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on Business, Economic and Financial History |
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Issue of 2021‒11‒29
twenty papers chosen by |
| By: | Hugh Rockoff |
| Abstract: | When the Great Depression struck the United States, Oliver M.W. Sprague was America’s foremost expert on financial crises. His History of Crises under the National Banking System is a frequently cited classic. Had he diagnosed a banking panic and called for an aggressive response by the Federal Reserve, it might have made a difference; but he did not. Sprague’s misdiagnosis had, I argue, two causes. First, the crisis lacked the symptoms of a panic, such as high short-term interest rates in the New York money market, which Sprague had identified from his studies of previous crises. Second, Sprague’s macro-economic ideas led him to conclude that an expansionary monetary policy would be of little help once a depression was underway. Sprague’s main concern was that abandoning the gold standard would intensify the crisis, a concern that led him to resign his position as advisor to the U.S. Treasury to protest Roosevelt’s gold policy. |
| JEL: | B2 N12 N2 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29416&r= |
| By: | Herrade Igersheim |
| Abstract: | Although falling within the scope of political and moral philosophy, it is well known that A Theory of Justice has also had a great impact on economists. As such, Rawls put great emphasis on his desire to combine economics and philosophy, and particularly to deal with rational choice theory, notably and famously claiming that “the theory of justice is a part, perhaps the most significant part, of the theory of rational choice” (1971, 15). After the publication of A Theory of Justice, aspects of it came in for criticism – often very vehement – by economists such as Arrow (1973), Musgrave (1974), Harsanyi (1975) and later by Sen (1980). Rawls’s immediate answers (1974a,b in particular) showed that he first wanted to maintain a dialogue with the economists, but the later evolutions of his works (1993, 2001) clearly demonstrated that he had removed himself from the economic realm, returning to his initial philosophical territory in order to overcome the internal inconsistencies of A Theory of Justice. In this paper, by focusing extensively on the letter exchanges between Rawls and the economists before and after the publication of A Theory of Justice, I attempt to shed light on other (complementary) elements which can explain Rawls’s retreat from the realm of economics, and his progressive disenchantment regarding the possibility of a dialogue on equal footing between economists and philosophers. |
| Keywords: | Rawls, Sen, social justice, rational choice. |
| JEL: | B21 B31 D63 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2021-47&r= |
| By: | Conti, Gabriella (University College London); Poupakis, Stavros (University College London); Ekamper, Peter; Bijwaard, Govert (NIDI - Netherlands Interdisciplinary Demographic Institute); Lumey, Lambert H. (Columbia University) |
| Abstract: | This paper investigates impacts, mechanisms and selection effects of prenatal exposure to multiple shocks, by exploiting the unique natural experiment of the Dutch Hunger Winter. At the end of World War II, a famine occurred abruptly in the Western Netherlands (November 1944 - May 1945), pushing the previously and subsequently well-nourished Dutch population to the brink of starvation. We link high-quality military recruits data with objective health measurements for the cohorts born in the years surrounding WWII with newly digitised historical records on calories and nutrient composition of the war rations, daily temperature, and warfare deaths. Using difference-in-differences and triple differences research designs, we show that the cohorts exposed to the Dutch Hunger Winter since early gestation have a higher Body Mass Index and an increased probability of being overweight at age 18, and that this effect is partly accounted for by warfare exposure and a reduction in energy-adjusted protein intake. Moreover, we account for selective mortality using a copula-based approach and newly-digitised data on survival rates, and find evidence of both selection and scarring effects. These results emphasise the complexity of the mechanisms at play in studying the consequences of early conditions. |
| Keywords: | health, fetal origins hypothesis, famine, prenatal exposure |
| JEL: | I10 J13 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14789&r= |
| By: | Cage, Julia (Sciences Po, Paris); Dagorret, Anna (Stanford U); Grosjean, Pauline (UNSW Sydney); Jha, Saumitra (Stanford U) |
| Abstract: | Can heroes legitimize strongly-proscribed and repugnant political behaviors? We exploit the purposefully arbitrary rotation of French regiments to measure the legitimizing effects of heroic credentials. 53% of French line regiments happened to rotate under a specific general, Philippe Petain, during the pivotal WWI battle of Verdun (1916). Using recently-declassified intelligence data on 95,314 individuals, we find the home municipalities of regiments serving under Petain at Verdun raised 7% more Nazi collaborators during the Petain-led Vichy regime (1940-44). The effects are similar across joining Fascist parties, German forces, paramilitaries that hunted Jews and the Resistance, and collaborating economically. These municipalities also increasingly vote for right-wing parties between the wars. The voting effects persist after WWII, becoming particularly salient during social crises. We argue these results reflect the complementary role of the heroes of Verdun in legitimizing and diffusing the authoritarian values of their former leader. |
| JEL: | D74 L14 N44 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3923&r= |
| By: | John Fitzgerald (Department of Economics, Trinity College Dublin); Seán Kenny (Department of Economic History, Lund University); Alexandra Lopez Cermeno (Department of Economic History, Lund University) |
| Abstract: | The pandemic-induced economic crisis has seen a massive build up in savings across Europe and North America as households could not spend their income as they normally would. The last time that consumers were seriously rationed was during the Second World War. This paper models the behaviour of households during the War years and its immediate aftermath in Ireland, Sweden, the US and the UK. We first estimate overall consumption and then consider how total consumption was allocated over different categories of goods, including rationed goods. The model shows that consumers saved rather than spend on available unrationed goods and services. These savings were held in liquid form and, once the War was over and rationing eased, a consumption boom transpired. However, only some of the savings were spent on previously rationed goods as significant excess savings were also converted into physical assets in the housing market. There is evidence that this pattern is being repeated as the Covid-19 crisis eases. |
| Keywords: | Rationing, consumer behaviour, consumption, savings, Second World War, economic history |
| JEL: | D12 D14 N12 N14 N30 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep1221&r= |
| By: | Nicola Amendola; Giacomo Gabbuti; Giovanni Vecchi |
| Abstract: | We argue against the use of composite indices, such as the Human Development Index (HDI), in economic history. We show that the HDI can be interpreted as a formal representation of the analyst's ethical system. We support our claim by introducing a new class of paternalistic social welfare functions (Graaff 1957, Mas-Colell, 1995) which encompasses all the HDI formulas put forth by the literature. The theoretical framework is illustrated by an empirical investigation of the long-run evolution of Italians' living standards and civic liberties. We conclude that any history based on composite indices is one where both data and history play a minor role, if any. |
| Keywords: | Human development index; economic wellbeing; composite indices; living standards; CES; social welfare functions; Italy. |
| Date: | 2021–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2021/42&r= |
| By: | Chwieroth, Jeffrey M.; Walter, Andrew |
| Abstract: | How should we understand proliferating government bailouts of financial firms in successive crises since the 1970s and the rise of neoliberal norms opposing such discretionary public assistance? We argue that the relationship between bailouts and neoliberalism is one of mutually reinforcing coexistence. First, a new “bailout coalition” including much of the middle class has emerged in many countries over the past century, pushing governments to deliver extensive bailouts in crises. Second, many actors, including some within the bailout coalition, view neoliberal policy norms as a useful constraint on public assistance to other groups. This is especially visible during foreign crises. Third, governments often manage these conflicting pressures via a strategy of institutional “conversion,” adapting institutions and rules associated with neoliberalism to new purposes. This has generated rising costs, including declining policy coherence, increasing financial fragility, and rising distributional and identity conflict. |
| Keywords: | ES/K002309/1; MD130026; DP140101877; UKRI fund |
| JEL: | F3 G3 N0 |
| Date: | 2021–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:111871&r= |
| By: | Karol J. Borowiecki (Department of Economics, University of Southern Denmark) |
| Abstract: | Teachers and mentors in creative fields ranging from scientific research to the arts may shape their students' skills and views of the craft, and in turn the work they produce. How significant is this influence, how long does it last, and are there consequences for the variety and quality of students' inventive output? We study these questions in the context of Western music composition over five centuries, a historically important cultural institution, and in a setting where composers' musical lineage is well-documented, the content of their work can be directly compared, and its lasting value can be measured. We find strong evidence of influence, document when it arises and persists, and evaluate its consequences. The results provide insight into the production of creative or intellectual output, specifically around questions of where ideas come from, why certain ideas get produced as opposed to others, and what the ramifications might be. |
| Keywords: | teacher influence, creativity, cultural transmission, transmission of ideas, music history |
| JEL: | I21 J24 N30 O31 Z11 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep0521&r= |
| By: | Michela Giorcelli; Bo Li |
| Abstract: | This paper studies the causal effect of technology and knowledge transfers on early industrial development. Between 1950 and 1957, the Soviet Union supported the “156 Projects” in China for the construction of technologically advanced, large-scale, capital-intensive industrial facilities. We exploit idiosyncratic delays in project completion and the unexpected end of the Sino-Soviet Alliance, due to which some projects received Soviet technology embedded in capital goods and know-how, while others were eventually realized by China alone using domestic technology. We find that receiving both Soviet technology and know-how had large, persistent effects on plant performance, while the effects of receiving only Soviet capital goods were short-lived. The intervention generated horizontal and vertical spillovers, as well as production reallocation from state-owned to privately owned companies since the late 1990s. |
| JEL: | L2 M2 N34 N64 O32 O33 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29455&r= |
| By: | Lukas Kuld (Department of Business and Economics, TU Dortmund); Sara Mitchell (Department of Business and Economics, TU Dortmund); Christiane Hellmanzik (Department of Business and Economics, TU Dortmund) |
| Abstract: | We investigate quantity and quality effects of agglomeration in the careers of American authors. We combine novel yearly data on publications and work location of 471 eminent authors with US Census data to provide a complete picture of industry concentration and agglomeration economies from 1850-2000. We find that, on aggregate, an author has 40\% higher odds of publishing while living in New York City. The effect size increases with industry concentration but declines with industry maturity and technological progress after WWII. Taking relocation of working-age authors to New York City as an event study, we see a significant immediate increase in publications after arriving. In comparison, the penalty of moving away from the city is mild. Works published while an author lived in New York City were more likely to achieve critical acclaim and are more likely to have lasting influence in terms of present-day popularity. |
| Keywords: | Agglomeration economies, urban history, geographic clustering, productivity, literature, creativity |
| JEL: | N30 N90 R11 Z11 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep0821&r= |
| By: | Kim Ristolainen (Department of Economics, Turku School of Economics, University of Turku, Finland); Tomi Roukka (Department of Economics, Turku School of Economics, University of Turku, Finland); Henri Nyberg (Department of Mathematics and Statistics, University of Turku, Finland) |
| Abstract: | We show that financial crises are preceded by changes in specific types of narrative information contained in newspaper article titles. Our novel international dataset and the resulting empirical evidence are gathered by integrating information from a large panel of economic news articles in global newspapers between the years 1870 and 2016 with conventional macroeconomic and financial indicators. We find that the predictive information of newspaper article titles that signals coming crisis episodes is substantial over and above the macroeconomic and financial indicators. The new indicators capture common features that have often been discussed as potential causes of specific crises but which have not been incorporated into empirical models. |
| Keywords: | financial crisis, text data, leading indicators, topic model |
| JEL: | G00 G01 N01 C25 C82 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:tkk:dpaper:dp149&r= |
| By: | Claude Diebolt; Magali Jaoul-Grammare; Faustine Perrin |
| Abstract: | L’objectif de cet article est d’étudier les liens entre le financement de l’instruction primaire, la scolarisation et la croissance économique en France au XIXe siècle. Pour ce faire, nous utilisons des informations sur les financements alloués par l’État, les départements, les communes, et les ménages sur la période 1820-1913. Pour mener notre analyse, nous procédons en deux étapes. Tout d’abord, nous analysons l’évolution des différents types de financement dans le temps et nous nous appuyons sur la méthodologie des points atypiques pour détecter l’existence d’éventuelles ruptures dans les séries. Ensuite, nous étudions les relations de causalité entre les différents types de financement, le nombre d’enfants scolarisés dans l’instruction primaire et le produit intérieur brut. Au cours de la période étudiée, nos résultats confirment que la scolarisation de masse est d’abord portée par la volonté politique avant de s’expliquer par l’accroissement des richesses disponibles dans l’économie. |
| Keywords: | Instruction primaire ; Financement ; XIXe siècle ; France. |
| JEL: | H52 I24 N33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2021-46&r= |
| By: | Lima, Pedro G. (University of Porto); Teixeira, Pedro N. (University of Porto); Silva, Sandra T. (University of Porto) |
| Abstract: | Since the late twentieth century there has been a growing interest in academic and political circles on inequality. In this paper, we develop a systematic analysis of the literature on this topic published in economic journals since the 1950s. This is done through an innovative approach that presents (i) an identification and characterization of the main streams of research about Inequality since the 1950s; (ii) the development of a new method of analysis that combines (ii-a) a quantitative bibliometric analysis using the VOSviewer software, which maps them into different clusters, (ii-b) a qualitative analysis, where we determine the main streams of research, based, not only on the content of each reference, but also on the context where they are cited, and provide context to the development of each cluster by analysing the most important journals, authors, and institutions. The analysis leads to the identification of seven clusters, each of them with several streams of research. Each of the clusters is characterized according to several aspects such as the journals where the contributions were published, the alma matres and academic affiliations of the authors, and the countries in which those authors are based. The leading journals and the dominant academic institutions are the same as found in economics broadly considered, but they vary from cluster to cluster. Among the authors that have had major influence in the development of this field of economic research, stand out Anthony Atkinson, Simon Kuznets, Michael Kalecki, and Thomas Piketty. |
| Keywords: | inequality, distribution of income, wealth, bibliometrics, Kuznets, Atkinson, Piketty, Kalecki |
| JEL: | B2 D31 E24 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14777&r= |
| By: | Remy Guichardaz; Julien Pénin |
| Abstract: | The development of a dynamic model of endogenous economic change was a major challenge for Schumpeter throughout his academic career. With regard to this life-long objective, this work provides an explanation of why it was impossible for Schumpeter to offer a convincing endogenous theory of the emergence of novelty. We show that Schumpeter’s view of the apparition of pure novelty is centered around an individual and elitist dimension of entrepreneurship and an energetic and vitalist axiom of social change, which is by nature hardly compatible with endogenous evolution. Furthermore, our revisiting of the last writings of Schumpeter shows that, when it comes to the issue of the emergence of pure novelty, the impossibility persisted until his death. Contrary to the claim of some commentators, even the old Schumpeter remained stuck into an individualistic, elitist and energetic view of the generation of pure novelty. |
| Keywords: | Schumpeter; entrepreneur; economic evolution; endogenous change; innovation. |
| JEL: | B15 O3 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2021-41&r= |
| By: | Eduardo Corso (Central Bank of Argentina) |
| Abstract: | For more than half a century, the evolution of saving patterns in Argentina has been characterized by the dollarization of households and firms’ stores of value. We will explore the main elements that conditioned the saving decisions of households and firms throughout the argentine monetary history. To this end, we will begin by analyzing the evolution of the real returns of the main private sector’s stores of value over almost eighty years. Understanding the effects of changing monetary and exchange rate environments on real returns, constitutes a central element of the analysis. It allows us to shed light on asset substitution between stores of value denominated in local currency and those denominated in dollars. From a methodological perspective, in order to rationalize the households and firms’ stores of value demands, we will use optimal portfolio selection approaches under alternative preferences schemes. The main contribution of this article is to use portfolio theory to show that the dollarization of private sector stores of value observed in Argentina for more than fifty years constitutes an adaptive response by households and firms exposed to uncertain economic environments, characterized by disruptive exchange rate shocks and persistent inflationary processes. |
| Keywords: | dollarization, store of value, portfolio selection |
| JEL: | E41 E44 G11 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:bcr:wpaper:202195&r= |
| By: | Kano, Kazuko; Kano, Takashi |
| Abstract: | The main tenet of the New Keynesian (NK) paradigm is that price dispersion caused by nominal price stickiness is the primary source of allocative inefficiency. This study empirically evaluates the welfare implications of NK models by observing how internal and external price dispersion responds to two types of large aggregate shocks: high inflation and sharp currency depreciation. For this purpose, we consider the history of US military deployment on a small southern island in Japan called Okinawa following the Pacific War. We investigate unique data variations in micro-level retail prices surveyed in Okinawa and mainland Japan before and after the Okinawan reversion to Japanese sovereignty in May of 1972. By considering the Okinawan experience of three currency regimes during the high inflation period of the early 1970s as valid quasi-natural experiments, we identify statistically significant deteriorations of currency misalignment associated with the sudden exogenous large USD depreciation versus the JPY following the Nixon Shock. Furthermore, we observe that these massive aggregate shocks left the average absolute size of price changes mostly unchanged, but significantly increased the average frequency of price changes in Okinawa. Because a calibrated small open-economy menu cost model fits these empirical findings better than the Calvo model, the welfare costs of exchange rate fluctuations may be more elusive than suggested by the openeconomy NK literature. |
| Keywords: | Currency regime, Currency misalignment, Welfare cost, Okinawan reversion, Menu cost model |
| JEL: | F31 F41 F45 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-114&r= |
| By: | Stan Veuger (American Enterprise Institute); Leah Brooks (The George Washington University Trachtenberg School of Public Policy and Public Administration); Jonathan Rose (Federal Reserve Bank of Chicago); Daniel Shoag (Case Western Reserve University Weatherhead School of Management) |
| Abstract: | This paper studies the urban development impacts of the civil disturbances that took place in Washington, DC following the assassination of Martin Luther King Jr. in 1968. |
| Keywords: | capital investment, Civil rights, development, Economic development, Washington D.C. |
| JEL: | A |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:aei:rpaper:1008572642&r= |
| By: | Jean-Sylvestre Bergé (Université Côte d'Azur, France; CNRS, GREDEG) |
| Abstract: | In his 1978 lecture at the Collège de France on the theme of "Security, territory and population", Michel Foucault established a link between "circulation", "security" and "space". He depicted the approach to circulation in the 17th and 18th centuries, based on legal tools such as international agreements and national or local regulations, as the expression of a desire to secure flows in the different spaces (maritime and terrestrial). The objective of this article, intended for an interdisciplinary readership, is to counter this analysis by arguing that, for a certain number of major forms of circulation (release of greenhouse gases, spread of products and organisms of all kinds, pandemics, dissemination of information, movement of persons, data, capital, waste, etc.), mankind is living with an illusion of control. The question is no longer who controls what, but rather who is suffering the loss of control? To answer this question, we must rethink our traditional models of circulation and control. All sorts of a priori approaches to circulation can be discussed (magical, liberal, social, ontological, fundamental, modal). As for control, we must recognise that it is perennially exercised in an environment full of holes. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2021-37&r= |
| By: | Brad Chattergoon; William R. Kerr |
| Abstract: | U.S. invention has become increasingly concentrated around major tech centers since the 1970s, with implications for how much cities across the country share in concomitant local benefits. Is invention becoming a winner-takes-all race? We explore the rising spatial concentration of patents and identify an underlying stability in their distribution. Software patents have exploded to account for about half of patents today, and these patents are highly concentrated in tech centers. Tech centers also account for a growing share of non-software patents, but the reallocation, by contrast, is entirely from the five largest population centers in 1980. Non-software patenting is stable for most cities, with anchor tenants like universities playing important roles, suggesting the growing concentration of invention may be nearing its end. Immigrant inventors and new businesses aided in the spatial transformation. |
| JEL: | L86 O30 O31 O32 O33 O34 R11 R12 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29456&r= |
| By: | Juan Gálvez; Vicente Pinilla; Raúl Serrano |
| Abstract: | Considering the transformation that the Spanish wine sector must have faced –a decreasing wine consumption and targeting towards the foreign market– the purpose of this work is to analyze how the Aragonese Protected Designations of Origin have reacted between 1995 and 2017. Thus, we will study –from a theoretical perspective– the strategy of agglomeration (clusters) and the benefits that these techniques bring to the wineries; subsequently we will address the main characteristics of the sector, using the StructureConduct-Performance Paradigm (SCP), which will provide us with information about the number of companies in the sector, its concentration ratio, behavior strategies, internationalization, sales, economic and financial rates of returns and indebtedness. |
| Keywords: | wine economics, protected designations of origin, business models premium |
| JEL: | L10 L20 L66 N84 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:seh:wpaper:2106&r= |