nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2017‒08‒06
23 papers chosen by

  1. Which comes first: good governance or prosperity? A historical experiment from the South African Republic and the Orange Free State By Stan du Plessis; Sophia du Plessis
  2. Can Immigration Cause Local Industrialization? Evidence from Germany’s Post-War Population Transfer By Michael Peters
  3. Heterogenous Mechanisms in WWII Stress Transmission: Evidence from a Natural Experiment By Vincenzo Atella; Edoardo Di Porto; Joanna Kopinska
  4. Immigrants and Savers: A Rich New Database on the Irish in 1850s New York By Simone Wegge; Tyler Anbinder; Cormac Ó Gráda
  5. Le Portugal et l`Euro By João de Sousa Andrade
  6. Sex and the Mission: The Conflicting Effects of Early Christian Investments on the HIV Epidemic in sub-Saharan Africa By Cagé, Julia; Rueda, Valeria
  7. Gender: An Historical Perspective By Paola Giuliano
  8. Back to the Future: Backtesting Systemic Risk Measures during Historical Bank Runs and the Great Depression By Brownlees, Christian; Chabot, Ben; Ghysels, Eric; Kurz, Christopher
  9. Contagion During the Initial Banking Panic of the Great Depression By Erik Heitfield; Gary Richardson; Shirley Wang
  10. Historical urban growth in Europe (1300–1800) By Rafael, González-Val
  11. "The Neoclassicals' Conundrum: If Adam Smith Is the Father of Economics, It Is a Bastard Child" By Oscar Valdes Viera
  12. Are Fixed Exchange Rates Still a Mirage? By Michael Bleaney; Mo Tian
  13. Equalization transfers and convergence between federal and unitary systems: a contribution to their historical analysis By Giorgio Brosio
  14. Creative Destruction of Industries: Yokohama City in the Great Kanto Earthquake, 1923 By Tetsuji Okazaki; Toshihiro Okubo; Eric Strobl
  15. When to Lean Against the Wind By Richter, Björn; Schularick, Moritz; Wachtel, Paul
  16. Política cambial, conflito de classes e desenvolvimento econômico na perspectiva de Celso Furtado By Lúcio Otávio Seixas Barbosa; Frederico G. Jayme Jr; Fabrício J. Missio
  17. Long Range Dependence and Structural Breaks in the Gold Markets By Chong, Terence Tai Leung; Lu, Chenxi; Chan, Wing H.
  18. Il paradosso di S. Pietroburgo, una rassegna By Ruggero Paladini
  19. Brevet d’invention et croissance économique : une analyse dans le cadre de l’économie tunisienne durant la période 1970 - 2010 By Mabrouki, Mohamed
  20. Partnership as Exeprimentation: Business Organization and Survival in Egypt, 1910-1949 By Cihan Artunc; Timothy Guinnane
  21. The Rise of New Corruption: British MPs during the Railway Mania of 1845 By Esteves, Rui; Geisler Mesevage, Gabriel
  22. EQCHANGE: A World Database on Actual and Equilibrium Effective Exchange Rates By Couharde, Cecile; Delatte, Anne-Laure; Grekou, Carl; Mignon, Valerie; Morvillier, Florian
  23. The Low Level of Global Real Interest Rates : a speech at the Conference to Celebrate Arminio Fraga’s 60 Years, Casa das Garcas, Rio de Janeiro, Brazil, July 31, 2017. By Fischer, Stanley

  1. By: Stan du Plessis; Sophia du Plessis
    Abstract: Two neighbouring republics, with a common history and culture, followed very different paths of development in the second half of the nineteenth century. Extraordinary mineral wealth was discovered during this period in the South African Republic (ZAR), the neighbour where political and economic stability was fragile compared with the Republic of the Orange Free State (OFS). We connect these divergent development paths to the literature on the resource curse, especially the recent literature on the conditional resource curse where the quality of the institutional structure plays a crucial role in the outcomes of a large resource discovery. By introducing a new objective measure for the quality of institutions, namely the accuracy of boundaries on maps, we provide evidence of the institutional quality in the ZAR prior to the discovery of gold on the Witwatersrand. The statistical technique that we use, Procrustes analysis, is an innovation in economic analysis. The evidence supports Acemoglu and Robinson's account of the development path in the ZAR, and the later Union of South Africa, as compromised by the conditional resource curse.
    Keywords: Resources curse, Institutional Economics, South Africa
    JEL: N17 B15 O43
    Date: 2017–06
  2. By: Michael Peters (Yale University)
    Abstract: Can increases in the size of the local population spur economic development? This paper uses a particular historical episode to study this question empirically. After the Second World War, between 1945 and 1948, about 12m Ethnic Germans were expelled from regions in Middle and Eastern Europe and transferred to Western Germany. At the time, this inflow amounted to almost 20% of the Western German population. Importantly, there are vast cross-sectional differences in the extent to which refugees were allocated to individual counties and various features of the allocation mechanism make it possible to construct exogenous variation in these local supply shocks. I study the effect of such shocks on Germany's regional economic development between 1950 and 1970. I find that refugee-inflows are positively correlated with local income per capita and manufacturing employment. These patterns are consistent with theories of agglomeration and endogenous technological change but harder to reconcile in a neoclassical framework.
    Date: 2017
  3. By: Vincenzo Atella (Università di Roma Tor Vergata, CEIS Tor Vergata and CHP Stanford University); Edoardo Di Porto (Università di Napoli Federico II, CSEF and UCFS, Uppsala University); Joanna Kopinska (CEIS Tor Vergata, Università di Roma Tor Vergata)
    Abstract: This paper analyses how in utero exposure to maternal stress from WWII affects long-term health and economic outcomes and describes different mechanisms at work, showing that current health conditions are heterogeneously related to the type of fetal stressor. We exploit the Italian armistice of September 8th 1943 as exogenous variation in the war intensity, providing WWII long-run causal effects on objectively measured health and economic outcomes. We find that in utero exposure to intense WWII events had long- lasting effects on health and that Nazi massacres predict late-onset depression, while nutritional deprivation suffered in large cities had lasting effects on diabetes. Finally, we innovate by showing that these effects increase with the age of the treated individuals.
    Keywords: Fetal programming hypothesis; War exposure; Nazi massacres, Stress; Famine; Chronic diseases; Health expenditure, Long-term effects, Italy.
    JEL: I1 O1
    Date: 2017–08–01
  4. By: Simone Wegge; Tyler Anbinder; Cormac Ó Gráda
    Abstract: We describe a new dataset created from the first 18,000 savings accounts opened (from 1850 to 1858) at the Emigrant Industrial Savings Bank in New York City. The bank was founded by Irish Americans and most of its depositors in its first decade of operations were recent Irish immigrants. The data offer a unique window on both savings behavior by the poor and not-so-poor in antebellum New York and on how emigrants who came primarily from rural parts of Ireland adapted to urban life. They also contain much that is new on the regional origins of mid-nineteenth century Irish immigrants and on their settlement patterns in New York.
    Keywords: Savings behavior; Irish immigration; Social mobility; New York
    JEL: N D14 F22
    Date: 2017–04
  5. By: João de Sousa Andrade (CeBER and Faculty of Economics of the University of Coimbra)
    Abstract: The European economic and monetary integration of Portugal should be analyzed from a historical perspective, taking into account not only economic but also political aspects. Despite its colonial heritage, Portugal is a country of emigrants in which Europe holds a very important part. Portuguese people have a European feeling they do not forget a dictatorship that has lasted almost half a century. The incomes of Portuguese are nowadays much higher as also the level of fixed capital - especially in infrastructure - and human capital than before European integration. The recent economic problems of the Portuguese economy are the result of imbalances that developed during the years after the Democratic Revolution. The absence of more appropriate policies for a monetary zone with a fixed exchange rate and with financial shocks caused by the reduction of interest rates and the massive entry of structural funds is responsible for the poor performance of the Portuguese economy after 2002 At present the banking crisis and public debt does not allow the exit of the Euro. But in spite of this constraint Portuguese governments and the great majority of the political parties envisage a deeper integration on the monetary union.
    Keywords: Emigration, dictatorship, democracy, public debt, real exchange rate, Euro.
    JEL: E31 E42 N10
    Date: 2017–07
  6. By: Cagé, Julia; Rueda, Valeria
    Abstract: This article investigates the long-term historical impact of missionary activity on the prevalence of HIV/AIDS in sub-Saharan Africa. On the one hand, missionaries were the first to invest in modern medicine in a number of countries. On the other hand, the Christian influence on norms may have affected sexual beliefs and behaviors. We built a new geocoded dataset locating Protestant and Catholic missions in the early 20th century, as well as their health investments. We show that missionary presence has conflicting effects on HIV today. Regions close to historical mission stations exhibit higher HIV prevalence. This higher prevalence is robust to multiple specifications accounting for urbanization. Less knowledge about condom use is a likely channel. Moreover, among regions historically close to missionary settlements, proximity to a mission with a health investment is associated with lower HIV prevalence. Safer sexual behaviors around missions with health investments are a possible explanatory channel.
    Keywords: health investments; historical persistence; HIV/AIDS; missions; sexual behavior
    JEL: D72 N37 N77 O33 Z12 Z13
    Date: 2017–07
  7. By: Paola Giuliano
    Abstract: Social attitudes toward women vary significantly across societies. This chapter reviews recent empirical research on various historical determinants of contemporary differences in gender roles and gender gaps across societies, and how these differences are transmitted from parents to children and therefore persist until today. We review work on the historical origin of differences in female labor-force participation, fertility, education, marriage arrangements, competitive attitudes, domestic violence, and other forms of difference in gender norms. Most of the research illustrates that differences in cultural norms regarding gender roles emerge in response to specific historical situations, but tend to persist even after the historical conditions have changed. We also discuss the conditions under which gender norms either tend to be stable or change more quickly.
    JEL: N0 Z1
    Date: 2017–07
  8. By: Brownlees, Christian; Chabot, Ben; Ghysels, Eric; Kurz, Christopher
    Abstract: We evaluate the performance of two popular systemic risk measures, CoVaR and SRISK, during eight financial panics in the era before FDIC insurance. Bank stock price and balance sheet data were not readily available for this time period. We rectify this shortcoming by constructing a novel dataset for the New York banking system before 1933. Our evaluation exercise focuses on assessing whether systemic risk measures were able to detect systemically important financial institutions and to provide early warning signals of aggregate financial sector turbulence. The predictive ability of CoVaR and SRISK is measured controlling for a set of commonly employed market risk measures and bank ratios. We find that CoVaR and SRISK help identifying systemic institutions in periods of distress beyond what is explained by standard risk measures up to six months prior to the panic events. Increases in aggregate CoVaR and SRISK precede worsening conditions in the financial system; however, the evidence of predictability is weaker.
    Keywords: Financial crises; Risk Measures; systemic risk
    JEL: G01 G21 G28 N21
    Date: 2017–07
  9. By: Erik Heitfield; Gary Richardson; Shirley Wang
    Abstract: The initial banking crisis of the Great Depression has been the subject of debate. Some scholars believe a contagious panic spread among financial institutions. Others argue that suspensions surged because fundamentals, such as losses on loans, drove banks out of business. This paper nests those hypotheses in a single econometric framework, a Bayesian hazard rate model with spatial and network effects. New data on correspondent networks and bank locations enables us to determine which hypothesis fits the data best. The best fitting models are ones incorporating network and geographic effects. The results are consistent with the description of events by depression-era bankers, regulators, and newspapers. Contagion - both interbank and spatial - propelled a panic which healthy banks survived but which forced illiquid and insolvent banks out of operations.
    JEL: C11 C23 C41 E02 N1 N12 N2 N22
    Date: 2017–07
  10. By: Rafael, González-Val
    Abstract: This paper analyses the evolution of the European urban system from a long-term perspective (from 1300 to 1800). Using the method recently proposed by Clauset, Shalizi, and Newman (2009), a Pareto-type city size distribution (power law) is rejected from 1300 to 1600. A power law is a plausible model for the city size distribution only in 1700 and 1800, although the log-normal distribution is another plausible alternative model that we cannot reject. Moreover, the random growth of cities is rejected using parametric and non-parametric methods. The results reveal a clear pattern of convergent growth in all the periods.
    Keywords: city size distribution, power law, Pareto distribution, Zipf’s law, Gibrat’s law
    JEL: C12 C14 R11 R12
    Date: 2017–07–28
  11. By: Oscar Valdes Viera
    Abstract: Neoclassical economists of the current era frequently pay lip service to Adam Smith's theories to certify the validity of natural-laws-based, laissez-faire policies. However, neoclassical theories are fundamentally disconnected from Adam Smith's notion of value, his understanding of the economic individual and their interactions in society, his methodology, and the field of study he afforded to political economy. Instead, early neoclassical economists parted ways with the theories of Adam Smith in an effort to construct economic laws that would validate the existing capitalist order as universal, natural, and harmonious.
    Keywords: Economic Thought; Classical School; Neoclassical Economics; Adam Smith; Economists
    JEL: A11 A13 B12 B13 B16 B20 B31
    Date: 2017–07
  12. By: Michael Bleaney; Mo Tian
    Abstract: In the twenty-first century, pegged exchange rates have become increasingly fixed: parity changes have become significantly rarer than in the 1980s and 1990s. Analysis of what triggers parity changes suggests that the high frequency of parity changes in the late twentieth century reflected the inflationary conditions of the time rather than a permanent shift associated with financial globalization.
    Keywords: exchange rates regimes, inflation, capital flows
    Date: 2017
  13. By: Giorgio Brosio (Università di Torino)
    Abstract: Equalization transfers, or grants, are a crucial component of modern federal and unitary countries. They also shape the evolution of different political systems promoting convergence in their effective working. The literature does not provide studies with a long-term and comparative perspective despite the relevance of this approach to the study of intergovernmental relations. The paper provides a contribution aimed at filling this void. It considers a small set of countries, including two unitary systems, Italy and the UK with a focus on English local government and three federal countries, Australia, Canada, and the United States. Federal systems are paying now more attention than initially to uniformity of policies and equality of access to the benefits of public policies, while unitary systems show now much more attention than in the past to reaching equality of access and benefits from policies through local autonomy and use of transparent intergovernmental grants, rather than with hierarchical command. Another way of illustrating this process is stressing the growing recognition of common citizenship in both federal and unitary states.
    Keywords: Evolution of intergovernmental relations; equalization transfers, political institutions
    JEL: H7 H77
    Date: 2017–07
  14. By: Tetsuji Okazaki (Graduate School of Economics, University of Tokyo); Toshihiro Okubo (Faculty of Economics, Keio University); Eric Strobl (ECOLE POLYTECHNIQUE)
    Abstract: The Great Kanto Earthquake occurred on September 1st, 1923 and inflicted serious damage on Yokohama City as well as Tokyo City. For example, about 90% of the factories in Yokohama City were burnt down. However, these manufacturing industries appear to have recovered from the damage swiftly. This paper investigates the existence of creative destruction due to the Great Kanto Earthquake. Using firm-level data on capital (horsepower of motors) before and after the earthquake, we find substantial creative destruction in Yokohama city. Larger firms tend to increase their capital more in seriously damaged areas.
    Keywords: natural disaster, Great Kanto Earthquake, creative destruction
    JEL: N95 Q54 R11
    Date: 2017–06–26
  15. By: Richter, Björn; Schularick, Moritz; Wachtel, Paul
    Abstract: This paper shows that policy-makers can distinguish between good and bad credit booms with high accuracy and they can do so in real time. Evidence from 17 countries over nearly 150 years of modern financial history shows that credit booms that are accompanied by house price booms and a rising loan-to-deposit-ratio are much more likely to end in a systemic banking crisis. We evaluate the predictive accuracy for different classification models and show that the characteristics of the credit boom contain valuable information for sorting the data into good and bad booms. Importantly, we demonstrate that policy-makers have the ability to spot dangerous credit booms on the basis of data available in real time. We also show that these results are robust across alternative specifications and time-periods.
    Keywords: Banking Crisis; Credit Booms; crisis prediction; macroprudential policy
    JEL: E32 E52 G01
    Date: 2017–07
  16. By: Lúcio Otávio Seixas Barbosa (Planning Department of Minas Gerais (SEPLAG-MG)); Frederico G. Jayme Jr (Cedeplar-UFMG); Fabrício J. Missio (Cedeplar-UFMG)
    Abstract: The aim of this paper is to analyze the contributions of Celso Furtado regarding the role of exchange rate policy and its relation with social conflict in the economic growth of peripheral economies. For that, we regain Furtado’s analyses about the Venezuelan case and in The Economic Formation of Brazil. We highlight two main conclusions from such works: i) exchange rate appreciation due to natural resources curse harms economic growth; ii) exchange rate policy is mainly a phenomenon associated with political economy, in which social conflict emerges. Hence, we claim that Furtado’s thought is still actual.
    Keywords: Development, exchange rate policy, social conflict.
    JEL: B1 B5
    Date: 2017–07
  17. By: Chong, Terence Tai Leung; Lu, Chenxi; Chan, Wing H.
    Abstract: The price of gold and its determining factors have been studied extensively in the literature. However, there is a lack of research on structural break in the long memory of the gold markets. This paper examines the long memory properties of gold prices. In particular, it attempts to test the stability of the long range dependence of gold returns and volatility. The results suggest that long memory exists in gold returns and volatility, and that the volatility of daily gold futures returns can be characterized by a hyperbolic decaying long memory process. Three episodes of structural breaks are found.
    Keywords: Long Memory; Modified R/S Statistic; FIGARCH; Spot Gold; Gold Futures
    JEL: C22
    Date: 2016–07–29
  18. By: Ruggero Paladini (Università Sapienza di Roma - Dipartimento di Studi Giuridici, Filosofici ed Economici)
    Abstract: In 1738 Daniel Bernoulli presented for the first time a study with a functional relationship between utility and wealth. The goal was to provide a solution to a "curious" paradox on probability theory. Almost three centuries after the St. Petersburg paradox is still debated. Two strands of research can be identified: the first, both theoretically and with surveys, examines the reasons for the subjective behavior of a player who is not willing to offer, if not a modest sum, to play a game that has an infinite expected value. The second one is the analysis by computer simulations of a large number of games, where unexpected statistical distributions emerge. From all of the studies it turns out that not only players offer very modest figures, but also that no gambling house will ever offer a St. Petersburg game.
    Keywords: expected value, utility function, fractal distributions.
    JEL: C18 D81
    Date: 2017–07
  19. By: Mabrouki, Mohamed
    Abstract: This study aims to empirically analyze the relationship between patent and economic growth, adopting the VAR approach. Indeed, in order to determine whether, in the context of the Tunisian economy and in the period from 1975 to 2010, the development of technological innovation promotes economic growth , we test an intuition of endogenous growth theory , analyzing the relationship between product growth rate (GDP) and the number of growth rates of patents filed by residents. The results indicate a statistically significant positive effect between patents filed during the previous period (t-1) and current economic growth (t). What reflects the importance of knowledge as being a decisive factor of growth.
    Keywords: Patent , Innovation, Growth , VAR , Tunisia
    JEL: C1 C22 O31 O4 O47
    Date: 2017–01
  20. By: Cihan Artunc (University of Arizona); Timothy Guinnane (Economic Growth Center, Yale University)
    Abstract: The relationship between legal forms of firm organization and economic development remains poorly understood. Recent research disputes the view that the joint-stock corporation played a crucial role in historical economic development, but retains the view that the costless firm dissolution implicit in non-corporate forms is detrimental to investment. We demonstrate the benefits of costless dissolution in an environment where potential business partners are not fully-informed. Using a multi-armed bandit model, we show that an experimentation mechanism creates a spike in dissolution rates early in firms’ lives, as less productive matches break down and agents look for better matches. We test the model’s predictions using a novel firm-level dataset comprising more than 12,000 enterprises established in Egypt between 1910 and 1949. Most partnerships dissolved within two years; afterwards, the risk of dissolution dropped to a lower, steady level. Corporations had much more uniform and lower attrition rates. Companies made up of partners who had been in business before also had flatter dissolution rates, confirming the link between learning and the early break-up of partnerships. The partnership reflected a trade-off between committing to a partner and sorting into potentially better matches.
    Keywords: firm longevity, multi-armed bandits, business enterprise forms
    JEL: D21 D22 N15 O16 L26
    Date: 2017–05
  21. By: Esteves, Rui; Geisler Mesevage, Gabriel
    Abstract: In the 1840s, speculation in railway shares in the UK prompted the creation of hundreds of new railway companies. Each company needed to petition Parliament for the approval of new railway routes. In this paper, we investigate whether parliamentary regulation of the new railway network was distorted by politicians' vested interests. Drawing on methods from peer-effects analysis, we identify situations where MPs could have traded votes with specific colleagues in order to get their preferred projects approved (logrolling). We confirm that logrolling was both prevalent and significant. Our estimates suggest that at least a quarter of approved lines received their bills because of logrolling. Companies approved through logrolling also underperformed in the stock market during the railway bubble and after its final crash in 1847.
    Keywords: networks; railways; rent-seeking; voting
    JEL: D72 N44 N73
    Date: 2017–07
  22. By: Couharde, Cecile; Delatte, Anne-Laure; Grekou, Carl; Mignon, Valerie; Morvillier, Florian
    Abstract: The aim of this paper is to present EQCHANGE the new database developed by the CEPII on effective exchange rates. EQCHANGE includes two sub-databases containing data on (i) nominal and real effective exchange rates, and (ii) equilibrium real effective exchange rates and corresponding currency misalignments for advanced, emerging and developing countries. More specifically, the first sub-database delivers effective exchange rates for 187 countries that are computed under three different weighting schemes and two panels of trading partners (186 and top 30) over the 1973-2016 period. The second sub-database provides behavioral equilibrium exchange rate (BEER) estimates and corresponding currency misalignments for 182 economies over the 1973-2016 period. We describe the construction of the two datasets and illustrate some possible uses by presenting results concerning the evolution and main characteristics of currency misalignments in the world from 2015 to 2016. By providing publicly available indicators of equilibrium exchange rates, EQCHANGE aims to contribute to key debates in international macroeconomics.
    Keywords: Exchange rates; Equilibrium exchange rates; Currency misalignments
    JEL: C23 C82 F31
    Date: 2017–07
  23. By: Fischer, Stanley (Board of Governors of the Federal Reserve System (U.S.))
    Date: 2017–07–31

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