under- utilized by economists and economic historians alike. This volume gives adetailed overview on the existing quantitative sources on European trade data, focusing on the eighteenth century. In the introduction we discuss the histo-riography of the use of early trade statistics in economic history and we present two recent projects conducted in France in this area: TOFLIT18 and RICardo. The volume includes twenty-three short essays that present the sources of Euro-pean early trade statistics. Seven additional papers discuss the methodologicalissues of using early trade statistics and illustrate how these statistics can be mobilized to produce new insights on European economic history.
    Keywords: Administrative history; Eighteen century; International trade statistics; Europpe; Globalization; Economie History
    Date: 2015–07
  5. By: Julio Martinez-Galarraga;Francisco Beltrán Tapia
    Abstract: By collecting a large dataset in mid-19th century Spain, this paper contributes to the debate on institutions and economic development by examining the historical link between land access inequality and education. This paper analyses information from the 464 districts existent in 1860 and confirms that there is a negative relationship between the fraction of farm labourers and literacy rates. This result does not disappear when a large set of potential confounding factors are included in the analysis. The use of the Reconquest as a quasi-natural experiment allows us to rule out further concerns about potential endogeneity. Likewise, by employing data on schooling enrolment rates and number of teachers, this paper explores the mechanisms behind the observed relationship in order to ascertain to which extent demand or supply factors are responsible for it. Lastly, the gender composition of the data, which enables distinguishing between female and male literacy levels, together with boys and girls schooling enrolment rates, is also examined.
    Keywords: economic history, inequality, land access inequality, education inequality, Spain, Pre-Industrial Spain
    Date: 2015–06–01
  6. By: Francisco J. Beltrán Tapia (University of Cambridge); Domingo Gallego (University of Zaragoza)
    Abstract: Drawing on a large dataset at the district level for mid-19th century Spain, this article shows not only that average (male-to-female) infant and childhood sex ratios were relatively high, but also that some regions experienced extremely high figures, thus pointing to some sort of excess female mortality. The analysis also suggests that economic deprivation was likely to trigger gender discrimination towards newborn and/or young girls. Although less conclusive, there is also evidence that certain social and cultural contexts could have also mitigated this behaviour.
    Date: 2015–06–14
  7. By: Rogério Arthmar (Department of Economics, Universidade Federal do Espírito Santo, Vitória, Brazil); Michael McLure (Business School, University of Western Australia)
    Abstract: On 17 March 1925, Britain’s Chancellor of the Exchequer, Winston Churchill, held what is now regarded as a famous dinner with Sir Reginald McKenna, John Maynard Keynes, Sir John Bradbury and Sir Otto Niemeyer to discuss the merits, or otherwise, of Britain returning to the gold standard. Following that dinner, it has become popular to refer to the ‘Keynes-McKenna school’, with those two men being characterised as the ‘antagonists’ to the proposal for Britain to return to gold. However, in light of A. C. Pigou’s reading of McKenna’s evidence to the 1924-25 Chamberlain-Bradbury Committee, and Pigou’s September 1924 draft of that Committee’s report, it is evident that Pigou’s views on the subject largely aligned with those of McKenna. As a result, it is suggested in this paper that historical reference to the ‘Pigou-McKenna school’ as a school of thought that was supportive of Britain returning to the gold standard in principle, but not supportive of doing so prematurely, is a meaningful notion – and perhaps more meaningful than reference to the ‘Keynes-McKenna school’, which incorrectly implies that McKenna was opposed to Britain returning to the gold standard.
    Date: 2015
  8. By: Raul Caruso (DISCE, Università Cattolica)
    Abstract: This paper proposes an interpretation of the Holocaust along the lines of economic theory and public choice. The Holocaust had been the most inhumane and brutal genocide in the twentieth century, and also a gigantic predatory enterprise shaped and engineered by a complex institutional machinery. The paper proposes a general interpretation based on the inclusion of identity-associated elements in the utility functions of Nazis. Under the Nazi regime, the production and strengthening of Nazi identity was a matter of political economy. In addition, interpretations of Aryanization (appropriation of Jewish property) and the running of extermination camps are provided.
    Keywords: Holocaust, identity, expropriation, dehumanization, Aryanization, extermination camps, genocide
    JEL: D74 H56 D78
    Date: 2015–06
  9. By: Thomas Buchmueller; John C. Ham; Lara D. Shore-Sheppard
    Abstract: In both its costs and the number of its enrollees, Medicaid is the largest means-tested transfer program in the United States. It is also a fundamental part of the health care system, providing health insurance to low-income families, indigent seniors, disabled adults and, in some states, low-income adults more broadly. This paper reviews the history and structure of the Medicaid program and the large body of economic research that it has spawned in the nearly half century since it was established. We begin by summarizing the program’s history, goals and current rules. We then present program statistics, mainly related to enrollment and expenditures. Finally we turn to the research on the impact of Medicaid on a broad range of outcomes, discussing theoretical and methodological issues important for understanding these effects and reviewing the empirical literature, describing what has been learned thus far, investigating areas where studies seem to reach different conclusions and pointing to areas where we believe additional research would be fruitful.
    JEL: I11 I13 I18 I3
    Date: 2015–07
  10. By: Tobias Haimin Wung-Sung (Department of Border Region Studies, University of Southern Denmark)
    Abstract: Like many other ethnic Germans in Europe, the German minority in Denmark supported the Nazi regime in Germany and its policy of territorial expansion. But unlike most German minorities of Europe, the Germans in Denmark avoided post-war forced deportation or assimilation. Able to stay in their native region, the minority reconstructed their civic life over the next 25 years. The minority regarded education vital for securing the group’s long-term survival. The success of re-building schools, however, did not leave the minority unchanged. Over time, the identities that were constructed and communicated in the new schools changed as much as society surrounding them. The article brings forward this identity transformation through an analysis of the education system reconstruction process, 1945-1970. The article shows that children and youths of the German-minded minority in post-war North Schleswig attended schools that gradually replaced hostility and national separatism with transnational inclusion and an international outlook.
    Keywords: minorities, children, education, identity, history, Schleswig, Denmark, Germany
    JEL: J15 I20 N44
    Date: 2015–07
  11. By: Robin Winkler
    Abstract: How good was the standard of living in pre-war Nazi Germany? Some historians have argued that household food consumption in the 1930s was at least as high as in the Weimar Republic, in spite of militarisation. This article provides new evidence against this view by demonstrating that food price controls significantly distorted consumption patterns. We estimate that involuntary substitution effects cost average working-class households 7% of their disposable income. Consumer welfare in Nazi Germany was thus meaningfully lower than observed consumption levels and prices suggest. Our finding is based on microeconometric welfare analysis of detailed budget data for 4,376 individual German households surveyed in 1927 and 1937.
    Keywords: economic history, economic development, standard of living, consumer welfare, Germany
    JEL: N14 N34 D12 D52
    Date: 2015–05–13
  12. By: Pedro Carneiro (Institute for Fiscal Studies and cemmap and UCL); Sokbae Lee (Institute for Fiscal Studies and cemmap and SNU); Hugo Reis (Institute for Fiscal Studies)
    Abstract: The vast majority of immigrants to the United States at the beginning of the 20th century adopted first names that were common among natives. The rate of adoption of an American name increases with time in the US, although most immigrants adopt an American name within the first year of arrival. Choice of an American first name was associated with a more successful assimilation, as measured by job occupation scores, marriage to a US native and take-up of US citizenship. We examine economic determinants of name choice, by studying the relationship between changes in the proportion of immigrants with an American first name and changes in the concentration of immigrants as well as changes in local labor market conditions, across different census years. We find that high concentrations of immigrants of a given nationality in a particular location discouraged members of that nationality from taking American names. Poor local labor market conditions for immigrants (and good local labor market conditions for natives) led to more frequent name changes among immigrants.
    Keywords: Americanization; culture; first name; identity; immigration
    JEL: J15 N32
    Date: 2015–06
  13. By: Graddy, Kathryn
    Abstract: Does creativity, on average, increase or decrease during bereavement? Dates of death of relatives and close friends of 33 French artists and 15 American artists were gathered from electronic sources and biographies, and information on over 15,000 paintings was collected from Blouin's Art Sales Index and the Metropolitan Museum of Art's online collection, including over 12,000 observations on price. To preview the results, an event study indicates that prices of paintings decrease by over one-third on average in the two years following the death of a friend or relative. Furthermore, paintings that were created during this bereavement period are less likely to be included in the the Met's collection.
    Keywords: Art Auctions; Creativity; Death
    JEL: O31 Z1
    Date: 2015–07
  14. By: Popov, Vladimir
    Abstract: This paper examines the trajectory of growth in the Global South. Before the 1500s all countries were roughly at the same level of development, but from the 1500s Western countries started to grow faster than the rest of the world and PPP GDP per capita by 1950 in the US, the richest Western nation, was nearly 5 times higher than the world average. Since 1950 this ratio stabilized – not only Western Europe and Japan improved their relative standing in per capita income versus the US, but also East Asia, South Asia and some developing countries in other regions started to bridge the gap with the West. After nearly half of millennium of growing economic divergence, the world seems to have entered the era of convergence. The factors behind these trends are analyzed; implications for the future and scenarios are considered.
    Keywords: convergence, divergence, gap in per capita income between the West and the South, economic growth, institutional capacity of the state
    JEL: N00 O1 O40 O43 O47
    Date: 2015–07–31
  15. By: Mayshar, Joram; Moav, Omer; Neeman, Zvika; Pascali, Luigi
    Abstract: We propose that the development of social hierarchy following the Neolithic Revolution was an outcome of the ability of the emergent elite to appropriate cereal crops from farmers and not a result of land productivity, as argued by conventional theory. We argue that cereals are easier to appropriate than roots and tubers, and that regional differences in the suitability of land for different crops explain therefore differences in the formation of hierarchy and states. A simple model illustrates our main theoretical argument. Our empirical investigation shows that land suitability for cereals relative to suitability for tubers explains the formation of hierarchical institutions and states, whereas land productivity does not.
    Keywords: geography; hierarchy; institutions; state capacity
    JEL: D02 D82 H10 O43
    Date: 2015–07
  16. By: Lafortune, Jeanne (Pontificia Universidad Catolica de Chile); Tessada, José (Pontificia Universidad Catolica de Chile); Lewis, Ethan Gatewood (Dartmouth College)
    Abstract: This paper estimates the elasticity of substitution between capital and skill using variation across U.S. counties in immigration-induced skill-mix changes between 1860 and 1930. We find that capital began as a q-complement for skilled and unskilled workers, and then dramatically increased its relative complementary with skilled workers around 1890. Simulations of a parametric production function calibrated to our estimates imply the level of capital-skill complementarity after 1890 likely allowed the U.S. economy to absorb the large wave of less-skilled immigration with a modest decline in less-skilled relative wages. This would not have been possible under the older production technology.
    Keywords: immigration, capital-skill complementarity, skill-biased technical change, manufacturing, Second Industrial Revolution
    JEL: J24 N61 O33
    Date: 2015–07
  17. By: Anderaos de Araujo, Fabio
    Abstract: An analysis of the invariable measure of prices proposed by the eminent Italian economist Piero Sraffa, who laid the foundations for a new approach in modern economics. Three mathematical appendices are also provided. The first one shows step by step the construction of the Standard Commodity, which is a consistent solution to the transformation of labour values into prices of production. Appendix II is a general numerical example of a price system with two industries which makes the understanding of the distribution of income between wages and profits easier. Using a software spreadsheet, for example, it is possible to make numerical simulations and make comparisons between the results obtained from the Sraffa price system with that obtained from Marx's. The third appendix regards a numerical example of changes in technical progress and its effects on distribution of income. There is also a fourth appendix on the inclusion of rent and interest in Sraffa's price system. This is revised version of the original paper written few years ago.
    Keywords: Sraffa, labour theory of value, Standard Commodity, prices of production, income distribution
    JEL: A1 A2
    Date: 2015–08–01
  18. By: Miguel Ramirez (Department of Economics, Trinity College)
    Abstract: This paper contends that, in Chapters XVII, XXIX, XXX, and XXXI of Volume III of Capital, Marx develops an incisive conceptual framework in which excessive credit creation, indebtedness, and speculation play a critical and growing role in the reproduction of social capital on an extended basis; however, given the decentralized and anarchic nature of capitalist production, the credit system does so in a highly erratic and contradictory manner which only postpones the inevitable day of reckoning. The paper also highlights Marx’s relatively neglected but highly important analysis of the separation of ownership from management in the advanced capitalism of his day, England, and its modern-day implications for excessive risk-taking and debt-fueled speculation up until the eve of the crash. More importantly, the paper argues that in Vols. II and III Marx implicitly connected the expanding role of credit [which he associated with the development of capitalism] to a significant reduction in the turnover period of capital, thereby boosting the rate of surplus-value, and countering in a highly erratic and contradictory manner, the fall in the rate of profit. The growing role of credit has been relatively ignored in the Marxian literature as an important counteracting factor to the law of the declining rate of profit. It is not mentioned at all by Marx in his famous Chp. XIV, Vol. III of Capital where he discusses other important counteracting forces, nor by Engels [in this particular context] who edited both Vols. II and III.
    JEL: B10 B14 B24
    Date: 2015–07
  19. By: Alger, Ingela
    Keywords: Economics of the family, Fertility, Monogamy, Polygyny, Reproductive success, Evolution
    JEL: D10
    Date: 2015–05
  20. By: Simone M. Müller; Heidi J S Tworek
    Abstract: This article uses the example of submarine telegraphy to trace the interdependence between global communications and modern capitalism. It uncovers how cable entrepreneurs created the global telegraph network based upon particular understandings of cross-border trade, while economists such as John Maynard Keynes and John Hobson saw global communications as the foundation for capitalist exchange. Global telegraphic networks were constructed to support extant capitalist systems until the 1890s, when states and corporations began to lay telegraph cables to open up new markets, particularly in Asia and Latin America, as well as for strategic and military reasons. The article examines how the interaction between telegraphy and capitalism created particular geographical spaces and social orders despite opposition from myriad Western and non-Western groups. It argues that scholars need to account for the role of infrastructure in creating asymmetrical information and access to trade that have continued to the present day.
  21. By: Karen Knight (Business School, University of Western Australia)
    Abstract: This paper considers conceptions of A.C. Pigou as a “Marshallian” economist which have appeared in the literature. The specific objective of this paper is to identify differing perceptions of Pigou as a Marshallian by: identifying the key areas where scholars have perceived a certain continuity between Pigou’s work and Marshallian thought; identifying the key areas where scholars have perceived a certain discontinuity between Pigou’s work and Marshallian thought; and to reflect more systematically on the major characteristics scholars have attributed to the Cambridge School in its Marshallian form.
    Date: 2015
  22. By: Yi-Xuan Gao; Hua Liao; Paul J. Burke; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: Road transport will account for a large share of developing countries¡¯ future energy demand. This paper reviews the trends in road transport energy consumption in 12 countries (Group of 7 and BRICS) over the period 1973-2010. We report several stylised facts: road transport energy use and its share in total energy use have been rising; there were large differences in road transport energy use per capita across countries, resulting from differences in country size, resource endowments, fuel prices, and other factors; oil accounts for approximately 95% of road transport energy in the selected countries (except Brazil); oil will likely be the dominant road transport energy source in most countries for some years to come but not in the long run; and the use of alternative road transport energy sources is increasing.
    Keywords: Road transport, Energy consumption, Historical
    JEL: Q41
    Date: 2014–09–20
  23. By: Jonathan Pritchett (Department of Economics, Tulane University); Herman Freudenberger (Department of Economics, Tulane University)
    Abstract: Steckel and Ziebarth (2014) find that biases in height by age imposed by traders versus non-traders were negligible. Importantly, their method of identifying traders differs from that of Pritchett and Freudenberger (1992). Using a sample of inward coastwise manifests for the port of New Orleans, we show that Steckel and Ziebarth made errors classifying shippers, that they underestimate the relative number of slaves shipped by traders, and that their empirical estimates of selection bias are attenuated towards zero.
    Date: 2015–07
  24. By: Gissler, Stefan (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Leverage is often seen as villain in financial crises. Sudden deleveraging may lead to fire sales and price pressure when asset demand is downward-sloping. This paper looks at the effects of changes in leverage on asset prices. It provides a historical case study where a large, well-identified shock to margin credit disrupted the German stock market. In May 1927, the German central bank forced banks to cut margin lending to their clients. However, this shock affected banks differentially; the magnitude of credit change differed across banks. Using the strong connections between banks and firms in interwar Germany, I show in a difference-in-differences framework that stocks affiliated with affected banks decreased over 12 percent during 4 weeks. Volatility of these stocks doubled. Relating directly bank balance sheet information to asset prices, this paper finds that a one standard deviation decrease in lending to investors increased an affected stock's volatility by 0.2 2 standard deviations. These results are robust to the problem that banks' lending decisions may be influenced by asset prices. The Reichsbank threatened banks to cut their short-run funding. Using the differences in exposure towards this threat, an instrumental variable strategy provides further evidence that a sharp decrease in leverage may lead to stock price fluctuations.
    Keywords: Asset pricing and bonds; banks; credit unions; and other financial institutions; economic history; equity
    Date: 2015–02–15
  25. By: Marion Fourcade (University of California, Berkeley); Etienne Ollion (Université de Strasbourg); Yann Algan (Département d'économie)
    Abstract: In this essay, we analyze the dominant position of economics within the network of the social sciences in the United States. We begin by documenting the relative insularity of economics, using bibliometric data. Next we analyze the tight management of the field from the top down, which gives economics its characteristic hierarchical structure. Economists also distinguish themselves from other social scientists through their much better material situation (many teach in business schools, have external consulting activities), their more individualist worldviews, and their confidence in their discipline's ability to fix the world's problems. Taken together, these traits constitute what we call the superiority of economists, where economists' objective supremacy is intimately linked with their subjective sense of authority and entitlement. While this superiority has certainly fueled economists' practical involvement and their considerable influence over the economy, it has also exposed them more to conflicts of interests, political critique, even derision.
    Keywords: Economist; Social science network; Field supremacy
    JEL: A11 A22 I23 J44
    Date: 2015
  26. By: Jean-Luc Gaffard (OFCE); Maurizio Iacopetta (OFCE)
    Abstract: The government, buoyed by the law to recapture the real economy, the Florange act, which establishes the possibility of double voting for patient shareholders (who have held their shares at least two years), has just taken two significant decisions by temporarily increasing its holdings in the capital of Renault and Air France in order to ensure that in a general shareholders meeting the double voting option is not rejected by the qualified majority authorized under the law. The objective spelled out by France’s Minister of the Economy in Le Monde is to help “recapture the industrial spirit of capitalism” by favouring long-term commitments in order to promote investment that will foster solid growth. Under the impulse of the Florange law, that has recently introduced the institute of the double voting for ‘patient’ shareholders (shareholders who have held their company’s shares for at least two years), the government has taken the important decision of increasing temporarily its equity shares into two major French companies: Renault and Air France.
    Keywords: Company gouvernance; Bank financing; Spirit of capitalism; Corporation; Managment
    Date: 2015–06
  27. By: Sokbae Lee* (Institute for Fiscal Studies); Hyunmin Park (Institute for Fiscal Studies); Myung Hwan Seo (Institute for Fiscal Studies); Youngki Shin (Institute for Fiscal Studies)
    Abstract: Using the Reinhart-Rogoff dataset, we find a debt threshold not around 90 percent but around 30 percent above which the median real GDP growth falls abruptly. Our work is the first to formally test for threshold effects in the relationship between public debt and median real GDP growth. The null hypothesis of no threshold effect is rejected at the 5 percent signicance level for most cases. While we find no evidence of a threshold around 90 percent, our findings suggest that the debt threshold for economic growth may exist around a relatively small debt-to-GDP ratio of 30 percent. Empirical results are more robust with the postwar sample than the long sample that goes before World War II.
    Date: 2014–09
  28. By: Raffaella Giacomini (Institute for Fiscal Studies and cemmap and UCL)
    Abstract: Does economic theory help in forecasting key macroeconomic variables? This article aims to provide some insight into the question by drawing lessons from the literature. The definition of "economic theory" includes a broad range of examples, such as accounting identities, disaggregation and spatial restrictions when forecasting aggregate variables, cointegration and forecasting with Dynamic Stochastic General Equilibrium (DSGE) models. We group the lessons into three themes. The first discusses the importance of using the correct econometric tools when answering the question. The second presents examples of theory-based forecasting that have not proven useful, such as theory-driven variable selection and some popular DSGE models. The third set of lessons discusses types of theoretical restrictions that have shown some usefulness in forecasting, such as accounting identities, disaggregation and spatial restrictions, and cointegrating relationships. We conclude by suggesting that economic theory might help in overcoming the widespread instability that affects the forecasting performance of econometric models by guiding the search for stable relationships that could be usefully exploited for forecasting.
    Date: 2014–09

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