Working Papers

Abstract:

Schumpeter’s ‘perennial gale of creative destruction’ blew strongly through Britain during the Industrial Revolution, as the factory mode of production displaced the cottage mode in many industries. A famous example is the shift from hand loom weaving to the use of power looms in mills. As the use of power looms expanded, the price of cloth fell, and the ‘golden age of the hand loom weaver’ gave way to poverty and unemployment. This paper argues that the fates of the hand and machine processes were even more closely interwoven. With the expansion of factory spinning in the 1780s, the demand for hand loom weavers soared in order to process the newly available cheap yarn. The rise in demand raised the earnings of hand loom weavers, thereby, creating the ‘golden age’. The high earnings also increased the profitability of developing the power loom by raising the value of the labour that it saved. This meant that less efficient–hence, cheaper to develop--power looms could be brought into commercial use than would have been the case had the golden age not occurred. The counterfactual possibilities are explored with a model of the costs of weaving by hand and by power. The cottage mode of production was an efficient system of producing cloth, but it self-destructed as its expansion after 1780 raised the demand for sector-specific skills, thus providing the incentive for inventors to develop a power technology to replace it. The power loom, in turn, devalued the old skills, so poverty accompanied progress.

JEL Codes: N63, N34, O31

Keywords: Technological Change, Invention, Technological Unemployment, Creative Destruction

Reference: 142

Individual View

Abstract:

This paper proposes a new method for defining an international poverty line based on explicit budgeting. The novel feature is that linear programming is used to deduce the diet that minimizes cost and guarantees survival. Nonfood items are also explicitly budgeted and amount to about one quarter of the cost of subsistence. A series of least cost diets are calculated with increasingly demanding nutritional requirements for twenty countries using prices from ICP 2011. The aim is to see which requirements rationalize the spending pattern of the poor. The ‘reduced basic’ model does the job. When the cost of the nonfood items are added to the cost of the ‘reduced basic’ diet, the resulting Linear Programming Poverty Line (LPPL) averages $1.88 per day across the poor countries in the sample. The same model rationalizes both the spending pattern of the poor and the World Bank Poverty Line. The LPPL has the advantages that it is (1) clearly related to survival and well being, (2) comparable across time and space since the same nutritional requirements are used everywhere, (3) adjusts consumption patterns to local prices, (4) presents no index number problems since solutions are always in local prices, and (5) requires only readily available information, namely, the prices in ICP or equivalent.

JEL Codes: I12, I32, O61, O63

Keywords: Absolute poverty, Diet problem, Linear Programming, World Bank Poverty Line

Reference: 141

Individual View

Abstract:

This article explores the role of individual cultural distance on income, using the genetic distance as a proxy for cultural distance. We show that cultural distance has heterogeneous predictive power. In particular, culturally distant individuals living in regions with other individuals from more trusting ancestries or less xenophobic ones are more likely to be economically successful. First generation migrants seem to be less likely to success the more culturally distant they are, but this effect vanishes as time spent in the USA increases. Our research challenges the static view that cultural differences are necessarily an obstacle to economic performance in the long-run. Our interpretation of the results is robust to the use of alternative measures for cultural distance.

JEL Codes: J61, N30, O15, Z13, Z15 r

Keywords: Cultural Distance, Cultural Diversity, Genetics, Historical Persistence, Labor Participation, Social Capital

Reference: 140

Individual View

Abstract:

The paper looks at the development of the secular stagnation thesis, in the context of the economic history of the time. It explores some 19th century antecedents of the thesis, before turning to its interwar development. Not only Alvin Hansen, but Keynes and Hicks were involved in the conversations that led to Hansen's eventual statement of the thesis that we are familiar with. The argument made sense in the context of the interwar period, but more so in Britain than the US.

Keywords: Secular stagnation, Alvin Hansen, Keynes, Economic history, History of economic thought, Interwar

Reference: 139

Individual View

Friendly societies were voluntary associations offering members sickness and medical insurance. By the end of the nineteenth century they were one of the most important forms of formal sickness and health insurance around the English-speaking world. A number of historians and economists have argued the competitive advantage of the friendly societies lay in their ability to monitor claims and curtail opportunism. This paper tests this claim, using a newly compiled panel dataset of societies operatingin in New Zealand in the 1870s and 1880s. The statistical material compiled by the New Zealand Registrar of friendly societies was of exceptional quality. Critically the Registrar collected information on the age structure of members in a large number of societies over a number of years. This allows us to test the impact of various behavioural and financial variables on claims rates, whilst controlling for the age of the members of a society. Regression analysis shows that branches were able to overcome moral hazard in the sense that members did not mechanistically respond to higher benefits scales by claiming more. However friendly societies faced diseconomies of scale. Larger, growing, and rural branches had higher claims rates, either because members responded a more fragile system of monitoring, or because they felt less of a sense of obligation to their society. Moreover an increase in the wealth of a society was associated with an increase in sickness claims. This suggests that members adjusted their behaviour in response to society’s ability to pay, and/or that societies sanctioned more claims when times were good. These two results indicate that members often worked through ill health but were able to claim if a society’s finances were in good health.

Keywords: Mutual aid, Moral hazard, institutions for collective action, friendly societies

Reference: 138

Individual View

By collecting a large dataset in mid-19th century Spain, this paper contributes to the debate on institutions and economic development by examining the historical link between land access inequality and education. This paper analyses information from the 464 districts existent in 1860 and confirms that there is a negative relationship between the fraction of farm labourers and literacy rates. This result does not disappear when a large set of potential confounding factors are included in the analysis. The use of the Reconquest as a quasi-natural experiment allows us to rule out further concerns about potential endogeneity. Likewise, by employing data on schooling enrolment rates and number of teachers, this paper explores the mechanisms behind the observed relationship in order to ascertain to which extent demand or supply factors are responsible for it. Lastly, the gender composition of the data, which enables distinguishing between female and male literacy levels, together with boys and girls schooling enrolment rates, is also examined.

Keywords: economic history, inequality, land access inequality, education inequality, Spain, Pre-Industrial Spain

Reference: 137

Individual View

How good was the standard of living in pre-war Nazi Germany? Some historians have argued that household food consumption in the 1930s was at least as high as in the Weimar Republic, in spite of militarisation. This article provides new evidence against this view by demonstrating that food price controls significantly distorted consumption patterns. We estimate that involuntary substitution effects cost average working-class households 7% of their disposable income. Consumer welfare in Nazi Germany was thus meaningfully lower than observed consumption levels and prices suggest. Our finding is based on microeconometric welfare analysis of detailed budget data for 4,376 individual German households surveyed in 1927 and 1937.

JEL Codes: N14, N34, D12, D52

Keywords: economic history, economic development, standard of living, consumer welfare, Germany

Reference: 136

Individual View

This paper presents a new consistent yearly series of gross income (between-group) inequality Ginis for four occupational categories in Argentina, Brazil, Chile, Colombia, Mexico, and Venezuela over the period 1900-2011 using a newly assembled wage dataset.  The approach used differentiates labour by skill level and allows for changing allocation of the labour force over time.  Profits and rents are calculated as a residual.  Our regional Gini shows a changing secular process with a reclined "S" shape with an inflection point around 1940 and a peak in the 1990s.  There are mixed country trends in the early and middle decades, but in most cases inequality was on the rise in the 1960s.  There was also a tendency for narrowing wage inequality in the middle decades of the last century - at the time of the Great Levelling in the developed economies - but whose impact was more than off-set by a rising share of the top group.  Inequality in the 20th century is a story of increased polarisation - particularly post 1970 - amid significant social mobility.

JEL Codes: N36, O15, O54

Keywords: economic history, economic development, income inequality, Latin America

Reference: 135

Individual View

Data from two different primary sources were used to construct indices of house prices (HPI) and rents (RRPI) of residential property located in London and the Home Counties between 1895 and 1939.  The indices were derived using the hedonics method of price index measurement, which extracts the variation in prices due to differences in the quality of dwellings that form the sample across different time periods.  Both nominal and real HPIs and RRPIs are reported in the paper, as well as simple summary statistics on the levels of house prices and rental values, years purchase and returns on housing for a selected number of boroughs in London over time.

Keywords: housing, rents, inflation, building societies

Reference: 134

Individual View

Gender bias against girls in nineteenth-century England has received much interest but establishing its existence has proved difficult.  We utilise data on heights of 16,402 children working in northern textile factories in 1837 to examine whether gender bias was evident.  Current interpretations argue against any difference.  Here our comparisons with modern height standards reveal greater deprivation for girls than for boys.  But this result cannot be taken at face value.  We query whether modern standards require adjustment to account for the later timing of puberty in historical populations and develop an alternative.  Gender discrimination remains, although its absence amongst younger children precludes an indictment of culturally-founded gender bias.  The height data must remain mute on the source of this discrimination but we utilise additional information to examine some hypotheses: occupational sorting, differential susceptibility to disease, poorer nutrition for girls, disproportionate stunting from the effects of nutritional deprivation, and type and amount of work undertaken, specifically labour additional to paid work in the domestic sphere.  Of these, we favour housework as the main culprit, factory girls undertook more physical labour than factory boys and this was reflected in disproportionate stunting.  The 'double burden' was, and remains, a form of gender discrimination.

Reference: 133

Individual View

Existing theories of pre-emptive war typically predict that the leading country may choose to launch a war on a follower who is catching up, since the follower cannot credibly commit to not use their increased power in the future.  But it was Japan who launched a war against the West in 1941, not the West that pre-emptively attacked Japan.  Similarly, many have argued that trade makes war less likely, yet World War I erupted at a time of unprecedented globalization.  This paper develops a theoretical model of the relationship between trade and war which can help to explain both these observations.  Dependence on strategic imports can lead follower nations to launch pre-emptive wars when they are potentially subject to blockade.

Reference: 132

Individual View

Abstract:

This paper is the first to use the individual level, longitudinal catch-up growth of boys and girls in a historical population to measure their relative deprivation. The data is drawn from two government schools, the Marcella Street Home (MSH) in Boston, MA (1889-1898) and the Ashford School of the West London School District (1908- 1917). The paper provides an extensive discussion of the two schools including the characteristics of the children, their representativeness, selection bias and the conditions in each school. It also provides a methodological introduction to measuring children’s longitudinal catch-up growth. After analysing the catch-up growth of boys and girls in the schools, it finds that there were no substantial differences between the catch-up growth by gender. Thus, these data suggest that there were not major health disparities between boys and girls in late nineteenth century America and early twentieth century Britain.

Keywords: Children

Reference: 131

Individual View

This paper presents a new adaptive framework for understanding children's growth in the past.  Drawing upon the recent work of Gluckman and Hanson (2006) and their co-authors on adaptive responses in relation to growth, I present three prenatal and three postnatal adaptive mechanisms that affect the growth patterns of children.  The most novel adaptive response to the historical literature is the prenatal predictive adaptive response where the foetus develops assuming that the postnatal environment will closely match prenatal conditions.  Thus, the metalbolism and growth trajectory of a child is programmed during the prenatal period: children experiencing good conditions in utero would have a higher metabolism and growth trajectory than their counterparts facing poor conditions.  Having discussed the framework and other responses in detail, I then use it to reinterpret the growth pattern of American slaves (Steckel, 1979, 1986).  I argue that the mismatch between relatively good conditions in utero and absolutely appalling conditions in infancy and early childhood led slave children to become incredibly stunted by age three or four.  However, after this age, slave children experienced rapid catch-up growth, first because their immune systems had become more developed and had adapted to the poor disease environment and later because their diet improved tremendously and hookworm exposure was reduced when they entered the labour force around age ten.  Thus, American slave children were able to experience rapid catch-up growth because they were prenatally programmed for a higher metabolism and growth trajectory.  The paper concludes by setting out some stylized facts about children's growth in the past and pointing toward areas of future research.

Reference: 130

Individual View

 I use variation in childhood exposure to the Dust Bowl, an environmental shock to health and income, as a natural experiment to explain variation in adult human capital.  I find that the Dust Bowl produced significant adverse impacts in later life, especially when exposure was in utero, increasing rates of poverty and disability, and decreasing rates of fertility and college completion.  Dependence on agriculture exacerbates these effects, suggesting that the Dust Bowl was most damaging via the destruction of farming livelihoods.  This collapse of farm incomes, however, had the positive effect of reducing demand for child farm labor and thus decreasing the opportunity costs of secondary schooling, as evidence by increases in high school completion amongst the exposed.

Keywords: Dust Bowl, environmental shock, human capital formation, early life health

Reference: 129

Individual View

This working paper analyzes demographic change in Southeast Asia's main cities during and soon after the World War II Japanese occupation.  We argue that two main patterns of population movements are evident.  In food-deficient areas, a search for food security typically led to large net inflows to main urban centres.  By contrast, an urban exodus dominated in food surplus regions because the chief risk was to personal safety, especially from Japanese and Allied bombing.  Black markets were ubiquitous, and essential to sustaining livelihoods in cities with food-deficit hinterlands.  In Rangoon and Manila, wartime population fluctuations were enormous.  Famines in Java and northern Indochina severely impacted Jakarta and Hanoi through inflows of people from rural areas.  In most countries, the war's aftermath of refugees, revolution and political disruption generated major rural-urban population relocations.  Turmoil in the 1940s had the permanent consequences of augmenting the primacy of Southeast Asia's main cities and promoting squatter settlement.

JEL Codes: N15, N90, N95, R11

Keywords: urbanization, Southeast Asia, famine, World War II, entitlements, Japan

Reference: 128

Individual View

Many previous studies of the role of trade during the British Industrial Revolution have found little or no role for trade in explaining British living standards or growth rates.  We construct a three-region model of the world in which Britain trades with North America and the rest of the world, and calibrate the model to data from the 1760s and 1850s.  We find that while trade had only a small impact on British welfare in the 1760s, it had a very large impact in the 1850s.  This contrast is robust to a large range of parameter perturbations.  Biased technological change and population growth were key in explaining Britain's growing dependent on trade during the Industrial Revolution.

JEL Codes: F11, F14, F43, N10, N70, O40

Keywords: British Industrial Revolution, Great Divergence, trade, colonies, growth, specialization

Reference: 126

Individual View

This paper presents a wage series for unskilled English women workers from 1260 to 1850 and compares it with existing evidence for men.  Our series cast light on long run trends in women's agency and wellbeing, revealing an intractable, indeed widening gap between women and men's remuneration in the centuries following the Black Death.  This informs several debates: first whether or not "the golden age of the English peasantry" included women; and second whether or not industrialization provided women with greater opportunities.  Our contributions to both debates have implications for analyses of growth and trends in wellbeing.  If the rise in wages that followed the Black Death enticed female servants to delay marriage, it contributed to the formation of the European Marriage Pattern, a demographic regime which positioned England on a path to modern economic growth.  If the industrial revolution provided women with improved economic options, their gains should be included in any overall assessment of trends in the standard of living distorts the overall evaluation of the gains from industrialization.

JEL Codes: J3, J4, J5, J6, J7, J8, N33

Keywords: Black Death, England, gender wage gap, industrial revolution, gender segregation, wages, women

Reference: 127

Individual View

Reference: 125

Individual View

We examine the importance of geographical proximity to coal as a factor underpinning comparative European economic development during the Industrial Revolution.  Our analysis exploits geographical variation in city and coalfield locations, alongside temporal variation in the availability of coal-powered technologies, to quantify the effect of coal availability on historic city population sizes.  Since we suspect that our coal measure could be endogenous, we use a geologically derived measure as an instrumental variable: proximity to rock strata from the Carboniferous era.  Consistent with traditional historical accounts of the Industrial Revolution, we find that coal exhibits a strong influence on city population size from 1800 onward.  Counterfactual estimates of city population sizes indicate that our estimated coal effect explains at least 60% of the growth in European city populations from 1750 to 1900.  This result is robust to a number of alternative modelling assumptions regarding missing historical population data, spatially lagged effects, and the exclusion of the United Kingdom from the estimation sample.

Keywords: Coal, Historical Population, Geography

Reference: 124

Individual View

The paper examines the behavior of the British economy 1890-1913 by using a newly assembled quarterly data set.  This provides a basis for estimating a small macroeconomic model, which can be used to explore the relationship between the policy responses of the Bank of England and the course of the economy.  It is one of the few papers to make use of UK quarterly data and seeks to extend the earlier work of Goodhart (1972).  The paper goes on to look into the determinants of external and internal gold flows and relates these to an extensive historical literature.  The outcome is compared with the traditional representation of the working of the gold standard, as set out in the well-known Interim Report of the Cunliffe Committee (1918).  It is found that operation of the model accords in general with the views of the Committee.  The views of the Committee were applicable to the pre 1914 gold standard, but less so to the restored interwar gold standard.

The next question to be considered is how far the Bank observed 'The Rules of the Game' in the sense of relating the reserves of the commercial banks to the gold reserves held at the Bank.  It is shown that the relationship between the Bank's reserves and the reserves of the commercial banks was severely distorted by the massive gold movements of 1895-6.  These flows were associated with US political conflicts over the monetization of silver.  With the exception of this episode, the Bank is shown to have had a limited measure of discretion in operating the gold standard.  The final question to be considered is whether a similar model can be estimated from US data and related to the views of Friedman and Schwartz.

Reference: 123

Individual View

In the late 19th century Britain accumulated substantial overseas assets.  It has been generally accepted that overseas investment displaced domestic investment.  This paper questions this assumption by pointing to the rise in the savings ratio, which enabled high capital exports to be combined without reducing the rate of domestic investment.  The determinants of consumption and savings are examined and it is argued that the rise in savings can be attributed to the fall in the dependency ratio.  This phenomenon is familiar from modern studies of economic development and also from US experience in the 19th century.  The determinants of business investment are analysed and the results indicate the importance of both real profits and accelerator effects for investment, but there is no evidence of crowding out of home investment by overseas issues.  House building then is examined and demographic factors are found to be important.  Crowding out effects may have been present, but this is not the only hypothesis, which is consistent with the data.  The collapse in house building could also be attributed to the massive boom and bust in the property market in the period 1890-1914.

Reference: 122

Individual View

Information on the performance of equities during the latter part of the globalized long nineteenth century is scarce, particularly for smaller European economies such as Ireland.  Using a dataset of over 35,000 price-year observations from the Investor's Monthly Manual, this paper constructs new monthly Irish stock market price indices for the period 1864-1930, encompassing periods of significant economic and political turmoil in Irish history.  In addition to a total market index covering all 118 equity securities issued by 94 companies, sector-specific indices are presented for railways, financial services companies, and miscellaneous industrial and retail companies.  Weighted by market capitalization, nominal equity prices were largely static in the 1860s, before increasing by almost 60% in nominal terms between 1870 and 1878.  Between 1878 and 1879, equity prices fell by one sixth in the space of a year, after which there was a secular rise in equity prices for two decades, with equity prices in 1899 twice what they had been in 1864.  Between the turn of the century and the outbreak of the Great War, though, prices fell by 25%, a pattern that stands in stark contrast to returns on the London exchange, which were greater during 1894-1913 than during the preceding two decades.  The period from 1914 until 1929 saw a number of boom-bust cycles, concurrent with war and other political events affecting Ireland, including its independence movement.  Railway equities, which had trebled between the mid-1860s and the turn of the century, fell sharply during the 1910s and 1920s.  In contrast, financial equity prices - which were just 20% higher in 1920 than in 1864 - rose strongly during the 1920s.  Overall, the average annual gain in equity prices over the period was just 0.9%, well below levels associated with an equity premium puzzle.

JEL Codes: E3, G12, N23, N24

Keywords: Irish stock exchange, Investor's Monthly Manual, long-run stock returns, 19th Century, 20th Century, Ireland

Reference: 120

Individual View

It is commonly thought that the rapid increase in household saving during the early years of National Socialism was partly driven by ideological factors.  On this view, the popularity of the regime allowed it to exert 'moral suasion' on households to save more than they might have done in the absence of such indoctrination.  This paper employs the previously unpublished raw data from a household budget survey conducted in 1937 to identify ideological heterogeneity at the household level.  Assuming that households' responsiveness to the regime's saving propaganda was a function of their exogenous ideological commitment to National Socialism, the paper tests the hypothesis that Nazi households saved more than others.  The new evidence presented here does not confirm this hypothesis.

JEL Codes: N14, D12

Keywords: German economic history, National Socialism, household saving

Reference: 119

Individual View

In 2009, Horrell, Meredith and Oxley used trends in body mass to argue that poor London women in the later 19th century suffered declining access to household resources over their lifetimes.  The authors evaluated competing models of household behaviour, rejected the unitary model of equal distribution throughout the household, saw some support for a safety-first model, but on the whole concluded that resources were allocated in accordance with bargaining power linked to the economic worth of family members.  As (particularly married) women's labour-force participation fell, so too did their share of the food diminish, and with this they lost weight.  This unequal distribution was supported by a moral economy of the family: a set of shared values about obligations and entitlements which protected earners and prioritized the needs of children secured by maternal sacrifice.  The current paper explores further the role of power in the family.  The contention of a bargaining household is supported through a very different but contemporaneous case study: the modern industrial town of Paisley.  The paper juxtaposes a service economy (Wandsworth near London) with a modern manufacturing sector (Paisley near Glasgow) in order to contrast how economic form and opportunities in the market sector shaped relations and outcomes in the household sector.  Again, our measure is lifetime nutrition and our data are drawn from prisons.  We find that families bargained over the allocation of resources; that bargaining position was heavily influenced by economic value, mediated by maternal sacrifice; that this was an earner bias rather than a gender bias; and that new industrial work for women and children supported a more egalitarian distribution that improved everyone's health status via superior heights and heavier weights.  It is a tale of two cities, of blood and bone, of flesh and families.

Reference: 118

Individual View

This paper surveys the experience of economic growth in the 20th century with a focus on technological change at the frontier together with issues related to success and failure in catch-up growth.  A detailed account of growth performance based on historical national accounts data is given and is accompanied by a review of growth accounting evidence on the sources of economic growth.  The key features of our analysis of divergence in growth outcomes are an emphasis on the importance of 'directed' technical change, of institutional quality, and of geography.  We provide brief case studies of the experience of individual countries to illustrate these points.

JEL Codes: N10. O33, O43, O47

Keywords: catch-up, divergence, growth accounting, technical change

Reference: 117

Individual View