nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2016‒04‒23
37 papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. On the Origins of Moral Hazard: Politics, International Finance and the Latin American Debt Crisis of 1982 By Altamura, Carlo Edoardo; Flores Zendejas, Juan
  2. “His great object is to be continued in Command in this Province†: The Quartering Dispute of 1757-58 By Hyun Wu Lee
  3. Labor Market Institutions in the Gilded Age of American Economic History By Suresh Naidu; Noam Yuchtman
  4. Clans, Guilds, and Markets: Apprenticeship Institutions and Growth in the Pre-Industrial Economy By de la Croix, David; Doepke, Matthias; Mokyr, Joel
  5. The New Economics of Religion By Sriya Iyer; ; ;
  6. "The Macrogenoeconomics of Comparative Development" By Quamrul Ashraf; Oded Galor
  7. The Doors That April Opened By Santos, José Carlos Ary dos; Pimentel, António; Adão, Deolinda M.; Potts, Claude H.
  8. Cirebon as the Silk Road: A New Approach of Heritage Tourisme and Creative Economy By Jaelani, Aan
  9. Please Call Me John: Name Choice and the Assimilation of Immigrants in the United States, 1900-1930 By Pedro Carneiro; Sokbae Lee; Hugo Reis
  10. The Child Quality-Quantity Tradeoff, England, 1780-1880: A Fundamental Component of the Economic Theory of Growth is Missing By Clark, Gregory; Cummins, Neil
  11. Measuring the extent and implications of corporate political connections in prewar Japan By Tetsuji Okazaki; Michiru Sawada
  12. A progress report on Marxian economic theory: On the controversies in exploitation theory since Okishio (1963) By Naoki Yoshihara
  13. Explaining regional inequality from the periphery: The mexican case, 1900-2000. By José Aguilar Retureta
  14. El bienestar biológico de los españoles durante la Restauración: un análisis provincial By José Miguel Martínez-Carrión
  15. MITI (METI)'s Policies for Industrial Adjustment in Postwar Japan (Japanese) By FUKAO Mitsuhiro
  16. The Relation between Industrial Development and Industrial Policy in Korea's High Economic Growth Period (Japanese) By YEO Inman
  17. Ethnic Entrepreneurship in the U.S. High-tech Industry By Subodh Bhat
  18. Heterodox Challenges to Consumption-Oriented Models of Legislation By Luigi Russi; John D. Haskell
  19. Series largas de algunos agregados demograficos regionales, 1950-2015 By Angel De la Fuente
  20. Industrial policy and exchange rate skepticism By Luiz Carlos Bresser-Pereira; Fernando Rugitsky
  21. "Colonial American Paper Money and the Quantity Theory of Money: An Extension" By Farley Grubb
  22. The Rise and Fall of Exceptional Australian Incomes since 1800 By David Greasley; Jakob B. Madsen
  23. State Capacity and Public Goods: Institutional Change, Human Capital, and Growth in Early Modern Germany By Dittmar, Jeremiah E.; Meisenzahl, Ralf R.
  24. So what is Capital in the Twenty-First Century? Some notes on Piketty’s book Working paper, forthcoming in Capitalism & Society By Kornai, János
  25. The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade By Vernon Henderson; Tim Squires; Adam Storeygard; David Weil
  26. The Stages of Economic Growth Revisited, Part 2: Catching Up to and Joining the Economic Leader By Kehoe, Timothy J.; Costa, Daniela; Raveendranathan, Gajen
  27. Family Size and the Demand for Sex Selection: Evidence From China By Samuel Marden
  28. Labor in the Twenty-First Century:The Top 0.1% and the Disappearing Middle-Class By William Lazonick
  29. Why Did Socialism Fail? The Role of Factor Inputs Reconsidered By Vonyo, Tamas; Klein, Alexander
  30. Financial cycles and co-movements between the real economy, finance and asset price dynamics in large-scale crises By Punzi, Maria Teresa
  31. From Abstraction to Phenomenology in Social Theory: Yanis Varoufakis the Economist By Ugo Mattei
  32. The Dichotomy, Inconsistency, and Peculiar Outmodedness of the „Mainstream“ Textbook. The Example of Institutions By Elsner, Wolfram
  33. Rent Extraction by Capitalists By Markus Brueckner
  34. Interest Groups and the Impossibility of Democratic Socialism: Hayek, Jewkes, and the Arrow Theorem By Makovi, Michael
  35. Assessment of the effects of disasters in Latin America and the Caribbean, 1972-2010 By Bello, Omar; Ortiz Malavassi, Laura M.; Samaniego, Joseluis
  36. Three Lectures on the Theory of Money and Financial Institutions: Lecture 1: A Nontechnical Overview By Martin Shubik
  37. Back in the bazaar: taking Pierre Bourdieu to a trading room By Olivier Godechot

  1. By: Altamura, Carlo Edoardo; Flores Zendejas, Juan
    Abstract: A consensus has not been reached in the ongoing debate on the effects of lender of last resort functions by the IMF, given the contradictory results from macroeconomic analyses that depend upon samples and periods. This paper sheds new light on the relationship between international banks and their home governments, the IMF and international regulators during the years that preceded the debt crisis of 1982. Based on new archival evidence, we find that commercial banks’ decisions to lend were largely based on home governments’ preferences, competition, and the assumption that home governments and international organizations would provide lending of last resort functions to support borrowing governments. These factors also influenced loan pricing. While previous works suggest that the 1982 debt crisis was unexpected, we show that banks reacted to the deteriorating macroeconomic situation in many emerging economies once the role of international organizations as lenders of last resort became uncertain.
    Keywords: Sovereign debt markets, Sovereign defaults, International finance, Moral hazard, Country risk
    JEL: F3 N2 F5
    Date: 2016
  2. By: Hyun Wu Lee (Texas A&M University at Qatar)
    Abstract: Colonel Henry Bouquet, best known for his illustrious military career in the British army during the Seven Years’ War, set sailed to Charles Town, South Carolina, in the summer of 1757, after receiving an assignment from his superior Lord Loudoun to defend the southern provinces of British North America. His mission was to raise provincial troops, supervise fortification projects of the city, and suppress a potential slave insurrection in the colony where enslaved Africans outnumbered white colonists. A seemingly innocuous assignment, however, quickly turned sour for Bouquet when he landed in Charles Town’s harbor with his troops.An issue of quartering soldiers consumed most of Bouquet’s nine-month stay in Charles Town as he clashed with the Commons House of South Carolina over the terms on how much should the colonial government ought to pay and what provisions should be provided to His Majesty’s Troops. Traditionally, historians have treated this dispute as a military-civilian friction in which the both sides attempted to define the constitutional authority of British army in the American colonies.On a closer examination of Bouquet’s activities in Charles Town, however, a new alternative explanation emerges. Shortly after his arrival in Charles Town, Bouquet acquired plantations and slaves with the help of his fellow Swiss-Protestant officers in the British army and the French-Huguenot community in Charles Town. Upon learning that Bouquet had been “endeavouring to acquire Property,†South Carolina Governor, William Henry Lyttelton, accused Bouquet and his fellow Swiss officers of pursuing their private interests. In short, ethnic politics shaped Charles Town’s quartering dispute as much as the disagreement over constitutional ground as the colonial elites of Scottish background exercised their power to oppose and undermine the Swiss-French officer’s mission in South Carolina.
    Keywords: Henry Bouquet, William Henry Lyttelton, Charles Town, Swiss-French Huguenots, Quartering Dispute, Scottish, Highlanders
    JEL: N91
  3. By: Suresh Naidu; Noam Yuchtman
    Abstract: Although 19th century American labor markets were unencumbered by regulatory legislation, labor market institutions played an active role determining labor market outcomes and the distribution of income. We provide evidence of firm-specific rents in 19th century labor markets: employees in firms experiencing positive output price shocks earned significant wage premia, relative to very similar workers. Employees and employers bargained over rents in the labor contract, with workers striking to raise wages. We present data on strikes' frequency in the 19th century, and suggestive correlations between strikes and wages. The U.S. government supported employers in limiting strikes' efficacy. Strike-breaking actions included intervention by police and militia; employers often relied on less drastic, but still effective, judicial labor injunctions suppressing strikes. We document the rise of these injunctions, pointing to the important role played by the judicial branch in structuring (Northern) American labor market institutions prior to the rise of legislative regulation.
    JEL: N3 O10 P16
    Date: 2016–03
  4. By: de la Croix, David; Doepke, Matthias; Mokyr, Joel
    Abstract: In the centuries leading up to the Industrial Revolution, Western Europe gradually pulled ahead of other world regions in terms of technological creativity, population growth, and income per capita. We argue that superior institutions for the creation and dissemination of productive knowledge help explain the European advantage. We build a model of technological progress in a pre-industrial economy that emphasizes the person-to-person transmission of tacit knowledge. The young learn as apprentices from the old. Institutions such as the family, the clan, the guild, and the market organize who learns from whom. We argue that medieval European institutions such as guilds, and specific features such as journeymanship, can explain the rise of Europe relative to regions that relied on the transmission of knowledge within extended families or clans
    Keywords: Apprenticeship; Clans; Dissemination of Knowledge; Guilds
    JEL: E02 J24 N10 N30 O33 O43
    Date: 2016–03
  5. By: Sriya Iyer; ; ;
    Abstract: The economics of religion is a relatively new field of research in economics. This survey serves two purposes – it is backward-looking in that it traces the historical and sociological origins of this field, and it is forward-looking in that it examines the insights and research themes that are offered by economists to investigate religion globally in the modern world. Several factors have influenced the economics of religion: (1) new developments in theoretical models including spatial models of religious markets and evolutionary models of religious traits; (2) empirical work which addresses innovatively econometric identification in examining causal influences on religious behavior; (3) new research in the economic history of religion that considers religion as an independent rather than as a dependent variable; and (4) more studies of religion outside the Western world. Based on these developments, this paper discusses four themes – first, secularization, pluralism, regulation and economic growth; second, religious markets, club goods, differentiated products and networks; third, identification including secular competition and charitable giving; and fourth, conflict and cooperation in developing societies. In reviewing this paradoxically ancient yet burgeoning field, this paper puts forward unanswered questions for scholars of the economics of religion to reflect upon in years to come.
    Date: 2015–01–01
  6. By: Quamrul Ashraf; Oded Galor
    Abstract: A vibrant literature has emerged in recent years to explore the influences of human evolution and the genetic composition of populations on the comparative economic performance of societies, highlighting the roles played by the Neolithic Revolution and the prehistoric “out of Africa” migration of anatomically modern humans in generating worldwide variations in the composition of genetic traits across populations. The recent attempt by Nicholas Wade’s A Troublesome Inheritance: Genes, Race and Human History to expose the evolutionary origins of comparative economic development to a wider audience provides an opportunity to review this important literature in the context of his theory.
    Date: 2016
  7. By: Santos, José Carlos Ary dos; Pimentel, António; Adão, Deolinda M.; Potts, Claude H.
    Abstract: An outgrowth of a library exhibition in UC Berkeley’s Doe Library, this book commemorates the 40th anniversary of Portugal’s Carnation Revolution (Revolução dos Cravos) which took place on April 25, 1974. The poem “As portas que Abril abriu†first published in 1975 by the fabled poet of the revolution José Carlos Ary dos Santos and graphically reinforced by António Pimentel’s illustrations provided a fitting and powerful structure for the installation. Because a translation was not available, the curators provided one there and now documented in this book the first-ever parallel English translation of the text.
    Keywords: Arts and Humanities, Portugal, dictatorship, Estado Novo, coup d'état, Carnation Revolution, Revolução dos Cravos, 25 de Abril, poetry, literature and revolution, Portugal -- History -- Revolution, 1974
    Date: 2014–04–25
  8. By: Jaelani, Aan
    Abstract: The tourism industry and creative economy in Cirebon can not be separated from the historical aspect of the city's growth and development as silk lines in the spread of Islam, trade, and acculturation is very smooth so that the ethnic diversification becomes a major part in tourist activities. With a qualitative approach that emphasizes the phenomenon of ethnic Cirebon with tourist objects that vary in every corner of this city, then this paper confirms that Cirebon is a tourist destination that is unique in terms of religion, culture, history, to the creative economy, especially religious tourism that will create this city as a friendly city for tourists
    Keywords: tourism industry, creative economy, heritage tourism, ethnic diversification, silk road
    JEL: A1 A13 B4 B41 D9 D91 L6 L83 N01 N3 N35 N9 N95 Q01 Z1 Z11 Z13
    Date: 2016–04–05
  9. By: Pedro Carneiro (University College London); Sokbae Lee (The Institute for Fiscal Studies); Hugo Reis (Banco de Portugal)
    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: 2016–04
  10. By: Clark, Gregory; Cummins, Neil
    Abstract: In recent theorizing, modern economic growth was created by substituting child quality for quantity. However evidence for this tradeoff is minimal. In England the Industrial Revolution occurred in a period 1780-1879 of substantial human capital investment, but no fertility control, huge random variation in family sizes, and uncorrelated family size and parent quality. Yet family size variation had little effect on educational attainment, occupational status, or longevity, for both prosperous and poor families. More children reduced inherited wealth, but even that effect largely disappeared by the next generation. There is no quality-quantity tradeoff. Growth theory must proceed in other directions.
    Keywords: Economic Growth; Human Capital; Quality-Quantity Tradeoff
    Date: 2016–04
  11. By: Tetsuji Okazaki; Michiru Sawada
    Abstract: This paper explores the extent of political connections of firms, and examines their implications on firm values, using firm-level data from prewar Japan. We collect the data of directors, their positions in the House of Representatives, stock prices and financial performance, on publicly traded companies in late 1920s and early 1930s Japan. It is found that almost 20% of the publicly traded companies had political connections through politician directors. Especially, firms in the regulated industries such as the electric power and railroad, were more likely to have political connections. Overall, there is no evidence that connections with politics added firm values. On the other hand, with respect to those firms that newly obtained political connections, we found that the stock returns improved from the pre-election period to the post-election period.
    Date: 2016–03
  12. By: Naoki Yoshihara (Department of Economics, University of Massachusetts Amherst)
    Abstract: This report explores the development of exploitation theory in mathematical Marxian economics by reviewing the main controversies surrounding the proper definition of exploitation since the contribution of Okishio (1963). The report first examines the debates on the Fundamental Marxian Theorem and Class-Exploitation Correspondence Principle, developed mainly in the 1970s and 1980s, followed by the property relation theory of exploitation by Roemer (1982). Then, the more recent exploitation theory proposed by Vrousalis (2013) and Wright (2000) is introduced. Finally, the report introduces and comments on recent axiomatic studies of exploitation by focusing on the work of Veneziani and Yoshihara (2015a).
    Keywords: Proper Definitions of UE Exploitation, Property Relations Definition of Exploitation, Profit-Exploitation Correspondence Principle
    JEL: D63 D51
    Date: 2016–04
  13. By: José Aguilar Retureta (Universitat de Barcelona, Spain)
    Abstract: Economic Historians have paid close attention to the long term evolution of regional inequality. Nevertheless, so far research has largely focused on industrialised economies, neglecting to a large extent the experience of low- and middle-income countries. This paper aims to provide, using a new regional labour productivity database, evidence on the determinants of regional income inequality changes in Mexico from 1900 to the present. Different forces have driven regional inequality in each historical period. During the primary-export led-growth period of the first globalization (1900-1930) differences across regions in the intensity of structural change caused an increasing divergence. From 1930 to 1980, during the State-led Industrialisation, internal migrations contributed to a strong process of regional convergence in productivity, both in the within and the between-sector components of regional inequality. Finally, the increasing regional divergence that has taken place from 1980 onwards has been mainly an effect of the operation of labour productivity differentials within each sector.
    Keywords: Economic History, Economic Growth, Regional Income Inequality, Mexico.
    JEL: N16 N96 R11
    Date: 2016–03
  14. By: José Miguel Martínez-Carrión
    Abstract: Anthropometric indicators provide valuable information on nutritional status and living standards. This paper uses these indicators to explore the biological wellbeing of Spaniards during the Bourbon Restoration. From a sample of anthropometric data composed of 119,571 soldiers at age 20, measured between 1903 and 1906 -cohorts which were born between 1883 and 1886-, it presents the provincial results of height, weight, and BMI values and other aspects of biological living standards. Average heights are compared with previous periods to check the biological well-being during the second half of the nineteenth century. Anthropometric outcomes (height, weight and chest circumference) show the inequality of nutritional status in Spanish geography and suggest the influence of environmental and institutional factors in human development.
    Keywords: height, standard of living, territorial inequality, nutritional status, Spain
    JEL: I14 I15 N33 N54
    Date: 2016–03
  15. By: FUKAO Mitsuhiro
    Abstract: This paper takes a retrospective review of the policies for "industrial adjustment" conducted by the Ministry of International Trade and Industry (MITI) and its successor, the Ministry of Economy, Trade and Industry (METI), in postwar Japan, and examines the effects of their completion which occurred from the end of the 1990s to the beginning of the 2000s. The industrial adjustment policy, in the general meaning, aimed to revitalize the declining industries and/or promote resource (capital and labor) allocations from declining industries to growing ones. As such, shifting was not necessarily promoted smoothly, and the government provided various support to firms and the labor side to facilitate it. In Japan, industrial adjustment policies historically have been practiced on such industries as textiles, coal mining from the 1960s, and basic materials industries from the 1970s, based on the legislation of Act on Temporary Measures concerning Stabilization of Designated Depressed Industries (1978), Act on Temporary Measures concerning Improvement of Structure of Designated Industries (1983), Act on Temporary Measures for Facilitating Industrial Structure Adjustment (1987), and so on. The essentials of these policies are 1) adjustments of supply and demand at production or investment level in the depressed industries and 2) mitigation of unemployment problem or social conflicts, through which the industrial adjustment of such industries would be achieved more or less smoothly. MITI had played the role of coordinator among various concerned interests as needed to reflect changing circumstances in successive periods. However, in the latter half of the 1990s and on, the conventional industrial adjustment policies were ended, and some parts of the policies related to the restructuring and industrial revival were inherited by the "industrial revitalization policy" which MITI (METI) established as one of the new lines of policies at that time. Although this policy was based on market mechanism in principle, the policy intervention on the industries, especially on the specific firms to protect them, persisted in different forms, whereas some aspects of the labor were excessively "marketized." This situation could possibly cause negative effects on the Japanese economy in the medium-and long-term, thus re-examining the policy system might be required.
    Date: 2016–03
  16. By: YEO Inman
    Abstract: From the early 1960s till the late 1970s, the Korean economy achieved high economic growth. During that period, industrial structure changed dramatically, as the proportion of the manufacturing industry, especially heavy and chemical industries, rapidly increased. It is generally accepted that industrial policy is the main cause of such change. In this paper, the effects of industrial policy for industrial development are analyzed, dividing the high economic growth period into three intervals. For the 1960s, I analyze the relationship between export-oriented light industry promotion policy and the development of the textile industry. In the 1970s, a policy to promote the heavy and chemical industry was achieved, and I analyze how the shipbuilding industry is affected by that policy. Finally, for the 1980s, I examine the automotive industry which was the target of industrial rationalization policy. From the analysis, I find that the role and effectiveness of industrial policy differ depending on period and industry. Compared to the private sector, the amount of information that the government possesses could explain the effectiveness of industrial policy.
    Date: 2016–03
  17. By: Subodh Bhat (San Francisco State University)
    Abstract: Since the 1990s, there has been an explosion of startups by Indians and Chinese in the U.S. high-tech industry. This study investigates the motivations, support systems, networks, attitudes and behaviors of these new Indian entrepreneurs based on interviews with over two dozen entrepreneurs and a web survey of eighty respondents. The respondent sample was predominantly male, between 30 and 49 years of age and had masters degrees.Our respondent entrepreneurs were motivated primarily by the desire to create something new and the potential for making money. Other major motivators were the propensity for action (“doing†), the excitement of entrepreneurship, the desire for autonomy and having the technological edge or industry vision. They relied on friends, former co-workers and relatives for help in starting the business. They also highlighted the importance of fellow Indians (informal rather than formal networks) in the startup process. This was also demonstrated in the fact that about three-fourth of the co-founders of our respondents’ businesses were Indians. Surprisingly, university ties and formal professional networks, whether Indian or not, were rated least influential in the startup process. Whereas former co-workers, friends, and other Indians helped across a range of business functions, family help was mainly in the realm of finance. Only one-fifth of these entrepreneurs received help from any government institution. Our respondents rated their success in business as quite high on various measures. Unfortunately, they also reported that their businesses were not generally quite profitable. They judged their success not only on the basis of typical business barometers like revenues and profits, but also on personal wealth, sense of achievement and organization-building.Our respondents attributed their success mainly to hard work and focus or drive. Other major factors were supportive relationships at work and with family and friends, technical knowledge and experience, command of English, education in the U.S., and access to finance. Friends, former co-workers, and the general category of Indians played major roles in the success of these entrepreneurs. Surprisingly, relatives and university mates were not considered very crucial for success. Business or professional organizations were rated least important.
    Keywords: Entrepreneurship, high-tech, startup success
  18. By: Luigi Russi (International University College of Turin); John D. Haskell (Mississippi College School of Law)
    Abstract: Consumption-oriented models of governance dominate the contemporary global legal architecture. The financial crisis beginning in 2008, however, poses fundamental questions about the future viability of these approaches to economics and law. This paper attempts to first, evaluate consumption's salient historical development and themes from the post World War II era to more recent legislative innovation, and second, introduce seven heterodox vignettes that challenge the hegemony of consumption in legislative policy. The paper concludes with some brief reflections upon potential opportunities and limitations of these heterodox traditions within future scholarship and policy addressing the interplay of law and consumption in global governance.
    Keywords: political economy, ordoliberalism, critical legal theory, deep ecology, consumerism
    JEL: N30 P16 P46
    Date: 2015–04
  19. By: Angel De la Fuente
    Abstract: En el presente trabajo se recopilan, extienden o construyen series regionales y nacionales de movimientos naturales de poblacion, poblacion de derecho, saldos migratorios netos y estructura por edades de la poblacion para el periodo 1950-2015.
    Keywords: Analisis Regional , Documento de Trabajo , Espana , Investigacion
    JEL: J10
    Date: 2016–04
  20. By: Luiz Carlos Bresser-Pereira; Fernando Rugitsky
    Abstract: The aim of the present paper is to put in historical perspective the development thinking on the relationship between industrial and exchange rate policies. The first section focuses on the thought of the so-called pioneers of development economics, specifically their preference for protectionism and their belated recognition that an exchange-rate policy could act as a substitute to it. In the second one, we analyze the exchange rate skepticism that arises out of the theories that identify a foreign constraint to growth, in addition to the one revealed by the pioneers. The third section briefly complements the previous discussion with reference to macroeconomic formulations that allow for short-run contractionary effects of a devaluation, reinforcing the skepticism in question. In the fourth section, we discuss the revival of development thinking in the 1980s and its discussion about East Asian trajectories, a literature that placed great emphasis on industrial policy. Finally, in the fifth section we discuss the new historical facts and the new development macroeconomics’ models that are putting an end to exchange rate skepticism.
    Keywords: exchange rate; industrial policy; protectionism; East Asian countries.
    JEL: B20 O24 O25
    Date: 2016–03–24
  21. By: Farley Grubb (Department of Economics, University of Delaware)
    Abstract: The quantity theory of money is applied to the paper money regimes of seven of the nine British North American colonies south of New England. Individual colonies, and regional groupings of contiguous colonies treated as one monetary unit, are tested. Little to no statistical relationship, and little to no magnitude of influence, between the quantities of paper money in circulation and prices are found. The failure of the quantity theory of money to explain the value and performance of colonial paper money is a general and widespread result, and not an isolated and anomalous phenomenon.
    Keywords: bills of credit, bills of exchange, border effects, price indices, purchasing power parity
    JEL: E31 E42 E51 N11
    Date: 2016
  22. By: David Greasley (Emeritus Professor of Economic History, University of Edinburgh); Jakob B. Madsen (Professor of Economics, Monash University)
    Abstract: We gauge how productivity and factor endowments shaped the rise and fall of Australia’s exceptional incomes. New measures of TFP, which include natural resource inputs, are utilized in an accounting of income growth. Further, the drivers of TFP growth are explored. Pastoralism and mining had negative TFP externalities, and we incorporate these finding into a unified accounting of incomes which distinguishes the roles of endowments and productivity. Nevertheless, TFP growth played an important role in promoting exceptional incomes between 1842-1890. Our findings favour a more balanced interpretation of Australian growth that has roles for natural resources, labour participation and productivity.
    Keywords: Australia, productivity, natural resources, knowledge, education
    JEL: N1 N5 O30 O40
    Date: 2016–03
  23. By: Dittmar, Jeremiah E.; Meisenzahl, Ralf R.
    Abstract: What are the origins and consequences of the state as a provider of public goods? We study legal reforms that established mass public education and increased state capacity in German cities during the 1500s. These fundamental changes in public goods provision occurred where ideological competition during the Protestant Reformation interacted with popular politics at the local level. We document that cities that formalized public goods provision in the 1500s began differentially producing and attracting upper tail human capital and grew to be significantly larger in the long-run. We study plague outbreaks in a narrow time period as exogenous shocks to local politics and find support for a causal interpretation of the relationship between public goods institutions, human capital, and growth. More broadly, we provide evidence on the origins of state capacity directly targeting welfare improvement.
    Keywords: Education ; Growth ; Human Capital ; Institutions ; Persistence ; State Capacity
    JEL: I25 N13 O11 O25
    Date: 2016–03–15
  24. By: Kornai, János
    Abstract: This study was inspired by Piketty’s excellent and important book. Its title and numerous statements in it arouse in readers expectations of a comprehensive analysis of capitalism. By comparison the author of this paper felt important aspects were lacking. The capitalist system has numerous immanent traits and innate tendencies, of which the paper takes a closer look at three properties. 1. One basic feature is dynamism, innovation, and creative destruction. No picture of capitalism can be full if this basic aspect is ignored. 2. Capitalism inevitably brings about a high degree of inequality; this must be eased by reforms, but cannot be entirely overcome. 3. The basic characteristics of capitalism – private ownership and the dominance of market coordination – give rise to strong incentive mechanisms that encourage but owners and enterprise executives to innovate and to cooperate effectively. One of the main incentives is competition, especially oligopolistic competition. There are strong mutual effects among these three important tendencies. It is impossible to understand well Piketty’s main subject, the distribution of income and wealth, if it is divorced from the other two tendencies. The study ends with its author’s own value judgements on the favourable and harmful, unjust attributes of the capitalist system.
    Keywords: capitalism, comparative approach, innovation, income distribution, incentives, sources of top income
    JEL: D21 D30 D60 N10 O31 P10 P51
    Date: 2016–04–11
  25. By: Vernon Henderson; Tim Squires; Adam Storeygard; David Weil
    Abstract: We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average are 560 kilometers. We first document that nearly half of the variation can be explained by a parsimonious set of physical geography attributes. A full set of country indicators only explains a further 10%. When we divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, we find that the agriculture variable have relatively more explanatory power in countries that developed early and the trade variable have relatively more in countries that developed late, despite the fact that the latter group of countries are far more dependent on agriculture today. We explain this apparent puzzle in a model in which two technological shocks occur, one increasing agricultural productivity and the other decreasing transportation costs, and in which agglomeration economies lead to persistence in urban locations. In countries that developed early, structural transformation due to rising agricultural productivity began at a time when transport costs were still relatively high, so urban agglomerations were localized in agricultural regions. When transport costs fell well before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. With structural transformation, these initial coastal locations grew, without formation of more cities in the agricultural interior.
    Keywords: Agriculture, physical geography, development
    JEL: O13 O18 R12
  26. By: Kehoe, Timothy J. (Federal Reserve Bank of Minneapolis); Costa, Daniela (Federal Reserve Bank of Minneapolis); Raveendranathan, Gajen (Federal Reserve Bank of Minneapolis)
    Abstract: Rostow (1960) hypothesized that taking off into economic growth was a difficult task for countries in the 19th century, requiring major changes in institutions. In the 20th century, however, as the United States and other advanced countries became richer because of improvements in technologies and managerial practices, it became easier for poor countries to take off into rapid growth by adopting some of these improvements. {{p}} We hypothesize that, while taking off is now easier, the difficult transition is now from take-off to catch-up, where nations grow closer to the economic leader (now the United States). Doing so often requires major reforms in policies and institutions. Data suggest that when countries reach the limits imposed by their policies and institutions, their growth slows sharply. Even countries like Japan that have joined the United States in economic leadership in defining best practice in some sectors lag behind in other sectors. Our theory suggests that China is currently reaching its limits to rapid growth.
    Date: 2016–04–12
  27. By: Samuel Marden (Department of Economics, University of Sussex)
    Abstract: In China, many fewer girls are born than would be expected given natural birth rates. This imbalance has worsened dramatically over the last 40 years. The roughly contemporaneous fall in fertility per woman is often mooted as a source of this apparent increased demand for sex selection: fewer births make it harder to have a son by chance. Despite this, causal evidence is limited. This paper exploits geographic variation in changes in fertility, arising as a consequence of China’s agricultural reforms (1978-84), to provide this evidence. Specifically, I show that households living in counties that benefitted more from the reforms, increased their fertility relative to households elsewhere. I then show that these households are also less likely to engage in sex selection. These changes appear to have been due to higher local incomes interacting with the enforcement of the One Child Policy. The timing of the changes in fertility and sex selection are informative: while fertility increased almost immediately, the decline in sex selection only emerged from the mid 1980s— contemporaneous with the widespread availability of ultrasound. These results suggest that the dramatic decline in fertility in 1970s China, as well as the smaller decline due to the One Child Policy in the 1980s, may have had an important role in fuelling the demand for sex selection.
    JEL: J11 J13 J16
    Date: 2016–03
  28. By: William Lazonick (University of Massachusetts Lowell and The Academic-Industry Research Network.)
    Abstract: The ongoing explosion of the incomes of the richest households and the erosion of middle-class employment opportunities for most of the rest have become integrally related in the now-normal operation of the U.S. economy. Since the beginning of the 1980s, employment relations in U.S. industrial corporations have undergone three major structural changes – summarized as “rationalization,†“marketization,†and “globalization†– that have permanently eliminated middle-class jobs in the United States. From the early 1980s, rationalization, characterized by plant closings, terminated the jobs of high-school educated blue-collar workers, most of them well-paid union members. From the early 1990s, marketization, characterized by the end of a career with one company as an employment norm, placed the job security of middle-aged whitecollar workers, many of them college educated, in jeopardy. From the early 2000s, globalization, characterized by the movement of employment offshore to lower-wage nations, left all members of the U.S. labor force, whatever their educational credentials and work experience, vulnerable to displacement. Initially, these structural changes in employment could be justified as business responses to changes in technologies, markets, and competitors. Once U.S. corporations transformed their employment relations, however, they often pursued rationalization, marketization, and globalization to cut current costs rather than to reposition themselves to produce competitive products. Defining superior corporate performance as ever-higher quarterly earnings per share, companies turned to massive stock repurchases to “manage†their own corporations’ stock prices. Trillions of dollars that could have been spent on innovation and job creation in the U.S. economy over the past three decades have instead been used to buy back stock for the purpose of manipulating stock prices. Legitimizing this financialized mode of corporate resource allocation has been the ideology, itself a product of the 1980s and 1990s, that a business corporation should be run to “maximize shareholder value.†Through their stock options and stock awards, corporate executives who make these resource-allocation decisions are themselves prime beneficiaries of the focus on rising stock prices as the sole measure of corporate performance. While rationalization, marketization, and globalization undermined stable and remunerative employment structures, the “financialization†of the U.S. corporation entailed the distribution of corporate cash to shareholders through stock repurchases, often in addition to generous cash dividends, and, incentivizing these distributions, the stock-based remuneration of top corporate executives. In this essay, I review evidence on the fundamental structural changes related to rationalization, marketization, and globalization that, since the early 1980s, have eroded U.S. middle-class employment opportunities. Then, I analyze how, in many different ways and in many different industries, the financialized mode of corporate resource allocation has undermined the prosperity of the U.S. economy. I go on to show how justified by the ideology that companies should be run to “maximize shareholder value,†this financialized behavior boosts the remuneration of top corporate executives, providing a major explanation for the increasing concentration of income among the top 0.1% of U.S. households that is, through the very way it is achieved, based on the systematic destruction of middle-class employment opportunities available to members of the U.S. labor force.
    JEL: D22 D31 G35 G38 J53 L21 M12 M21 N82 O30 P12
    Date: 2015–02
  29. By: Vonyo, Tamas (Bocconi University); Klein, Alexander (University of Kent)
    Abstract: We present revised growth accounts for three socialist economies between 1950 and 1989. Government statistics reported distorted measures for both the rate and trajectory of productivity growth in Czechoslovakia, Hungary, and Poland. Researchers have benefited from revised output data, but continued to use official statistics on capital input, or estimated capital stock from official investment data. Investment levels and rates of capital accumulations were, in fact, much lower than officially claimed and over-reporting worsened over time. Sluggish factor accumulation, specifically declining equipment investment and labor input, contributed much more to the socialist growth failure of the 1980s than previously thought.
    Keywords: growth accounting, capital accumulation, Socialism, Eastern Europe JEL Classification: N14, N64, O47, P27
    Date: 2016
  30. By: Punzi, Maria Teresa
    Abstract: We empirically analyze asset price boom-bust cycles over a long-run period of 1896-2014 for the U.S., the Netherlands, Norway and Sweden. We focus on macro-financial linkages to understand if these are common phenomena during financial crises, or if the linkage was simply amplified during the last financial crisis in 2007. In particular, we ask if economic recessions are usually followed by asset price and credit bursts, and find that housing and stock prices tend to lead real economic activities, while developments in credit and money markets typically lag developments in the real economy. The dynamic of assets' portfolio allocation effects in times of crises has been the same. We also study the cyclical behaviour of real GDP per capita, asset prices (housing or stocks) and lending. In particular, we test for the existence of co-movements with asset prices during periods of crisis. We find that the correlations between real GDP per capita and real housing prices and between lending and real housing prices have increased since World War II, and that the increase is much more pronounced if we compare the Great Recession with the Great Depression. Monetary policy shocks also become more important in explaining the co-movements in the Great Recession, compared with the Great Depression. Furthermore, inflation shocks have played an important role in explaining the correlation between house prices and lending for Scandinavian countries.
    Keywords: Housing Prices,Stock Prices,Business Cycle,Co-movements,Large-Scale Dataset
    JEL: C23 E32 E44 E52 G10 G21
    Date: 2016
  31. By: Ugo Mattei (UC Hastings, University of Turin & IUC Turin)
    Abstract: This document contains the text of the academic 'laudatio' delivered by IUC Academic Coordinator Ugo Mattei, upon appointing Yanis Varoufakis a Honorary Professor of the IUC in March 2016. The address presents an overview of Yanis Varoufakis' intellectual development and trajectory, to demonstrate how the latter fulfils the motivations underpinning his honorary appointment, namely: (i) Varoufakis' denunciation, informed by disciplinary acumen, of the theoretical and practical failure of the current mainstream approach in economics; (i) his deep theoretical contribution to the discipline of Political Economy through the recovery of the humanistic thought of Karl Marx; (iii) his lucid analysis of the reasons for the collapse of austerity policies in Europe and elsewhere; (iv) his vivid demonstration of the fallacy – also theoretical – of the extractive financial policies that victimize the working classes, the poor and the commons in Europe; (v) the clarity, in his theoretical work, about the incompatibility with the democratic ideal of a macroeconomic framework devoid of government instruments able to cushion the shock to the markets imposed by the capitalist mode of production in the absence of regulation and control of financial speculation.
    Keywords: Yanis Varoufakis, political economy, heterodox economics, economic uncertainty, Europe, Greece, democracy
    JEL: B1 B31 B51
    Date: 2016–01
  32. By: Elsner, Wolfram
    Abstract: This paper critically reviews the leading microeconomic textbooks of Varian, Pindyck/Rubinfeld, and Schumann/Meyer/Stroebele, with a focus on their theoretical inconsistencies and their lack of an institutional perspective.
    Keywords: microeconomics; economic teaching; textbooks; institutions
    JEL: A20 A22 A23
    Date: 2016–04–03
  33. By: Markus Brueckner
    Abstract: Rent extraction by capitalists is present if the capital income share exceeds the capital output elasticity. Based on a sample of 111 countries during the period 1970-2010, this paper provides estimates of the capital output elasticity and compares these to countries' capital income shares. Three findings arise: (i) for the average country in the sample, the capital income share significantly exceeds the capital output elasticity; (ii) the difference between the capital income share and the capital output elasticity has increased since the 1980s; (iii) in democracies the capital income share is not significantly different from the capital output elasticity.
    Keywords: Capital output elasticity, capital income share, rent extraction
    JEL: E0 O4
    Date: 2016–04
  34. By: Makovi, Michael
    Abstract: Andrei Shleifer and Robert W. Vishny (1994) have used Public Choice analysis to criticize market socialism. Peter J. Boettke (1995) and Peter T. Leeson and Boettke (2002) have argued that F. A. Hayek's Road to Serfdom (2007 [1944]) constituted a form of Public Choice analysis as well. Boettke and Leeson say that Hayek adumbrated a form of Arrow's Impossibility Theorem. This essay shows that Hayek was joined by John Jewkes in presaging a form of the Arrow theorem. In addition, this essay expands on the analysis by Boettke and Leeson, elucidating the broader implications which the Arrow theorem has for democratic socialism in particular. Democratic socialism is demonstrated to be impossible, in the sense that it cannot successfully accomplish the goals of its advocates. This is because the Arrow theorem implies that democratic political institutions are fundamentally incompatible with socialist economics.
    Keywords: Hayek; Road to Serfdom; democratic socialism; market socialism; economic democracy; totalitarianism; public choice; government failure; arrow; impossibility; rent seeking; rent-seeking
    JEL: A12 B24 B25 B51 B53 D70 P10 P20 P30 P50
    Date: 2016–03–21
  35. By: Bello, Omar; Ortiz Malavassi, Laura M.; Samaniego, Joseluis
    Abstract: The purpose of this work is to review ECLAC’s experience in assessing the economic and social impact of disasters. Toward that end, the database established according to assessment reports is described and the patterns of sectoral damage and losses from different types of events are defined.
    Date: 2015–12
  36. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: This is a nontechnical retrospective paper on a game theoretic approach to the theory of money and financial institutions. The stress is on process models and the reconciliation of general equilibrium with Keynes and Schumpeter’s approaches to non-equilibrium dynamics.
    Keywords: Bankruptcy, Innovation, Growth, Competition, Price-formation
    JEL: C7 E12
    Date: 2016–04
  37. By: Olivier Godechot (OSC - Observatoire sociologique du changement - Sciences Po - CNRS - Centre National de la Recherche Scientifique, MaxPo - Max Planck Sciences Po Center on Coping with Instability in Market Societies - IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris - Max Planck Institute for the Study of Societies)
    Abstract: Drawing on Pierre Bourdieu's theory of aesthetic judgment, this text offers an inductive account of financial reasoning inside a trading room. Driven to maximise bank profits, trading room operators do not find ‘one best way’. Rather they choose among several possible winning strategies: mathematical arbitrage, economic analysis, chartist analysis. These strategies differ sharply from one another in their conception of the market, method, proximity to scholarly knowledge, and legitimacy. We show that the choice of one method depends on a system of tastes and distastes that are both historical – depending on individuals’ social and educational background – and relational – depending on the individual's relative position within the trading room viewed as a field.
    Keywords: class,finance,rationality,field theory,habitus
    Date: 2016–03

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