Working Papers

Authors: Norbet Paddags

Feb 1997

The importance of fiscal policy for the inflationary process in Germany in the early 1920s has long been recognised, and at the same time the room for reform has been viewed as very limited. This paper will address this question anew by away of counterfactual analysis. Taking the railways - which contributed significantly to the Reich budget deficit - as an example, various areas of possible reform will be discussed on the basis of contemporary sources, including parliamentary debates. It will be argued that although the traditional opinion about the limits of political reform are confirmed, the economic room for manoeuvre was significantly greater than is often assumed.

Reference: 013

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Authors: Avner Offer

Dec 1996

A pronounced cycle of car sales in the 1950s is explained in terms of styling competition and consumer preferences. An oligopolistic industry concentrated on non-price competition, and responded to perceived consumer demand for styling and status, with an accelerated product cycle. Demand was shifting from higher price-and-status models, to the feature-loaded high end of low-price models. This suggests a consumer preference for sensual gratification rather than status. But feature competition was eventually constrained by the physical limitations of car size and power, which created a competitive impasse. Upwards feature drift also opened up a gap at the bottom of market. This gap was invaded by imports. Consumer feature fatigue was expressed in buyers strike in 1958, but Detroit responded nimbly with the new compacts in 1959. There is also evidence that rapid depreciation of new cars, explained by Akerlof in terms of a market for lemons is also found in used cars sold by dealers, and is likely to represent the value of dealer distribution and warranty services.

Reference: 011

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Authors: Wayne Graham

Aug 1996

The early history of the Transvaal gold mines for long has been linked with imperialism, the Jameson Raid and the Boer War. The gold mine owners actually had no financial interest in war with the Boers since their money was made primarily by stock market manipulation, rather than in efficiently utilising the underlying assets. South African gold mining shares were consistently overvalued relative to their true earning power, both before and after the Jameson Raid. Only the outbreak of the war caused them to slump badly.

Reference: 010

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Authors: Charles Feinstein

Jul 1996

This paper presents new estimates of nominal earnings, the cost of living earnings for manual workers in Great Britain over the period 1770 to 1870. The estimates are adjusted to allow for unemployment and for the inclusion of agricultural workers in Ireland. The series are then analyzed to establish their implications for the debates about the impact of the industrial revolution on the standard of living; and about the pace of economic growth during this period. The main findings are that the improvement in the material standard of living of the British working class was negligible before 1815 and very modest until after 1861; and that the income-based estimates are consistent with recent evidence from other sources showing a relatively slow rate of growth during the industrial revolution.

Reference: 009

Authors: Hans-Joachim Voth

Jun 1996

This paper analyses why hours of work increased in London between 1750 and 1800. On the basis of a new technique, changes in labour input are described. The main part of the paper uses the data gathered from witnesses accounts to evaluate a number of competing hypotheses. The main part of the large rise in annual working hours, it is argued, can be attributed to the increased availability of consumer durables.

Reference: 008

Authors: James Foreman Peck

May 1996

As the nineteenth century ended, three principal types of engine competed to power the early motor car. Had some minor condition been different around the beginning of the twentieth century, perhaps therefore todays road vehicles would not be powered overwhelmingly by internal combustion engines. That at least is an implication of the lock-in hypothesis. However the choice of product technology depended not on chance but at first on differential relative endowments of natural resources and capital. Abundant oil deposits and water encouraged the American development of lower first cost steam engines, which used more fuel and less capital. Electricity also was cheaper in the United States than in Europe, outside Germany. Since European endowments were not as auspicious for steamers or electrics at the turn of the century, European entrepreneurs focussed on the internal combustion engine. Judged by the rapid development 1895-1900, they chose the most progressive technological trajectory. By 1904, US motor firms were adopting European product technology and abandoning steam. By the end of the First World War they had also given up electricity.

Reference: 007

Authors: Hans-Joachim Voth

Apr 1996

Little is known about the length of the working year in pre-industrial times. This paper develops a new method for analysing patterns of time-use in the past. Witnesses accounts in court records, it will be argued, reflect the actual behaviour of a group that is representative of the population at large. This new technique is applied to London during the middle of the eighteenth century. Results are compared with evidence from other eighteenth-century sources. These findings have important implications for our understanding of the Industrial Revolution. Our estimate of the number of working days helps to resolve some apparent contradictions between wage and income measures.

Reference: 006

Authors: Paul A. David

Mar 1996

Authors: Philip Grover

Feb 1996

It is commonly accepted that the decline of the Wests woollen industry was in large part due to the greater employment of steam power by the Yorkshire industry. Using the account books of the Stroudwater Canal Company, the article examines the role of the Stroudwater Canal in bringing coal to the mechanising woollen industry in the Stroudwater region of the Gloucestershire industry. It is shown that distance was not the main factor in the movement of coal, but that the toll levels were more important. The article shows that the toll levels significantly affected the amount of steam power employed in the Gloucestershire woollen industry, and that the Stroudwater Canal Company therefore played a significant role in the industrys decline during the early nineteenth century.

Reference: 004

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Authors: Avner Offer

Jan 1996

The Great Transformation’ from customary exchange to impersonal markets has not been completed. Reciprocal exchange pervades modern societies. It takes the form of ‘gifts’ which are reciprocated without certainty. It is driven by the pursuit of ‘regard’: the approbation of others. The idea is found in Adam Smith. Money is avoided in regard exchanges, because it is impersonal. Instead, the regard signal is embodied in goods, services or time (attention). The personalisation of gifts authenticates the signal. Large-scale reciprocal exchange persists in family formation and in inter-generational transfers. It features in labour markets, in agriculture, the professions, in marketing, entrepreneurship, and also in corruption and crime. Reciprocal exchange is constrained by time and psychic energy, but is likely to persist as a preferred source of regard.

Reference: 003

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Constructing an agricultural output series requires a rational economic basis on which to convert one crop into another, and a conversion method using only the information which we have at our disposal. The traditional method fails on both counts. We develop two alternative methods. The first is extremely parsimonious but imprecise; the second is less parsimonious but allows us to isolate the effect of different crop rotations on wheat yields. We compare the three methods using the farm dataset compiled by Arthur Young on his tours of England and Wales during the Agricultural Revolution and we show that new fallow crops substantially increased the wheat yield.

Reference: 002

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Authors: Hans-Joachim Voth, Timothy Leunig

Nov 1995

In this paper, we re-examine the effect of smallpox on the height attained by those who suffered from this disease. To this end, we analyse a dataset assembled by Floud, Wachter and Gregory on the height of recruits into the Marine Society, 1770-1873. Using both time series and cross-sectional analysis, we show that smallpox was indeed an important determinant of height: those who had suffered from smallpox were significantly shorter. This suggests that the increase in heights documented by Floud et al. may be explained not just by increased nutritional intake, but also by the eradication of smallpox.

JEL Codes: N33

Reference: 001

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Nuffield Economic Working Papers

These Papers can be found on an external site

Authors: F. Banu Demir

Jun 2020

I present a trade model featuring North-South differences in demand for quality and in quality of task supply.  The model explains a number of stylised facts: Southern firms charge higher factory-gate prices for their products in rich than in poor, and in distant than in near markets.  The model predicts that firms vary the quality of their products across  markets by changing, between varieties, the fractions of low and high-quality tasks.  This mechanism for quality differentiation introduces a new margin to trade: the extensive margin of intermediate imports.  Extension of the model to general equilibrium with heterogeneous firms shows that even under low fixed and zero variable trade costs, only the more productive Southern firms export to the rich Northern market.  Compared to their domestic market, they charge higher prices in the North, with the most productive ones earning higher revenues.

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Authors: David P. Myatt, Chris Wallace

Jun 2020

Collective action problems arise in a variety of situations. The economic theory of public good provision raises a number of important questions. Who contributes to the public good, and who free rides? How might a social planner exploit the interdependence of decision-making to encourage contributions? Under what conditions will such actions result in public good provision? Using a simple game theoretic framework and recent results from the study of equilibrium selection, this paper attempts to answer some of these questions. Under reasonable assumptions of asymmetry and less than complete information, the more efficient agent will contribute. Contributions can be elicited by `integrating` the production process when agents are sufficiently emph{optimistic} about the success of the project. When this is not the case, the social planner may be better off `separating` the project so that individual contributions are independent of each other.

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Authors: Florian Ploeckl

Jun 2020

Information technology, like the telephone, influences market access; this paper answers the question about a reverse effect, does market access affect information technology, in particular its adoption?  Using the introduction of the telephone in Bavaria, I demonstrate with a rank, order and stock effects diffusion model how market access affects the diffusion of local telephone exchanges over towns as well as the rate of adoption of telelphone lines within towns.  The results of a duration analysis show that market access speeds up the diffusion, a spatial correlation specification demonstrates that this is not just a geographic effect.  The rate of adoption within towns is also affected by the adoption of lines in other towns, the results indicate that about 4% of all lines are due to the ability to call outside your local exchange network.  Market access is therefore shown to impact the adoption of technology.

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Governance is becoming increasingly important in development and poverty reduction policies. However, the forms and methods by which it is to be incorporated into donor programs are only emerging at present. In this paper, we contrast two very different approaches - the White House led Millennium Challenge Account (MCA) and DFID`s Drivers of Change (DOC) Approach - to analysing governance, and compare their theoretical underpinnings. A key factor explaining why these different approaches have been adopted is that for the USA, global poverty reduction is a footnote to its foreign policy and national security agenda, whereas in the UK, global poverty reduction engages both the national political leadership and the civil society. In the conclusion, the paper suggests that enduring contradictions confronted by all donors complicate the treatment of governance in empirically nuanced terms (as DOC attempts to do) while privileging a more universalistic approach like the MCA.

Authors: Valerie Lechene, Jerome Adda, University College London and IFS

Jun 2020

This paper proposes a joint model of tobacco consumption and mortality over the life-cycle. The decision to smoke is a trade off between current utility derived from smoking and a mortality risk increasing with age. Individuals with a longer potential life expectancy have more incentive to cut back on smoking and thus self select out of smoking. Using detailed data on mortality, morbidity and smoking we are able to identify this selection effect. We empirically evaluate its importance in explaining heterogeneity in smoking behaviour among adults. We find that heterogeneity in potential life expectancy explains part of the heterogeneity in smoking behaviour, even when conditioning on sex, education and occupation and information on other risky behaviour. When we embed heterogeneous potential life expectancies within a rational addiction model of smoking, we find that the model is able to match the life cycle profiles of smoking.

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Authors: Tim Willems

Jun 2020

This paper analyzes secessions through the lens of representative democratic institutions and considers the incentives of partisan political parties to support independence movements.  It points out that, if anything, separatists should expect to receive support from exactly the "unlike-minded" political party - the reason being that this party might see a break-up as an opportunity to reshape the electorate towards its own preferences.  By doing so, a party could increase its future probability of being elected, while it is also able to shift the entire political spectrum towards its own partisan ideal.  The model is able to explain much of what is currently going on in the debate on Scottish independence, while it can also be applied to issues of political integration (the European Union) and territorial conflicts (think of Ukraine and Russia in relation to Crimea, as well as the situation in Israel).

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Authors: Tony Syme

Jun 2020

Unemployment in the 1930s was low in France by international standards, nevertheless there was a virulent drive to expel immigrant workers as a means of limiting domestic unemployment. This involved not only the repatriation of the foreign chômeur, but also legislation to displace the foreign worker from his workplace. This paper extends the current debate over the effectiveness of this strategy with the use of two archival datasets. The inability of the State to reach its immigrant employment targets is confirmed, but it is suggested that it was not that unemployed Frenchmen were not willing to take the unattractive jobs that immigrants held, but that employers were unwilling to substitute their foreign workers with their French unemployed equivalents that undermined this repatriation drive. One implication is that the repatriation of foreign workers that did take place compromised the economic recovery that would begin in 1936.

Authors: Valerie Lechene, Martin Browning, University of Copenhagen

Jun 2020

Several models of intra-household decision making have been suggested in the literature. One important dichotomy is between non-cooperative and cooperative models (including specific models of bargaining). The other important distinction is between models that allow for caring and those that do not. We present a framework that includes all suggested models and variants as special cases. We derive the theoretical predictions of these models for the relationship between expenditures on goods and the intra-household distribution of income. We estimate and test between these relationships using Canadian household expenditure data. We conclude that there is evidence that both husbands and wives care for each other in the sense that with an unequal distribution of incomes the high income partner behaves as a `Becker dictator` and there is local income pooling. We further find that for about half of the households in our sample (those with mor

Authors: Michela Cella

Jun 2020

In this paper we analyze a simple two-sided adverse selection model with one principal and one agent. They are both risk neutral and have private information about their type. We also assume that the private information of the principal is correlated with the one of the agent. The main result of the paper is that the principal can extract a larger share of the surplus from the agent than in the case where her information is public. The principal can design such a contract because she exploits the fact that her type is an informative signal on the agent`s one. We fully characterize the equilibrium of the principal agent game in which different types of principal offer the same menu of contracts that leave the agent uninformed about the principal`s type. This gives more freedom to the principal when setting the transfers because the agent`s constraints need to hold only at an interim stage. The principal gains from a peculiarity of the co

Authors: Edoardo Gallo

Jun 2020

This paper presents a bargaining model between individuals belonging to different groups where the equilibrium outcome depends on the communication network within each group.  Belonging to a group gives an informational advantage: connections help to gather information about past transactions and this information can be used to make more accurate demands in future bargaining rounds.  In the long-term there is a unique stochastically stable equilibruim which depends on the peripheral or least connected individuals in each group.  Comparative statistics shows that a denser and more homogeneous network allows members of a group to obtain a better deal.  An empirical analysis of the observed price differential between Asian and white buyers in New York's Fulton fish market is consistent with these predictions.  An extension explores an alternative set-up where buyers and sellers belong to the same communication network:

Authors: John Knight, Sai Ding and Alessandra Guariglia

Jun 2020

This paper addresses the hotly-debated question: do Chinese firms overinvest?  A firm-level dataset of 100,000 firms over the period of 2000-07 is employed for this purpose.  We initially calculate measures of investment efficiency, which is typically negatively associated with overinvestment.  Despite wide disparities across various ownership groups, industries and regions, we find that corporate investment in China has become increasingly efficient over time.  However, based on direct measures of overinvestment that we subsequently calculate, we find evidence of overinvestment for all types of firms, even in the most efficient and most profitable private sector.  We find that the free cash flow hypothesis provides a good explanation for China's overinvestment, especially for the private sector, while in the sector, overinvestment is attributable to the poor screening and monitoring of enterprises by banks.

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