nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2021‒12‒20
seventeen papers chosen by
Bernardo Bátiz-Lazo
Northumbria University

  1. The Other Great Migration: Southern Whites and the New Right By Samuel Bazzi; Andreas Ferrara; Martin Fiszbein; Thomas P. Pearson; Patrick A. Testa
  2. Inequality, living standards, and growth: two centuries of economic development in Mexico† By Bleynat, Ingrid; Challú, Amílcar E.; Segal, Paul
  3. Some Alternative Monetary Facts By Mr. Manmohan Singh; Mr. Peter Stella
  4. Discrimination and State Capacity: Evidence from WWII U.S. Army Enlistment By Nancy Qian; Marco Tabellini
  5. The aftermath of sovereign debt crises: a narrative approach By Lennard, Jason; Kenny, Seán; Esteves, Rui
  6. Monthly Report No. 12/2021 By Vasily Astrov; Ruslan Grinberg; Vladislav L. Inozemtsev; Artem Kochnev
  7. Cash demand in times of crises By Rösl, Gerhard; Seitz, Franz
  8. Simulating long-term impacts of mortality shocks: learning from the cholera pandemic By Nicole El Karoui; Kaouther Hadji; Sarah Kaakai
  9. Opening Heaven’s Door: Public Opinion and Congressional Votes on the 1965 Immigration Act By Giovanni Facchini; Timothy J. Hatton; Max F. Steinhardt
  10. The impact of U.S. employer-sponsored insurance in the 20th century By Vegard M. Nygaard; Gajendran Raveendranathan
  11. The Old Institutional School and Labour Market Functions and Policies By Drakopoulos, Stavros A.; Katselidis, Ioannis
  12. Pollution Trends and US Environmental Policy: Lessons from the Last Half Century By Joseph S. Shapiro
  13. La revolución industrial y sus impactos directos e indirectos en la sociedad y en las empresas By Matías Di Fiore Bottinelli; Alberto Néstor Terlato
  14. Ceo pay and the rise of relative performance contracts: A question of governance? By Bell, Brian; Pedemonte, Simone; Van Reenen, John
  15. Credit, crises and inequality By Bridges, Jonathan; Green, Georgina; Joy, Mark
  16. Tyrannical participation approaches in China’s regeneration of Urban heritage areas: a case study of baitasi historic district, Beijing By Wei, Ran
  17. Ups and downs in finance, ups without downs in inequality By Godechot, Olivier; Neumann, Nils; Apascaritei, Paula; Boza, István; Hällsten, Martin; Henriksen, Lasse Folke; Hermansen, Are; Hou, Feng; Jung, Jiwook; Kodama, Naomi; Křížková, Alena; Lippényi, Zoltán; Marta, Elvira; Melzer, Silvia Maja; Mun, Eunmi; Sabanci, Halil; Soener, Matthew; Thaning, Max

  1. By: Samuel Bazzi; Andreas Ferrara; Martin Fiszbein; Thomas P. Pearson; Patrick A. Testa
    Abstract: This paper provides a novel perspective on the Great Migration out of the U.S. South. Using a shift-share identification strategy, we show how millions of Southern white migrants transformed the cultural and political landscape across America. Counties with a larger Southern white share by 1940 exhibited growing support for right-wing politics throughout the 20th century and beyond. Racial animus, religious conservatism, and localist attitudes among the Southern white diaspora hastened partisan realignment as the Republican Party found fresh support for the Southern strategy outside the South. Their congressional representatives were more likely to oppose politically liberal legislation, such as the Civil Rights Act of 1964, and to object to the Electoral College count in 2021. These migrants helped shape institutions that reinforced racial inequity and exclusion, they shared ideology through religious organizations and popular media, and they transmitted an array of cultural norms to non-Southern populations. Together, our findings suggest that Southern white migrants may have forever changed the trajectory of American politics.
    JEL: D72 J15 J18 N32 P16
    Date: 2021–11
  2. By: Bleynat, Ingrid; Challú, Amílcar E.; Segal, Paul
    Abstract: Historical wage and income data provide both normative measures of living standards, and indicators of patterns of economic development. This study shows that, given limited historical data, median incomes are most appropriate for measuring welfare and inequality, while urban unskilled wages can be used to test dualist models of development. We present new estimates of these series for Mexico from 1800 to 2015 and find that both have historically failed to keep up with aggregate growth: GDP per worker is now over eight times higher than in the nineteenth century, while unskilled urban real wages are only 2.2 times higher, and national median incomes only 2.0 times higher. From the perspective of inequality and social welfare, our findings confirm that there is no automatic positive relationship between economic growth and rising living standards for the majority. From the perspective of development, we argue that these findings are explained by a dual economy model incorporating Lewis's assumption of a reserve army of labour, and we explain why the decline in inequality predicted by Kuznets has not occurred.
    JEL: N36
    Date: 2021–08–01
  3. By: Mr. Manmohan Singh; Mr. Peter Stella
    Abstract: In this paper, we discuss the modern history of monetarism and its alternatives, as well as the changing empirical relationship of various measures of money and inflation. After demonstrating that previous naïve correlations between money and inflation as established in the 20th century literature have largely disappeared, we explain why this cannot be taken as support for an increased reliance on permanent monetary finance. Rather, we argue that rapid technological innovation in payments systems—both public and private—including in global pledged collateral markets, portends a declining demand for central bank liabilities.
    Keywords: money aggregates;monetary financing;central bank balance sheet;WP;bank reserves;interest rate;financial market;balance sheet expansion;money demand
    Date: 2021–01–08
  4. By: Nancy Qian; Marco Tabellini
    Abstract: This paper investigates the empirical relationship between inclusion and state capacity, as theorized by Besley and Persson (2009). We examine the impact of racial discrimination on Black U.S. military enlistment during the onset of WWII. We find that discrimination had a large and negative effect on volunteer enlistment after the Pearl Harbor attack. The result is robust to a large number of controls that account for potential confounders. The negative effect of discrimination is moderated by geographical proximity to Pearl Harbor, and is larger for educated men. We provide consistent evidence for Japanese Americans.
    JEL: B0 N12 P16
    Date: 2021–11
  5. By: Lennard, Jason; Kenny, Seán; Esteves, Rui
    Abstract: Default is as old as sovereign debt. Since 1820, sovereigns have spent 18% of time in a state of default. Despite the scale of the problem, the causes and consequences of defaults are still imperfectly understood. In this paper we quantify the aggregate cost of defaults, based on a sample of 50 sovereigns between 1870 and 2010. Since defaults are endogenous to the business cycle, we use the narrative approach to identify plausibly exogenous episodes. We find significant and persistent costs of defaults starting at 1.6% of GDP and peaking at 3.3% before recovering to the pre-crisis level after five years. Moreover, we identify a large heterogeneity of costs by the cause of default. Higher costs are associated with defaults initiated by negative supply shocks, political crises, or adverse terms of trade. In contrast, domestic demand shocks have a moderate effect that is quickly reversed.
    JEL: E32 F41 H63 N10 N20
    Date: 2021–11
  6. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Ruslan Grinberg; Vladislav L. Inozemtsev; Artem Kochnev (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: ​Special Issue 30th Anniversary of the Break-up of the USSR Chart of the month Post-Soviet space marked by economic divergence by Vasily Astrov 30 years without the USSR outcomes and lessons by Ruslan Grinberg The demise of the Soviet Union 30 years ago was very abrupt and largely unexpected, even by those who set it in motion. The economic consequences of its collapse as well as those of fully embracing free market ideology without preserving the benefits of the former system proved catastrophic. The current anti-democratic and anti-western backlash in Russia is arguably the result of these policy missteps and could have been avoided, had different policies been pursued at the time. Goodbye to the ‘post-Soviet space’ by Vladislav L. Inozemtsev Thirty years after the break-up of the USSR, the term ‘post-Soviet space’ is no longer appropriate. On the one hand, there has been a sharp economic divergence between the post-Soviet republics, with the southern ‘periphery’ performing much better than the western regions. On the other hand, Russia’s foreign policy has focused increasingly on Belarus and Ukraine, opening up opportunities in Central Asia for other global players. Laws of disintegration by Artem Kochnev When it comes to analysis of the Soviet legacy in Europe, one can hardly avoid discussions about unrecognised states. This piece contributes to the discussion by analysing the constitutional design of the late Soviet Union. It argues that the origins of the breakaway republics were rooted in a contradictory institutional design, which provided political leaders with both the legitimacy and the legal grounds to exploit a nationalist agenda amid rising political activism. Monthly and quarterly statistics for Central, East and Southeast Europe
    Keywords: catching-up, economic divergence, Belovezh Agreement, free market reforms, particularistic chauvinism, southern periphery, western periphery, Russia’s foreign policy, post-Soviet geopolitics, breakaway republics, constitutional design, self-determination, armed conflicts
    Date: 2021–12
  7. By: Rösl, Gerhard; Seitz, Franz
    Abstract: In this paper, we focus on the role of different types of crises (technological crises, financial market crises, natural disasters) and their effects on the demand for cash in an international context. It becomes evident that over the past 30 years cash demand always increased in times of crises, independent of the nature of the crisis itself.However, the type of crises determines whether small or large banknote denominations are affected more. In case of payment uncertainties, we find a crisis-related increased demand for small denominations, probably reflecting an increased demand for transaction balances. In times of uncertainties regarding the financial and/or general economic development (also possibly driven by natural disasters), large banknote denominations were comparatively more in demand indicating that the crises-related need for non-transaction balances was the dominant driver.
    Keywords: Cash,banknotes,crises,Covid
    JEL: E41 E51 E58
    Date: 2021
  8. By: Nicole El Karoui; Kaouther Hadji; Sarah Kaakai
    Abstract: The aim of this paper is to study the long-term consequence on longevity of a mortality shock. We adopt an historical and modeling approach to study how the population evolution following a mortality shock such as the COVID-19 pandemic could impact future mortality rates. In the first of part the paper, we study the several cholera epidemics in France and in England starting from the 1830s, and their impact on the major development of public health at the end of the nineteenth century. In the second part, we present the mathematical modeling of stochastic Individual-Based models. Using the R package IBMPopSim, this flexible framework is then applied to simulate the long-term impact of a mortality shock, using a toy model where nonlinear population compositional changes affect future mortality rates.
    Date: 2021–11
  9. By: Giovanni Facchini; Timothy J. Hatton; Max F. Steinhardt
    Abstract: The Immigration Act of 1965 marked a dramatic shift in policy and one with major long term consequences for the volume and composition of immigration to the United States. Here we explore the political economy of a reform that has been overshadowed by the Civil Rights and Great Society programs. We find that public opinion was against expanding immigration, but it was more favorable to abolishing the old country of origin quota system. Votes in the House of Representatives and the Senate were more closely linked to opinion on abolishing the country of origin quotas than to public opinion on the volume of immigration. Support for immigration reform initially followed in the slipstream of civil rights legislation both among members of Congress and their constituents. The final House vote, on a more restrictive version of the bill, was instead more detached from state-level public opinion on civil rights and gained more support from those whose constituents wanted to see immigration decreased.
    Keywords: US immigration policy, 1965 Immigration Act, Congressional voting
    JEL: N12 F22 J68
    Date: 2021–12
  10. By: Vegard M. Nygaard; Gajendran Raveendranathan
    Abstract: The introduction of employer-sponsored insurance (ESI) in the 1940s led to the largest decline in the uninsurance rate in U.S. history. To study the fiscal and welfare implications of this insurance expansion, we endogenize the selection of workers into jobs with and without ESI in a general equilibrium life-cycle model where consumers face idiosyncratic health shocks. Our model rationalizes non-targeted empirical patterns related to ESI coverage between 1940 and 2010 and in recent cross-sectional data. ESI leads to moderate welfare gains in the short run (0.5 percent of lifetime consumption for the average consumer) but zero gains or even moderate losses in the long run. The reason is that the health insurance benefit provided by ESI dominates in the short run but the tax increase required to offset ESI tax exemptions dominates in the long run. We substantiate these welfare estimates by showing that our model rationalizes both the level and rise in total ESI tax exemptions. Finally, we show that tax-financed universal health insurance — considered among policymakers in the 1930s — would have led to significantly higher welfare gains.
    Keywords: employer-sponsored insurance; general equilibrium life-cycle; heterogeneous agents; universal health-care insurance; welfare.
    JEL: E24 H51 I13 J33
    Date: 2021–12
  11. By: Drakopoulos, Stavros A.; Katselidis, Ioannis
    Abstract: The significant role of institutional and non-market factors in the functioning of an economic system was a core theme of the old institutional economists. They also criticised the narrow conception of economic welfare only in terms of efficiency and satisfaction of consumer interests. Instead, they focused on issues related to justice, human self-development and labourers’ welfare. Their conception of the labour market functions is an indicative example of the uniqueness of their approach. In contrast to the standard approach, labour market functioning does not depend only on the price mechanism, but is also affected by other key factors and parameters such as the social norms, several psychological factors and various labour institutions. This chapter seeks to examine and highlight the contribution of the old institutional economics towards labour market functions and policies. After presenting the origins and method of the School, it briefly compares old Institutionalism and early Neoclassical economics focusing on labour market issues. It also discusses the old institutional approach with respect to the collective action and labour market policy. The chapter concludes with Ross-Dunlop debate on labour unions and the case of minimum wages policy in order to emphasize the relevance of early institutional ideas in analysing contemporary labour market issues.
    Keywords: Institutional School; Economic Policy; Labour Policy; Labour Market Institutions
    JEL: B15 B25 J08
    Date: 2021
  12. By: Joseph S. Shapiro
    Abstract: This article proposes and evaluates four hypotheses about US pollution and environmental policy over the last half century. First, air and water pollution have declined substantially, although greenhouse gas emissions have not. Second, environmental policy explains a large share of these trends. Third, much of the regulation of air and drinking water pollution has benefits that exceed costs, although the evidence for surface water pollution regulation is less clear. Fourth, while the distribution of pollution across social groups is unequal, market-based environmental policies and command-and-control policies do not appear to produce systematically different distributions of environmental outcomes. I also discuss recent innovations in methods and data that can be used to evaluate pollution trends and policies, including the increased use of environmental administrative data, statistical cost-benefit comparisons, analysis of previously understudied policies, more sophisticated analyses of pollution transport, micro-macro frameworks, and a focus on the distribution of environmental outcomes.
    JEL: H23 Q50 Q52 R11
    Date: 2021–11
  13. By: Matías Di Fiore Bottinelli; Alberto Néstor Terlato
    Abstract: A lo largo de la historia de los últimos 700 años, se han podido identificar, al menos, cuatro procesos revolucionarios. 3 La revolución de la imprenta, cuyo desarrollo se produjo en el contexto de una sociedad agrícola, la revolución industrial de una impronta urbana con eje en la naciente industria, la reciente revolución del conocimiento, también llamada de las TIC´s (tecnologías de la información y las comunicaciones) que fue impulsada por la computación, Internet, los protocolos de comunicación TCP IP y el comercio electrónico y el actual proceso revolucionario que presenta múltiples detonantes, como la genómica, micro y nanotecnología, robótica, inteligencia artificial, entre muchas otras, acompañados de relevantes cambios sociales. En retrospectiva, cada uno de estos procesos tuvo sus impactos directos e indirectos, algunos positivos, otros negativos. Esta investigación pone foco en la evaluación de la llamada Revolución Industrial. Se espera que su entendimiento deje algunos aprendizajes que permitan la mejor comprensión de los procesos que se desarrollan en la actualidad, donde se reevalúa, entre otros, el futuro del empleo, la relación del hombre con la maquina y los nuevos modelos organizacionales.
    Date: 2021–11
  14. By: Bell, Brian; Pedemonte, Simone; Van Reenen, John
    Abstract: We exploit the large rise in relative performance awards in the United Kingdom over the last two decades to investigate whether these contracts improve the alignment between CEO pay and firm performance. We first document that corporate governance appears to be stronger when institutional ownership is greater. Then, using hand-collected data from annual reports on explicit contracts, we show that (1) CEO pay still responds more to increases in the firms' stock performance than to decreases, and, importantly, this asymmetry is stronger when corporate governance is weak as measured by low institutional ownership; and (2) "pay for luck"persists as remuneration increases with random positive shocks, even when the CEO has equity awards that explicitly condition on firm performance relative to peer firms in the same sector. A major reason why relative performance contracts do not eliminate pay for luck is that CEOs who fail to meet the terms of their past performance awards are able to obtain more generous new equity rewards in the future in weakly governed firms. We show the mechanism operates both through the quantum of shares and the structure of new contracts. These findings suggest that reforms to the formal structure of CEO pay contracts are unlikely to align incentives in the absence of strong corporate governance.
    JEL: N0 R14 J01
    Date: 2021–10–14
  15. By: Bridges, Jonathan (Bank of England); Green, Georgina (Bank of England); Joy, Mark (Bank of England)
    Abstract: Using a panel dataset of 26 advanced economies over the five decades preceding the Covid crisis, we show that inequality rises following recessions and that rapid credit growth in the run up to a downturn exacerbates that effect. A one standard deviation credit boom leads to a 40% amplification of the distributional fallout in the bust that follows. These links between inequality, credit and downturns are particularly significant for recessions associated with financial crises. We also find some evidence that low bank capital ahead of a downturn amplifies the inequality increase that follows. These insights add a new dimension to policy cost-benefit analysis, at the distributional level. Newly established macroprudential regimes have been empowered with tools to safeguard financial stability by bolstering both lender and borrower resilience. Using those tools may have distributional effects, potentially limiting individual borrowing choices. Our findings make clear, however, that not using those tools can lead to distributional costs, in the event of an untamed crisis.
    Keywords: Recessions; local projections; inequality; macroprudential policy
    JEL: D63 G01 N10
    Date: 2021–11–12
  16. By: Wei, Ran
    Abstract: In China’s new model of heritage area regeneration, a series of approaches have been undertaken to promote community participation which is branded as inclusive and innovative by the local authority. Using Baitasi Historic District in Beijing as a case study, this research examines such new participation approaches. By analysing how the government has failed to meet the communities’ demands as well as to engage the communities in the decision-making process but only the implementation stage, I argue that the government has misused the concept of participation by equating attendance and notification to higher levels of participation. The participation approaches are ‘the tyranny of participation’ which de facto helps to justify the official agenda, exploit the communities for their financial contribution, and target the already privileged group while continuing to marginalise the underprivileged. These approaches make the new regeneration model no different from previous ones in terms of facilitating displacement and widening the socioeconomic gaps between the lower-class and the middle- and upper-classes. This research finally reflects on the flawed motivation, strategy, and subsequent negative consequences of such community participation and calls for more attempts in heritage practices to solve the issues.
    Keywords: community participation; tyranny of participation; heritage areas; relocation; regeneration
    JEL: N0
    Date: 2021–10–21
  17. By: Godechot, Olivier; Neumann, Nils; Apascaritei, Paula; Boza, István; Hällsten, Martin; Henriksen, Lasse Folke; Hermansen, Are; Hou, Feng; Jung, Jiwook; Kodama, Naomi; Křížková, Alena; Lippényi, Zoltán; Marta, Elvira; Melzer, Silvia Maja; Mun, Eunmi; Sabanci, Halil; Soener, Matthew; Thaning, Max
    Abstract: The upswing in finance over the past several decades has led to rising inequality, but do downswings in finance lead to a symmetric decline in inequality? In this paper, we analyze the asymmetry of the effect of ups and downs in financial markets, as well as the effect of increased capital requirements and the bonus cap on national earnings inequality. We use administrative employer-employee linked data on earnings from 1990 to 2017 for twelve countries. Additionally, we use data on earnings from bank reports, from 2009 to 2017 in thirteen European countries. We find a strong asymmetry in the effects of financial ups and downs on earnings inequality, a mitigating effect of rising capital requirements on the contribution of finance to inequality, and a restructuring effect of the bonus cap for the earnings of financiers, while neither policy affects absolute levels of earnings inequality.
    Keywords: inequality,finance,financial crisis,regulation
    JEL: N2 D31 G38
    Date: 2021

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