nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2017‒05‒28
eighteen papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Australian Exceptionalism? Inequality and Living Standards 1821-1871 By Laura Panza; Jeffrey G. Williamson
  2. The Rise and Fall of Armies By Jonathan J Adams
  3. Co-authorship in Economic History and Economics: Are We Any Different? By Andrew Seltzer; Daniel S. Hamermesh
  4. Social mobility during South Africa’s industrial take-off By Jeanne Cilliers; Johan Fourie
  5. Characterization of Gold Mining Institutions in the Nilgiri-Wayanad Region of India: A Historical-Institutional Perspective By Amalendu Jyotishi
  6. State Capacity and Public Goods: Institutional Change, Human Capital, and Growth in Historic Germany By Dittmar, Jeremiah; Meisenzahl, Ralf
  7. Innovation-Led Transitions in Energy Supply By Derek Lemoine
  8. Reallocation and Secularization: The Economic Consequences of the Protestant Reformation By Davide Cantoni; Jeremiah Dittmar; Noam Yuchtman
  9. Why did socialist economies fail? The role of factor inputs reconsidered By Tamás Vonyó; Alexander Klein
  10. Beresford's Revenge: British equity holdings in Latin America, 1869-1929 By Grossman, Richard
  11. China's Lost Generation: Changes in Beliefs and their Intergenerational Transmission By Roland, Gérard; Yang, David
  12. From planning to policy: Half a century of the CDP By Daniel Gay
  13. Fiscal Crises By Kerstin Gerling; Paulo A Medas; Tigran Poghosyan; Juan Farah-Yacoub; Yizhi Xu
  14. Interaction of Unofficial Philosophy and the Scientific and Technical Community in the Late USSR: The Case of Obninsk By Khandozhko, Roman
  15. Chômage et pauvreté en Grande-Bretagne (1601-1931) : le recensement des chômeurs By Benedicte Reynaud
  16. Kenneth Arrow's contribution to economic science By von Weizsäcker, Carl Christian
  17. Global Earnings Inequality, 1970–2015 By Hammar, Olle; Waldenström, Daniel
  18. The Fall of the Labor Share and the Rise of Superstar Firms By Autor, David; Dorn, David; Katz, Lawrence; Patterson, Christina; Van Reenen, John

  1. By: Laura Panza (Department of Economics, University of Melbourne); Jeffrey G. Williamson (Harvard University and The University of Wisconsin)
    Abstract: Although the Australian historical literature covering the colonies’ first century from the initial convict settlement in 1788 at Botany Bay to the post-gold rush census of 1871 is packed with assertions about Australian living standards and inequality exceptionalism2 – compared with western Europe and America, there has been very little evidence offered to confirm them. This paper will establish the Australian facts about living standards and inequality trends between the 1820s and the 1870s. Where do we find exceptionalism, compared with the United States, and where not? And can exceptionalism be readily explained by the fact that the US was undergoing a dramatic industrial revolution while Australia was following its commodity-exporting comparative advantage? We start by exploring the end-period benchmark, 1871, where previous literature (since Michael Mulhall in 1892) has reported a big Australian income per capita and living standard lead. We ask whether 1871 is a poor choice for making these comparisons, and whether 1861 would be better. The US had just fought a Civil War and underwent a “lost growth decade” and southern destruction in the 1860s (Lindert & Williamson 2016b). In addition, both countries had to deal with a mineral rent bust, one in Victoria and the other in California and Nevada. The result for 1861 without the devastated American south or the mineral-rich Victoria, California, and Nevada is a smaller Australian living standard lead, but a significant lead nonetheless. Next we ask whether Australia was born (relatively) rich or grew (relatively) rich by commodity-export-led (relatively) fast growth. It was the latter, a conclusion reached in two ways, indirectly à la Angus Maddison backcasting and directly à la historic purchasing-power-parity living standard estimates for the early years. Our new purchasing-power-parity estimates of working class living standards in the 1820s and 1830s place Australian towns below London. This not-born-relatively-rich conclusion is confirmed indirectly by an exceptionally fast growth performance between 1821 and 1871. In addition, we ask whether the convicts had similar living standards as free urban unskilled in the 1830s (the convicts were still nearly half of the labor force). We follow this with two additional questions: Was the 1871 Australian distribution of income as unequal as it was in the US and Western Europe then? Or was it exceptionally equal? If the latter, was it also as equal in the 1820s as it was in America in 1800? While we cannot yet answer either question, we can document inequality trends between those two dates by exploiting various proxies. Here we find exceptionalism since there is little evidence supporting rising income inequality over the half-century prior to 1871.
    Keywords: N17, N37, O47, O56
    Date: 2017–01
  2. By: Jonathan J Adams (Department of Economics, University of Florida)
    Abstract: For a thousand years, income growth was associated with a rising military employment share. But this share peaked in the early 20th century, after which military employment shares fell with income growth. I argue that rising military shares were driven by structural change out of agriculture, and the recent declines are driven by substitution from soldiers towards military goods. I document evidence for this substitution effect: as countries' incomes rise, the ratio of their military expenditure share to their military employment share rises too. I introduce a game theoretic model of growth and warfare that reproduces the time series patterns of military expenditure and employment. The model also correctly predicts the cross-sectional pattern, that military employment and expenditure shares are decreasing in income during wars. Finally, I show that faster economic growth can reduce military expenditure in the long run.
    JEL: E10 F51 H56 O40
  3. By: Andrew Seltzer; Daniel S. Hamermesh
    Abstract: Over the last six decades articles published in leading economic history journals have been less likely to be co-authored than articles published in leading general economics journals. However, in both economic history and general economics journals there have been strong, monotonic increases in the number of authors per article and the fraction of co-authored papers. Economics and economic history differ in the nature of collaboration, in that co-authorships in economic history are more likely to be formed of individuals of different seniority as compared to economics generally.
    JEL: B41 N01
    Date: 2017–05
  4. By: Jeanne Cilliers (Department of Economic History, Lund University); Johan Fourie (Department of Economics, Stellenbosch University)
    Abstract: In the absence of historical income or education data, the change in occupations over time can be used as a measure of social mobility. This paper investigates intergenerational occupational mobility using a novel genealogical dataset for settler South Africa, spanning its transition from an agricultural to an early industrialized society (1800–1909). We identify fathers and sons for whom we have complete information on occupational attainment. We follow a two-generation discrete approach to measure changes in both absolute and relative mobility over time. Consistent with qualitative evidence of a shift away from agriculture as the economy’s dominant sector, we see the farming class shrinking and the skilled and professional classes growing. Controlling for changes in the structure of the labor market over time, we find increasing social mobility, becoming significant after the discovery of minerals in 1868. We find this mobility particularly for semi-skilled workers but virtually no improved mobility for sons of farmers. We also test hypotheses related to the mobility prospects for first-born sons and sons of immigrants.
    Keywords: Intergenerational mobility, social mobility, resource curse, industrialization, colonialism, longitudinal data
    JEL: J60 J61 J62 N30 N37
    Date: 2017
  5. By: Amalendu Jyotishi
    Abstract: This paper explores the complex development of gold mining in the Nilgiri-Wayanad region of Southern India, demonstrating how entwined histories disrupt simple taxonomic structures of ‘formality' and ‘informality.' Drawing on the long history of gold mining in the region that dates back to the 1830's, this paper presents a counter-example to the conventional view that institutions develop in a trajectory of informality to formality. To do this, the article identifies three distinct phases of development in the gold mining industry of this region that mark and encompass shifts in governance of the area, global economic trends and commercial investment, property rights, government funding, influx of repatriate communities, and other social issues in the local economy. We conclude based on this analysis that institutions in the region have evolved from formal-artisanal to formal-industrial and then to informal small-scale.
  6. By: Dittmar, Jeremiah; Meisenzahl, Ralf
    Abstract: What are the origins and consequences of the state as a provider of public goods? We study institutional changes that increased state capacity and public goods provision in German cities during the 1500s. Cities that adopted institutional change subsequently began to differentially produce and attract human capital and grow faster. Institutional change occurred where ideological competition introduced by the Protestant Reformation interacted with local politics. We study plagues that shifted local politics in a narrow period as sources of exogenous variation in institutions, and find support for a causal interpretation of the relationship between institutional change, human capital, and growth.
    Keywords: education; growth; Human Capital; institutions; Political Economy; Public Goods; State Capacity
    JEL: I25 N13 O11 O43
    Date: 2017–05
  7. By: Derek Lemoine
    Abstract: I reconcile a benchmark model of directed technical change with the historical experience of energy transitions by allowing for a non-unitary elasticity of substitution between machines and the other factor of production, interpreted here as energy resources. I show that the economy becomes increasingly locked-in to the dominant sector when machines and resources are gross substitutes, but a transition from the dominant sector to the other is possible when machines and resources are gross complements. Consistent with history, a transition in research activity leads the transition in resource supply. A calibrated numerical implementation shows that innovation is critical for climate change policy. A policymaker would use a U-shaped emission tax trajectory so as to immediately transition innovation away from the fossil sector, wait for clean technology to improve, and then hasten a transition in resource supply later in the century.
    JEL: N70 O33 O38 O44 Q43 Q54 Q55 Q58
    Date: 2017–05
  8. By: Davide Cantoni; Jeremiah Dittmar; Noam Yuchtman
    Abstract: The Protestant Reformation, beginning in 1517, was both a shock to the market for religion and a first-order economic shock. We study its impact on the allocation of resources between the religious and secular sectors in Germany, collecting data on the allocation of human and physical capital. While Protestant reformers aimed to elevate the role of religion, we find that the Reformation produced rapid economic secularization. The interaction between religious competition and political economy explains the shift in investments in human and fixed capital away from the religious sector. Large numbers of monasteries were expropriated during the Reformation, particularly in Protestant regions. This transfer of resources shifted the demand for labor between religious and secular sectors: graduates from Protestant universities increasingly entered secular occupations. Consistent with forward-looking behavior, students at Protestant universities shifted from the study of theology toward secular degrees. The appropriation of resources by secular rulers is also reflected in construction: during the Reformation, religious construction declined, particularly in Protestant regions, while secular construction increased, especially for administrative purposes. Reallocation was not driven by pre-existing economic or cultural differences.
    Keywords: protestant reformation, secularization, sectoral allocation, human capital
    JEL: N13 N33 J24 E02
    Date: 2017–05
  9. By: Tamás Vonyó; Alexander Klein
    Abstract: We present new investment data and 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, 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: N14 N64 O47 P27
    Date: 2017–04
  10. By: Grossman, Richard
    Abstract: This paper presents monthly capital gain, dividend yield, and total return indices, and measures of total capitalization for common equity of Latin American and Caribbean-based firms quoted on the London Stock Exchange during 1869-1929. In addition to an overall Latin American index, I present and analyze sub-indices for countries (e.g., Argentina, Brazil, Chile) and industrial sectors (e.g., banks, mines, railways) with extensive UK listings. I compare the Latin American and Argentinian indices with data from Argentina's Bolsa index during 1900-1929. I also use the indices to compare equity market fluctuations across Latin American sectors and countries during the Baring crisis of 1890.
    Keywords: Argentina; Baring crisis; economic history; Latin America; London Stock Exchange
    JEL: G01 G10 N23 N26
    Date: 2017–05
  11. By: Roland, Gérard; Yang, David
    Abstract: Beliefs about whether effort pays off govern some of the most fundamental choices individual make. This paper uses China's Cultural Revolution to understand how these beliefs can be affected, how they impact behavior, and how they are transmitted across generations. During the Cultural Revolution, China's college admission system based on entrance exams was suspended for a decade until 1976, effectively depriving an entire generation of young people of the opportunity to access higher education (the "lost generation"). Using data from a nationally representative survey, we compare cohorts who graduated from high school just before and after the college entrance exam was resumed. We find that members of the "lost generation" who missed out on college because they were born just a year or two too early believe that effort pays off to a much lesser degree, even 40 years into their adulthood. However, they invested more in their children's education, and transmitted less of their changed beliefs to the next generation, suggesting attempts to safeguard their children from sharing their misfortunes.
    Keywords: Changes in Beliefs; China; Cultural change; Cultural Revolution; Cultural Transmission
    JEL: I23 O53 P26 P48 Z1
    Date: 2017–05
  12. By: Daniel Gay
    Abstract: The United Nations Committee for Development Policy (CDP) comprises 24 independent specialists from a variety of disciplines. It advises the UN Economic and Social Council on emerging economic, social and environmental issues relevant to sustainable development and international co-operation. The paper argues that since its launch in 1965 the CDP has at times struggled to make an impact, but that it has been most effective when it has been at its most creative and when it has broken with convention. It helped put into practice the target that developed countries should devote 0.7% of their gross national income to official development assistance. The Committee created the least developed countries category and continues to monitor and update membership of the group. Its members were prominent in the genesis of the human development approach and continue to conduct new work in the areas of governance, productive capacity and sustainable development.
    Keywords: aid, human development, least developed countries, official development assistance, sustainable development, United Nations
    JEL: F02 N01 O1 O2 O15 O19
    Date: 2017–04
  13. By: Kerstin Gerling; Paulo A Medas; Tigran Poghosyan; Juan Farah-Yacoub; Yizhi Xu
    Abstract: A key objective of fiscal policy is to maintain the sustainability of public finances and avoid crises. Remarkably, there is very limited analysis on fiscal crises. This paper presents a new database of fiscal crises covering different country groups, including low-income developing countries (LIDCs) that have been mostly ignored in the past. Countries faced on average two crises since 1970, with the highest frequency in LIDCs and lowest in advanced economies. The data sheds some light on policies and economic dynamics around crises. LIDCs, which are usually seen as more vulnerable to shocks, appear to suffer the least in crisis periods. Surprisingly, advanced economies face greater turbulence (growth declines sharply in the first two years of the crisis), with half of them experiencing economic contractions. Fiscal policy is usually procyclical as countries curtail expenditure growth when economic activity weakens. We also find that the decline in economic growth is magnified if accompanied by a financial crisis.
    Keywords: Economic growth;Financial crises;fiscal crisis, sovereign debt default, twin crises, Deficit, Studies of Particular Policy Episodes, General Outlook and Conditions
    Date: 2017–04–03
  14. By: Khandozhko, Roman (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The paper deals with the formation of philosophical interest of Soviet physicists in the 1950-80's and the social forms of realization of this interest, such as friendship groups with informal leadership, the official network of methodological seminars and the movement of systemic methodology. On the example of the Moscow Methodological Circle author demonstrates how the political pressure on the intellectual community in the period of "stagnation" first led to the emergence of esoteric and half-closed informal methodological seminar, and then to its "penetration" into peripheral institutional niches, such as the party education network of the one of the Soviet atomic centers. Leader of the seminar philosopher G.P. Schedrovitsky managed to apply systemic technical approach to the relevant for the Soviet modernity theme of the instrumentalization of thinking and the creation of a collective subject. As a result, this system of "practical philosophy" became popular among Soviet engineer-physicists working in the atomic project.
    Date: 2017–05
  15. By: Benedicte Reynaud (Université Paris-Dauphine, PSL Research University)
    Abstract: En 1895, Hubert Llewellyn Smith, premier commissaire du travail du Board of Trade (First Commissioner for Labour) s’oppose à un recensement des chômeurs en Grande-Bretagne (TNA CAB 37/38/2, CAB37/38/10). L’objet de cet article est de mettre au jour ce point aveugle et énigmatique de l’histoire de la statistique anglaise : comment rendre compte de cette défiance à l’égard de la quantification des sans-emplois en Grande-Bretagne ? Une première partie est consacrée à l’examen des relations entre chômage et pauvreté. Nous mettrons en évidence tout d’abord à travers la présentation de la Old Poor Law de 1601 que chômage et pauvreté ne sont pas dissociés. Autrement dit le secours des pauvres inclut celui des sans-emploi. En revanche, la New Poor Law de 1834 introduit une différence fondamentale avec la Old Poor Law. En effet, nous montrerons que la New Poor Law suivant en cela les principes des économistes classiques, nie l’existence du chômage. Il n’est donc pas nécessaire de quantifier un phénomène qui n’existe pas. Une seconde partie est consacrée aux spécificités du système statistique qui expliquent le renoncement à l’élaboration d’une statistique du chômage. La troisième partie présente l’une des conditions de possibilité de la solution anglaise de 1931, à savoir la loi sur le chômage de 1905 et les lois sur l’assurance chômage obligatoire de 1911, 1916 et 1921. Cela a en effet permit de distinguer les chômeurs des pauvres.
    Keywords: Chômage. Sociologie de la quantification, Grande-Bretagne. Pauvreté. Recensement XIXe siècle
    Date: 2017–03–28
  16. By: von Weizsäcker, Carl Christian (Center for Mathematical Economics, Bielefeld University)
    Date: 2017–05–11
  17. By: Hammar, Olle (Uppsala University); Waldenström, Daniel (Paris School of Economics)
    Abstract: We estimate trends in global earnings dispersion across occupational groups using a new database covering 66 developed and developing countries between 1970 and 2015. Our main finding is that global earnings inequality has declined, primarily during the 2000s, when the global Gini coefficient dropped nearly 10 points and the earnings share of the world's poorest half doubled. Decomposition analyses emphasize the role of income convergence between poor and rich countries and that earnings have become more similar within occupations in traded industries. Sensitivity checks show that the results are robust to varying real exchange rates, inequality measures and population definitions.
    Keywords: global inequality, development, inequality decomposition, labor markets
    JEL: D31 F01 O15
    Date: 2017–05
  18. By: Autor, David (MIT); Dorn, David (University of Zurich); Katz, Lawrence (Harvard University); Patterson, Christina (Massachusetts Institute of Technology); Van Reenen, John (MIT Sloan School of Management)
    Abstract: The fall of labor's share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments of trends in labor's share typically have relied on industry or macro data, obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of "superstar firms." If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm value-added and sales. As the importance of superstar firms increases, the aggregate labor share will tend to fall. Our hypothesis offers several testable predictions: industry sales will increasingly concentrate in a small number of firms; industries where concentration rises most will have the largest declines in the labor share; the fall in the labor share will be driven largely by between-firm reallocation rather than (primarily) a fall in the unweighted mean labor share within firms; the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; and finally, such patterns will be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.
    Keywords: labor share, sales concentration, firms
    JEL: E24 J31 L11
    Date: 2017–05

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