nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2018‒10‒01
twenty-one papers chosen by

  1. "A British merchant in Turkey: Freeman of the Levant Company and Consul Donald Sandison at Bursa, 1795-1868" By Emine Zeytinli
  2. Trade and Immigration, 1870-2010 By David S. Jacks; John P. Tang
  3. Re-estimating the Gainful Employment Rate of Older Men: the United States, 1870 to 1930. By Gardner, John; Gratton, Brian; Moen, Jon
  4. Long-run spatial inequality in South Africa: early settlement patterns and separate development By Dieter von Fintel
  5. African Migration to Europe and the Emergence of Modern Slavery Africa: Who is to Blame? Nigeria in Perspectives By SHEHU HASHIMU
  6. Debt dilution in 1920s America: lighting the fuse of a mortgage crisis By Postel-Vinay, Natacha
  7. For Richer, for Poorer: Bankers' Liability and Risk-taking in New England, 1867-1880 By Peter Koudijs; Laura Salisbury; Gurpal Sran
  8. The Intergenerational Transmission of Human Capital: Evidence from the Golden Age of Upward Mobility By David Card; Ciprian Domnisoru; Lowell Taylor
  9. The history of the financial markets group By Goodhart, Charles
  10. Are managerial capitalism and crony capitalism incompatible? The adaptation of the Spanish corporate elite to the capitalist system in the last century By Juan A. Rubio-Mondéjar; Josean Garrués-Irurzun; Luis Chirosa-Cañavate
  11. Outside Lending in the New York City Call Loan Market By Moen, Jon; Tallman, Ellis
  12. The Behavioral Economics of John Maynard Keynes By Ronald Schettkat
  13. Six Honest Serving Men – plus two – Question Real Estate Investment Theory and Practice By Stephen E. Roulac
  14. History of Commercial Property Derivatives By Walter Torous
  15. De l'algèbre de Boole à l'apprentissage organisationnel : une histoire logique de la cybernétique et du management By Baptiste Rappin
  16. Investment, Current Account, and the Long Swings of Unemployment By Hian Teck Hoon; Margarita Katsimi; Gylfi Zoega
  17. The Making of the Modern Metropolis: Evidence from London By Stephan Heblich; Stephen J. Redding; Daniel M. Sturm
  18. A century of tenant protection in Germany: An emergency measure that became permanent By Konstantin Kholodilin
  19. Private R&D Investment in the U.S. Food and Agricultural Sectors, 1950-2014 By Lee, Kyuseon; Pardey, Philip G.; Dehmer, Steven P.; Miller, Steve J.
  20. The political economy of reforms in central bank design: evidence from a new dataset By Davide Romelli
  21. The cultural origin of saving behavior By Costa-Font, Joan; Giuliano, Paola; Özcan, Berkay

  1. By: Emine Zeytinli (University of Leicester)
    Abstract: "Great Britain was effective in influencing the Ottoman Empire with commercial interests. Anglo- Ottoman commercial practices strengthened diplomatic relations and early British merchants carried diplomatic mission as well through the British Levant Company. This ended by the 1820s with the abolishing of the Levant Company. British merchants operating in the Ottoman dominions increased after the second decade of the nineteenth century and Anglo-Ottoman Commercial Agreement of 1838 made a positive contribution to this increase in coming decades. Moreover, diplomatic missions extended to the inland trade and production centres. Donald Sandison was one of the British/Scottish merchants settled in Constantinople, the capital of Ottoman Empire and operated his commercial activities from the early nineteenth century. He established business partnership and provided protection to some local Christian and Armenians through the British Embassy. He was initially a representative of the British East India Company and later admitted to be a member of the British Levant Company in 1817 and therefore, he was one of the privileged freemen of the company prior to his consular post. Sandison was appointed salaried consul for Bursa with the liberty to trade after operating as a merchant for more than two decades. He acted as the first consul to Bursa, one of the earliest industrial city, between 1838 and 1868. Sandison’s consular post were very significant as Bursa was a caravan terminal for the silk trade route and a silk cultivation centre that provided domestic and international demand of raw silk and silk fabric. British existence at Bursa was important during the period of Sandison as reeling silk industry developed due to the demand from European weavers and appreciation of British silk textile products in Ottoman market. Sandison also was one of the foreign merchants provided technology and for the industry to local weavers and carried out trade between British and Ottoman market. British foreign policy to the Ottoman Empire was largely economic within the Commercial Convention of 1838 after 1840s shaped by the information of consuls in a certain city or region, it aimed to keep the post for long years to have reliable and continuous information. The role of consuls in the Levant was mainly observing commercial potential and agricultural production of the region or the city. They were both diplomatic and commercial agents providing these information for shaping commercial strategy of Britain for a particular region. Therefore, reports were essential for British manufacturing seeking raw materials from the Ottoman market or aiming to penetrate the Ottoman market with semi-finished or finished goods. This bibliographic study focuses on an oversea British community member at Constantinople as a merchant by the first quarter of the nineteenth century and then a prestigious position, consul of Bursa for the commercial interest of Great Britain by the second quarter. Therefore, his life history and professional career is analysed in two periods; the first period covers Sandison’s commercial operations as a merchant of the Levant Company in Constantinople after the second decade of the nineteenth century. His business was closely related with the economic and political fluctuations of the Ottoman Empire as well as operations of the British Levant Company. Dissolution of the Levant Company in 1825 and uprising and later abolition of military units called Janissaries in 1826 necessitated him to reshape and re-establish his business at the end of 1820s."
    Keywords: "Donald Sandison, British merchant, Levant Company, Consul, Bursa, trade."
    JEL: N00
    Date: 2018–04
  2. By: David S. Jacks; John P. Tang
    Abstract: In this chapter, we describe long-run trends in global merchandise trade and immigration from 1870 to 2010. We revisit the reasons why these two forces moved largely in parallel in the decades leading up to World War I, collapsed during the interwar period, and then rebounded (but with much more pronounced growth in trade than in immigration). More substantively, we also document a large redistribution in the regional sources of goods and people with a shift from the former industrialized core countries—especially Europe—to those in the former periphery—especially Asia—as well as a very striking change in the composition of merchandise trade towards manufactured goods precisely dating from 1950. Finally, using a triple differences framework in combination with a dramatic change in US immigration policy, we find evidence that immigration and trade potentially acted as substitutes, at least for the United States in the interwar period.
    JEL: F10 N30 N70
    Date: 2018–09
  3. By: Gardner, John; Gratton, Brian; Moen, Jon
    Abstract: Analyses of the economic effects of the introduction of the public pension system on older men in the US have been hamstrung by difficulties generating reliable estimates of historical labor-force participation rates using data from early US censuses that only asked respondents about their occupations and not whether they were actively employed. We extend a unique feature of the 1901 Canadian census, which asked about retirement status as well as occupation, to older men in the 1900 US Census to estimate labor-force participation rates that adjust for misreporting of employment status. Our estimates show that reported rates substantially overestimate labor-force participation among older men. We also show that adjusted rates based on an econometric correction for misclassified limited dependent variables produces are similar to those based on the 1901 Canadian census. Using this technique to extend our adjustment shows that reported rates overstate older men’s labor-force participation rates in the 1880, 1910, 1920 and 1930 census, as well as the decline in those rates between 1900 and 1910.
    Keywords: Retirement, census, gainful employment, misclassification
    JEL: N31 N32
    Date: 2018–04
  4. By: Dieter von Fintel (Department of Economics, Stellenbosch University)
    Abstract: New economic geography theories predict that historically densely settled areas also become more industrialised. Industrial agglomeration has therefore cultivated spatial inequalities in all parts of the world. South Africa presents an interesting case study, where institutional failures interrupted the ‘usual’ agglomeration process. On the one hand, current day metropolitan regions are located in historically densely populated areas. On the other hand, apartheid-era homelands also had highly concentrated populations, but did not industrialise to the same extent as other parts of South Africa. Much earlier in history, following the mfecane, these locations attracted migrants in search of favourable agricultural conditions and physical security in the face of conflict (they were high rainfall, rugged areas). The benefit of settling in these areas, however, only remained prior to imposed restrictions on land ownership (1913 Land Act) and movement of people (during apartheid). This paper decomposes modern spatial inequality, and establishes that agglomerations and historical institutional failures explain large proportions of spatial inequality. Furthermore, the homelands wage penalty reverses once these controls are introduced into various models: had agglomeration taken its course without institutional constraints, the homelands would likely have developed into high paying local economies. While new economic geography theories hold in the urban core, the densely populated former homelands did not follow this trajectory. Spatial inequality is therefore more severe than it would have been had institutional failures not prevented the former homelands from industrialising at the same pace as other historically densely populated areas.
    Keywords: Spatial inequality, economic geography, apartheid homelands, African economic history
    JEL: N97 R11 D31
    Date: 2018
  5. By: SHEHU HASHIMU (Umaru Ali Shinkafi Polytechnic Sokoto)
    Abstract: Ever since the beginning of exploitation, penetration and colonialism of African continent by the European capitalists in the 17th and 18th centuries, the history of African perspectives changed from peaceful direction to a conflicting one. This is because institutions such economic, traditional ruling system, cultural heritage, tradition of excellence as well as the large population of the continent were either destroyed or had their existence shaped by this evil of colonization. For those who read African history they were aware of the African underdevelopment architected by colonialism. At the end of the day African?s leadership was left on the hands of indigenous people without a blue print to guide the new leadership. It?s against this background that this paper examines the current situation of this massive migration to Europe by Africans especially with Nigeria as a reference in perspective. The cause, consequences and who are to blame for this unprecedented event of modern slavery are part of the discussions of the paper. Again, bad governance, corruption coupled with leadership style and European economic policy toward developments in Africa contributed of threat through insecurity immigration. It forms another segment of this paper.
    Keywords: African; Migration; Europe; Slavery; Nigeria
    Date: 2018–06
  6. By: Postel-Vinay, Natacha
    Abstract: The idea that real estate could have contributed to banking crises during the Great Depression has been downplayed due to the conservatism of mortgage contracts at the time. For instance, loan-to-value ratios often did not exceed 50 per cent. Using newly discovered archival documents and data from 1934, this article uncovers a darker side of 1920s US mortgage lending: the so-called ‘second mortgage system’. As borrowers often could not make a 50 per cent down payment, a majority of them took second mortgages at usurious rates. As theory predicts, debt dilution, even in the presence of seniority rules, can be highly detrimental to both junior and senior lenders. The probability of default on first mortgages was likely to increase, and commercial banks were more likely to foreclose. Through foreclosure they would still be able to retrieve 50 per cent of the property value, but often after a protracted foreclosure process. This would have put further strain on banks during liquidity crises. This article is thus a timely reminder that second mortgages, or ‘piggyback loans’ as they are called today, can be hazardous to lenders and borrowers alike. It provides further empirical evidence that debt dilution can be detrimental to credit.
    JEL: N0 F3 G3
    Date: 2017–04–19
  7. By: Peter Koudijs; Laura Salisbury; Gurpal Sran
    Abstract: We study whether banks are riskier if managers have less liability. We focus on New England between 1867 and 1880 and consider the introduction of marital property laws that limited liability for newly wedded bankers. We find that banks with managers who married after a legal change had more leverage, were more likely to "evergreen" loans and violate lending rules, and lost more capital and deposits in the Long Depression of 1873-1878. This effect was most pronounced for bankers with wives from relatively wealthy families. We find no evidence that limiting liability increased firm investment at the county level.
    JEL: G01 G21 G28 N21
    Date: 2018–09
  8. By: David Card; Ciprian Domnisoru; Lowell Taylor
    Abstract: We use 1940 Census data to study the intergenerational transmission of human capital for children born in the 1920s and educated during an era of expanding but unequally distributed public school resources. Looking at the gains in educational attainment between parents and children, we document lower average mobility rates for blacks than whites, but wide variation across states and counties for both races. We show that schooling choices of white children were highly responsive to the quality of local schools, with bigger effects for the children of less-educated parents. We then narrow our focus to black families in the South, where state-wide minimum teacher salary laws created sharp differences in teacher wages between adjacent counties. These differences had large impacts on schooling attainment, suggesting an important causal role for school quality in mediating upward mobility
    JEL: I24
    Date: 2018–09
  9. By: Goodhart, Charles
    JEL: F3 G3
  10. By: Juan A. Rubio-Mondéjar (Universidad de Granada, Spain); Josean Garrués-Irurzun (Universidad de Granada, Spain); Luis Chirosa-Cañavate (Universidad de Granada, Spain)
    Abstract: In the last century, Spanish economic and society have experienced remarkable transformations, as the consolidation of a democratic State of law, and the access to the reduced club of developed countries. Such transformations have also reached the corporate elite. Nevertheless, has the professionalization of the managers of large companies represented a break with the old practices of crony capitalism? To answer this question, the paper analyzes the profiles of the presidents and CEO of the largest Spanish corporations, between 1917 and today. The application of prosopographic method to different aspects of the social capital of managers, on nine selected dates, will allow to understand better the evolution process of the Spanish corporate elite. This process includes an increase in managerial capabilities, due to the formation and cosmopolitan capital; but despite the advance of managerial capitalism, this has not meant the end of the so-called crony capitalism, —characteristic of both the Restoration and the Franco dictatorship—, and in the last decades it seems that there is again an "entrenchment" movement by the new business elite to defend their own interest to the detriment of those of the country.
    Keywords: Spain, Business Elite, Crony Capitalism, Social Capital
    JEL: N24 P12 H10 L40
    Date: 2018–09
  11. By: Moen, Jon; Tallman, Ellis
    Abstract: Before the Panic of 1907 the large New York City banks were able to maintain the call loan market’s liquidity during panics, but the rise in outside lending by trust companies and interior banks in the decade leading up the panic weakened the influence of the large banks. Creating a reliable source of liquidity and reserves external to the financial market like a central bank became obvious after the panic. In the call loan, like the REPO market in 2008, lack of information on the identity of lenders and volume of the market hindered attempts to stop panic-related depositor withdrawals. The call loan market did not contract after 1907; while the trust companies became less important, the New York national banks and outside lenders more than made up the difference.
    Keywords: call loan, clearing house, Panic of 1907, REPO
    JEL: N20 N21
    Date: 2018–04
  12. By: Ronald Schettkat
    Abstract: After the publication of Keynes’ “General Theory,” economics was frequently described as schizophrenia: (neo-) classical at the micro-level, but Keynesian at the macro-level. In actuality, Keynes’ revolution was, to a substantial part, based on the behavioral micro-foundations of the world we live in, which has been dismissed as ad hocery, or simply ignored or reclassified in the neoclassical synthesis. Keynes’ General Theory is truly general. It includes the full-employment equilibrium as a special case. In addition, its microeconomic foundations are broader than the extremely narrow behavioral assumption of the neoclassical model. Consequently, we argue that Keynes’ microeconomics – although not fully worked out - is actually revolutionary. This may be difficult for (neo-) classical economists to accept, but it is strongly confirmed by the recent results in behavioral economics. Keynes’ macroeconomics is the result of his microeconomics. Keynes’ theory is a criticism of (neo-) classical economics, where he offers alternatives from micro to macro. It is truly a general theory, micro and macro.
    Date: 2018–09
  13. By: Stephen E. Roulac
    Abstract: A century ago, Nobel literature laureate Rudyard Kipling, advanced the proposition that six critical lines of inquiry were fundamental to knowledge: What, Why, When, How, Where, and Who (Kipling, 1902) Had Kipling been writing today, likely he might have added two more honest serving men: Which and Whether. Knowledge derives from learning. In common with any significant, high-stakes, important undertaking, knowledge of real estate investment – its theory and practice — is a central critical success factor. Learning is the intended byproduct of education. In the 21st century that education is expected to be both rigorous and relevant, concurrently sound in theory and practical in application. Real estate investment knowledge — specifically, how real estate investment theory and practice are conveyed through education — can appropriately be considered through addressing Rudyard Kipling’s Six Honest Serving Men – Plus Two.
    JEL: R3
    Date: 2016–12–01
  14. By: Walter Torous
    JEL: R3
    Date: 2017–10–01
  15. By: Baptiste Rappin (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)
    Abstract: This article aims to establish the logical foundations of contemporary management. Taking cognizance of its cybernetic filiation, the author highlights the place of the modern logic revolution in the cybernetics before detecting its presence in management. More generally speaking, the intention is then extended to the logical-symbolic formalism of management.
    Abstract: Le présent article a pour objet d'établir les fondements logiques du management contemporain. Prenant acte de la filiation cybernétique de ce dernier, l'auteur met en évidence la place de la révolution de la logique moderne dans la cybernétique avant d'en déceler la présence dans le management. Le propos est ensuite étendu au forma-lisme logico-symbolique managérial de façon plus général. Mots clés : management, cybernétique, logique, apprentissage, formalisme.
    Keywords: Management,Cybernetics,Logic, Learning,Formalism,87,Management & Sciences Sociales,Cybernétique, théorie de l'information,Logique Booléenne,Apprentissage organisationnel,Formalisme
    Date: 2017–12–01
  16. By: Hian Teck Hoon (Singapore Management University); Margarita Katsimi (Athens University of Economics and Business); Gylfi Zoega (University of Iceland; Birkbeck, University of London)
    Abstract: We estimate the relationship between investment and unemployment over the time period 1960-2015 in 20 OECD countries. While neoclassical growth theory typically assumes full employment – with no effect of investment on unemployment – we find that over our sample period covering more than five decades, a statistically significant negative relationship does exist: when investment fell, unemployment increased. When the time period is broken down into two sub-periods to take account of the Great Recession, we find that the estimated coefficient of investment is slightly smaller when the period 2001-2015 is added to the 1960-2000 period. We also find a positive effect of the current account surplus on unemployment that very likely works through investment. A non-monetary model shows how an increase in policy uncertainty that sharply contracts investment and raises unemployment can lead to an increase in current account surplus.
    Keywords: Long swings of unemployment, investment, current account, Great Recession.
    JEL: E10 E22 E24
    Date: 2018–09
  17. By: Stephan Heblich; Stephen J. Redding; Daniel M. Sturm
    Abstract: Modern metropolitan areas involve large concentrations of economic activity and the transport of millions of people each day between their residence and workplace. We use the revolution in transport technology from the invention of steam railways, newly-constructed spatially-disaggregated data for London from 1801-1921, and a quantitative urban model to provide evidence on the role of these commuting flows in supporting such concentrations of economic activity. Steamrailwaysdramaticallyreducedtraveltimesandpermittedthefirstlarge-scaleseparationof workplace and residence. We show that our model is able to account for the observed changes in the organization of economic activity, both qualitatively and quantitatively. In counterfactuals, we find that removing the entire railway network reduces the population and the value of land and buildings in Greater London by 20 percent or more, and brings down commuting into the City of London from more than 370,000 to less than 60,000 workers.
    Keywords: agglomeration, urbanization, transportation
    JEL: O18 R12 R40
    Date: 2018–09
  18. By: Konstantin Kholodilin
    JEL: R3
    Date: 2017–03–01
  19. By: Lee, Kyuseon; Pardey, Philip G.; Dehmer, Steven P.; Miller, Steve J.
    Keywords: Agribusiness, Industrial Organization, Agricultural and Food Policy
    Date: 2017–06–15
  20. By: Davide Romelli (Trinity College Dublin)
    Abstract: What accounts for the worldwide changes in central bank design over the past four decades? Using a new dataset on central bank institutional design, this paper investigates the timing, pace and magnitude of reforms in a sample of 154 countries over the period 1972-2017. I construct a new dynamic index of central bank independence and show that initial reforms that increase the level of independence, as well as a regional convergence, represent important drivers of changes in central bank design. Similarly, an external pressure to reform, such as an IMF loan program, also increases the likelihood of reforms, while political factors or crises episodes have little impact. These results are robust to controlling for the direction and size of reforms, alternative indices of central bank independence and estimation strategies.
    Keywords: central banks, central bank independence, central bank governance, legislative reforms.
    JEL: E58 G28 N20 P16
    Date: 2018–09
  21. By: Costa-Font, Joan; Giuliano, Paola; Özcan, Berkay
    Abstract: Traditional economic interpretations have not been successful in explaining differences in saving rates across countries. One hypothesis is that savings respond to cultural specific social norms. The accepted view in economics so far is that culture does not have any effect on savings. We revisit this evidence using a novel dataset, which allows us to study the saving behavior of up to three generations of immigrants in the United Kingdom. Against the backdrop of existing evidence, we find that cultural preferences are an important explanation for cross-country differences in saving behavior, and their relevance persists up to three generations.
    JEL: N0
    Date: 2018–09–12

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