Tuesday, 29 November 2016

Long Run Growth in Spain: Evidence from Historical National Accounts

Leandro Prados de la Escosura
 (Universidad Carlos III,
CEPR, Groningen, and CAGE)
Can we rely on historical estimates of GDP to assess output and material welfare in the long run? 

In the early days of modern economic quantification, Kuznets (1952: 16-17), noticed the “tendency to shrink from long-term estimates” on the grounds of “the increasing inadequacy of the data as one goes back in time and to the increasing discontinuity in social and economic conditions”. Cautious historians recommend to restrict the use of GDP to societies that had efficient recording mechanisms, relatively centralised economic activities, and a small subsistence sector (Hudson, 2016; Deng and O’Brien, 2016). But should not the adequacy of data be “judged in terms of the uses of the results” (Kuznets, 1952: 17)? 

A new dataset

It is with these caveats that a new set of historical national accounts, with GDP estimates from the demand and supply side, is presented for Spain as the basis to investigate its modern economic growth (Prados de la Escosura, 2016b). 
Historical output and expenditure series are reconstructed for the century prior to the introduction of modern national accounts. The new series are built from highly disaggregated data grounded on the painstaking research carried out during the last decades. 
Then, available national accounts are spliced through interpolation, as an alternative to conventional retropolation, to derive new continuous series for 1958-2015 (Prados de la Escosura, 2014, 2016a). Later, the series for the ‘pre-statistical era’ are linked to the spliced national accounts providing yearly series for GDP and its components over 1850-2015. Finally, on the basis of new population and labour force estimates, GDP per head and labour productivity are derived (the dataset can be accessed at http://espacioinvestiga.org/bbdd-chne/?lang=en)

What do the data show? 

Aggregate economic activity multiplied fifty times between 1850 and 2015, at an average cumulative growth rate of 2.4 per cent per year. Four main phases may be established: 1850-1950 (with a shift to a lower level during the Civil War, 1936-1939), 1951-1974, 1975-2007, and 2008-2015, in which the growth trend varied significantly. 

Figure 1. Real GDP and GDP per head (2010=100) (logs)

But to what extent did a larger amount of goods and services affect individuals’ living conditions? Since population trebled, real GDP per head experienced nearly a 16-fold increase, growing at an annual rate of 1.7 percent. Such an improvement took place at an uneven pace. Per capita GDP grew at 0.7 per cent over 1850-1950, doubling its initial level. During the next quarter of a century, the Golden Age, its pace accelerated more than 7-fold, so by 1974 per capita income was 3.6 times higher than in 1950. Although economic progress slowed down from 1975 onwards, and the rate of per capita GDP growth shrank to one-half that of the Golden Age, the level of per capita GDP more than doubled between 1974 and 2007. The Great Recession (2008-13) shrank per capita income by 11 per cent, but, by 2015, its level was still 83 per cent higher than at the time of Spain’s EU accession (1985).
What steered such a remarkable rise in product per capita? GDP per capita depends on the amount of work per person and how productive this effort is. GDP per capita and labour productivity (measured as GDP per hour worked) evolved alongside over 1850-2015, even though, as the amount of hours worked per person shrank labour productivity grew at a faster pace –it increased 23-fold against 16-fold for GDP per capita. 

Figure 2. Per Capita GDP and its Components, 1850-2015 (2010=100) (logs)

Behind the decline in hours worked per person the main element is the reduction in hours worked per fully occupied worker, which fell from 2,800 hours per year in mid-nineteenth century to less than 1,900 in the early twentieth-first century. Thus, long-term gains in output per capita are entirely attributable to productivity gains, with phases of accelerating GDP per capita, such as the 1920s or the Golden Age (1950-1974), matching those of faster labour productivity growth. 
A closer look at the last four decades reveals, however, significant discrepancies, with phases of acceleration in labour productivity correspond to those of GDP per person slowdown, and vice versa. Thus, periods of sluggish (1975-84) or negative (2008-13) per capita GDP growth paralleled episodes of vigorous or recovering productivity growth, although in the first case, the ‘transition to democracy’ decade, labour productivity offset the sharp contraction in hours worked –largely resulting from unemployment- and prevented a decline in GDP per head. Conversely, the years between Spain’s accession to the European Union (1985) and the eve of the Great Recession (2007), exhibited substantial per capita GDP gains while labour productivity slowed down. Thus, during the three decades after Spain’s accession to the EU, in which grew at 3 per cent per year, doubling its GDP per head, the increase in hours worked per person contributed more than half of it. It can, then, be concluded that since the mid-1970s the Spanish economy has been unable to combine employment creation and productivity growth, with the implication that sectors that expanded and created jobs (mostly construction and services) were those less successful in attracting investment and technological innovation.

Falling behind, catching up, … and falling back again?

Spanish long-term growth has been similar to that of western nations, though Spain’s level of GDP per head appears systematically lower. 

Figure 3. Spain’s Comparative Real Per Capita GDP (2011 EKS $) (logs)

The pace of growth before 1950 was comparatively slow in Spain. Sluggish performance over 1883-1913 and failing to take advantage of its World War I neutrality to catch up, partly account for it. Furthermore, the progress achieved in the 1920s was outweighed by Spain’s short-lived recovery from the Depression, brought to a halt by Civil War (1936-39), and by a longer and weaker post-war reconstruction than in the warring western European countries after 1945. Thus, Spain fell behind between 1850 and 1950. 
The situation reverted from 1950 to 2007. The Golden Age, especially since 1960, stands out as years of outstanding performance and catching up to the advanced nations. Steady, although slower growth after the transition to democracy years (1975-84), allowed Spain to keep catching up until 2007. The Great Recession reversed the trend, although it is too soon to determine whether it has opened a new phase of falling behind. 
On the whole, Spain’s relative position to western countries has evolved along a wide-U shape, deteriorating to 1950 (except for the 1870s and 1920s) and recovering thereafter (but for the episodes of the transition to democracy and the Great Recession). Thus, at the beginning of the twentieth-first century Spanish real GDP per head represented a proportion of US and Germany’s income similar to that of mid-nineteenth century, and to that of the 1870s with regard to France and Italy, although had significantly improved with respect to the UK. 

This blog post was written by Leandro Prados de la Escosura, professor in Economic history at (Universidad Carlos III)

The working paper can be downloaded here: http://www.ehes.org/EHES_103.pdf


Deng, K. and P. O’Brien (2016), “China’s GDP Per Capita from the Han Dynasty to Communist Times”, World Economics 17, 2: 79-123.
Hudson, P. (2016), GDP per capita: from measurement tool to ideological construct, LSE Business Review (10 May 2016).
Kuznets, S. (1952), Income and Wealth of the United States. Trade and Structure, Income and Wealth Series II, Cambridge: Bowes and Bowes.
Prados de la Escosura (2016a), “Mismeasuring Long Run Growth. The Bias from Spliced National Accounts: The Case of Spain”, Cliometrica 10, 3: 251-275
Prados de la Escosura, L. (2016b), Spain’s Historical National Accounts: Expenditure and Output, 1850-2015, EHES Working Paper 103 http://www.ehes.org/EHES_103.pdf The dataset can be accessed at http://espacioinvestiga.org/bbdd-chne/?lang=en
Prados de la Escosura, L. (2014), Mismeasuring long-run growth: The bias from spliced national accounts,  (4 September) http://positivecheck.blogspot.se/

Tuesday, 15 November 2016

The mining sectors in Chile and Norway, ca. 1870-1940: the development of a knowledge gap

Kristin Ranestad is a post-doc at
University of Olso

New EHES working paper

Chile and Norway are two ‘natural resource intensive economies’, which have had different development trajectories, yet are closely similar in industrial structure and geophysical conditions. 

The questions of how and why Chile and Norway have developed so differently are explored through an in-depth comparative analysis of knowledge accumulation in one of the natural resource sectors, namely mining, from around 1870 to 1940, a period in which mining went through important technological changes and the two countries started to diverge.

Countries rich in natural resources which exhibit poor economic performance, are often understood as being ‘cursed’ and recommended to shift to industries which are not based on raw materials. A key empirical problem with the ‘resource curse’ argument, however, is that some of the richest countries in the world, such as Norway, Sweden, Canada and Australia, have developed fast-growing economies based on natural resources. Differences in economic performance across natural resource intensive economies suggests that an abundance of natural resources does not necessarily lead to stagnation. Conversely, some countries have arguably developed because of their natural resources, not despite them. Evidence suggests that natural resource intensive industries in high-income economies have been highly knowledge intensive, dynamic and innovative, they have created linkages to other industries within the economy, and developed specialisations and new industries which have contributed to complex economic structures (see e.g. Andersen 2012; De Ferranti et al. 2002; Hirsch-Kreinsen et al. 2003; Ville and Wicken 2012). In this paper, I seek to contribute to this debate by systematically comparing how knowledge accumulation occurred in one sector, namely mining. Comparing one natural resource sector allows for much more in-depth empirical analyses than on a country level and allows us to explore how natural resource industries in some countries have become highly innovative, while others have not. 

A gap started to emerge between the two mining sectors from the late nineteenth century. While the mining sector in Chile was considered technologically advanced in the mid-nineteenth century, from the late nineteenth century, Chile’s share of copper production fell dramatically, multinational created ‘enclaves’, a technological gap emerged within the sector between technologically advanced multinational companies and small-scale companies using old technology, thousands of mines were abandoned and many of ore deposits remained unexploited. The mining sector in Norway, on the other hand, was innovative, multinational companies were more integrated in the host economy and production of large-scale electro-metallurgical production started in the late nineteenth century. 
“Boletin Minero”: The mining bulletin  included articles 
about mining companies, mining production, 
new technology, debates about the mining education etc.

Why did this gap between the two mining sectors develop? I explore how comparable knowledge organisations in the two countries; formal mining education, organisations for technology transfer and geological research centres, developed technological knowledge, and how such organisations encouraged or blocked innovation for the sectors.

I use primary sources from archives in Chile, Norway and the United States in the form of written documents. Study programs and course descriptions for both countries make it possible to compare the mining instruction on higher and intermediate level in detail. Graduate lists enable comparisons of the availability of mining engineers and technicians in the sector. Student yearbooks provide unique information about all the mining engineers, technicians, and other skilled workers with expertise which was relevant for mining. The books provide information about the work, positions and travels of the graduates.  These sources, together with engineering and company reports and technical and mining journals, allow us to follow the graduates from school and into their working life, and they enable us to make in-depth comparisons of the relationship between knowledge development, education, learning and innovation (See Ranestad 2016 for an explanation of these sources).

The detailed comparison of these knowledge organisations shows that there were differences between Chile and Norway in terms of knowledge accumulation. The set of organisations in Chile blocked transfer, use and diffusion of knowledge, while in Norway the organisations facilitated the creation, transfer and adoption of knowledge, which in turn contributed to an overall dynamic and innovative mining sector. This led to a knowledge gap between the two countries. 

“Ingeniørene” : An example of the student yearbooks which
include  detailed information about the
career paths of the engineers.

The formal mining instructions in the two countries were similar, but two countries differed when it came to the availability of mining engineers, technicians and other relevant skilled workers to administrate mining companies and manage complex technology. In particular, Chile had too few formally trained workers to fill the managing and strategic technical positions at the thousands of mining companies, technical schools and research centres. Additionally, the two countries differed when it came to scholarships and funds for practical learning. During trips abroad engineers and technicians acquired valuable contacts, information of new techniques, and most importantly they acquired practical know-how with foreign technology. While continuous public and private programs were established in Norway, and most of the mining engineers went abroad to learn, scholarships were only provided sporadically in Chile, and only very few engineers went abroad. These differences in knowledge accumulation between the two countries, I argue, contributes to explain the diverging paths of the two sectors. 

The two countries also differed when it came to geological mapping, prospecting, analyses of ore and economic planning. Without a deep understanding of the geology and about the existing mineral deposits and their potential profits, new mining projects could hardly take place and the mining sector could barely advance (David and Wright 1997). In Norway, The Geological Survey of Norway, a public organisation, was established in 1858 and had in principle two main tasks. On one hand, it was to contribute to new knowledge about geological features, their scope and potential utility. On the other hand, it sought to contribute to new and more systematic surveys of the country’s geological formations and deposits (Børresen and Wale 2008). In Chile, a permanent organisation with the aim of systematically map the country’s resources, did not exist. Sporadic geological work was carried out (Villalobos 1990), but it was not nearly enough to acquire complete and in-depth knowledge of existing ore deposits, their grade and possible profits. Therefore, the several thousand mines that were abandoned and unexploited mineral deposits remained unknown. This situation endured and large mineral deposits were not found up until recent time (De Ferranti et al 2002, 58-59). In short, the lack of geological maps and ore surveys in Chile had huge implications for the progress of the mining sector by blocking the start-up of mining projects. This, in turn, was linked to the small number of mining engineers and geologists in the country, who were indispensable for this type of work. These differences in knowledge accumulation contribute to explain the emerging development gap of the two sectors.  

The underlying reason for the knowledge gap may be linked to the role of the state. In Chile, members of the National Mining Society, professors and engineers expressed the need for more geological surveys, more skilled workers and more initiatives to send engineers abroad to learn. However, although some public initiatives were implemented, they were clearly not enough to encourage continuous innovation processes in the sector. It is, perhaps, strange that not more was done in Chile to develop knowledge for mining and to learn about the existing mineral and metal deposits, considering that this was a country with huge mineral and metal ores and some of the largest copper deposits in the world. Despite this huge natural resource potential, mapping the country’s natural resources, education and knowledge transfer were simply given lower priority by the broader set of political decision-makers. In Norway, in contrast, the state was much more active in supporting knowledge development as it funded the National Geological Survey, guaranteed general schooling, financed universities, mining and technical schools and managed many of the scholarships for study travels. 

Finally, I would like to commemorate Karl Gunnar Persson, who was a kind, joyful and caring person. He was a great support to Paul and very understanding. I met him several times with Paul for dinner and drinks and we heard cheerful stories about his travels, life experiences and research. I miss him and those very nice and interesting conversations.

This blog post was written by Kristin Ranestad, University of Olso
The EHES working paper can be downloaded here: http://www.ehes.org/EHES_105.pdf

Andersen, Allan Dahl. 2012. “Towards a new approach to natural resources and development: the role of learning, 
innovation and linkage dynamics”. Int. J. Technological Learning, Innovation and Development, vol. 5 (3).

Børresen, Anne Kristine, and Astrid Wale. 2008. Kartleggerne. Trondheim: Tapir akademisk forlag.

David, Paul, and Gavin Wright. 1997. “Increasing Returns and the Genesis of American Resource Abundance”. Industrial and Corporate Change, vol. 6 (2).

De Ferranti, David, Guillermo E. Perry, Daniel Lederman, and William E. Maloney. 2002. From Natural Resources to the Knowledge Economy. Washington D. C: The World Bank.

Hirsch-Kreinsen, Hartmut, David Jacobsen, Steffan Laestadius, and Keith Smith. 2003. “Low-Tech Industries and the Knowledge Economy: State of the Art and Research Challenges”. PILOT Policy and Innovation in Low-Tech. Oslo: STEP – Centre for Innovation Research.

Ranestad, Kristin. 2015. ”The mining sectors in Chile and Norway from approximately 1870 to 1940: the development of a knowledge gap.” PhD diss., University of Geneva.

Villalobos, S. et al. (1990): Historia de la ingenieria en Chile. Santiago: Editorial Universitaria.

Ville, S., & Wicken, O. (2013). “The dynamics of resource-based economic development: Evidence from Australia and Norway”. Industrial and Corporate Change, 22 (5).

Friday, 21 October 2016

Danger to the Old Lady of Threadneedle Street?

Patrick O'Brien  is Professor Emeritus,
London School of Economics

NEW EHES Working paper 

The Bank Restriction Act of 1797 suspended the convertibility of the Bank of
England's notes into gold. The current historical consensus is that the suspension was a result of the state's need to finance the war, France’s remonetization, a loss of confidence in the English country banks, and a run on the Bank of England’s reserves following a landing of French troops in Wales.

In a recent EHES paper (O’Brien and Palma 2016) we argue that while these factors can help us understand the timing of the Restriction period, they cannot explain its success. We deploy new long-term data which leads us to a complementary explanation: the policy succeeded thanks to the reputation of the Bank of England, achieved through a century of prudential collaboration between the Bank and the Treasury. Furthermore, the Restriction Period led to a permanent shift in the role of banknotes in the economy, despite the inauguration of the classical gold standard in 1821.

Nuno Palma is Assistant Professor,
 University of Groningen

This episode has some parallel with the better-known 1914 suspension of the gold standard, but some important differences too. One such difference is the much more moderate effects that resulted. No major financial crisis followed, and inflation eventually increased but remained moderate. In the words of Schumpeter (1987/1954, p. 690-1): “In spite of the suspension … war finance did not produce any great effects upon prices and foreign exchange-rates until about 1800. To the modern student who is inured to stronger stuff, the most striking feature of the subsequent inflation is its mildness … at no time was the government driven to do anything more unorthodox than abnormally heavy borrowing from the Bank, and even this borrowing never surpassed the limits beyond which the term ‘borrowing’ becomes an euphemism for printing government fiat”.

The Bank of England – which was a private company, though it was already beginning to play a public role – had suffered a significant drain in its reserves from the mid-1790s. In 1797 it suspended convertibility of its notes into gold. It also started issuing small denomination notes. Banknotes became increasingly important as a means of payment. As we document in the paper, the economy-wide circulation of all means of exchange except coin (such as inland bills of exchange or banknotes) at the retail and wage-paying levels had remained limited until the 1790s. The data allows us to study the case of Bank of England notes in detail, by comparison with coin supply (Figure 1 below). As the figure suggests, the 1797 suspension marks a discontinuity for Bank of England notes, which increased a great deal in real terms after that date. At the same time, coin supply had been falling since shortly after the beginning of war. It is tempting to interpret this shift in terms of Gresham’s law, but we do not favor that interpretation because the selection of a “bad” means of payment implies asymmetry of information and no seller would have had any difficulty distinguishing Bank of England notes from coin. Instead, Bank of England notes eventually gained a discount (which reached a maximum of about 50%), but this only mattered after about 1808.

Not only did the value of Bank of England notes in circulation increase a great deal, but their denominational distribution changed. While up to the 1790s £10 notes were the lowest note denomination issued by the Bank of England (over £1,000 in 2015 prices), it was only in 1793, at the start of the war against Napoleonic France, that £5 notes were first issued. Denominations of £5 were in turn followed by £2 and £1 banknotes, issued in 1797, coinciding with the Restriction Period. Crucially, also allowing for a margin of contemporaneous inflation, £1 was then just enough to pay a laborer’s weekly wage. The fact that many new issues were of lower denominations implies that just looking at the value of the increase of Bank of England notes underestimates how much more frequent they became at this time. This had important long-term consequences, because it was at this point that for the first time ordinary people, and in particular the lower classes, became accustomed to banknotes as a means of payment.

Figure 1. Coin supply and Bank of England notes, at constant prices of 1700.
Sources: Bank of England (1967), Palma (2016); for the deflator, Broadberry et al (2015).

As the suspension took place, a large number of merchants all over the country signed declarations in which they promised to accept and keep using banknotes. The most prominent of these meetings was that of London; while the Bank of England had a role in arranging this meeting, the fact is that it could not force the merchants to take that decision, which was also publicly announced through publication in The Times. Hence both merchants and regular people accepted the Bank’s notes. Figure 2 shows a contemporary print where John Bull, who represents the English people, accepts the paper pound despite the warnings of French alarmists who warn him that it will be worthless once the French land.

Figure 2. John Bull accepts paper money despite the warnings of French alarmists,
by James Gillray. Published at Hannah Humphrey’s print shop
on St. James Street, London, March 1st, 1797

The argument we make in this paper is that the emergency conditions of the 1790s combined with a long history of prudent behavior as well as close collaboration between the Bank and the Treasury to allow this to be possible. While Bordo and White (1991) focus on the credibility of the public finances of the British State, our focus here is on the credibility of the outstanding liabilities of one particular institution, the Bank of England. We argue that the credible commitment underpinning the success of British public finance consisted of two parts: the government's commitment to sound public finance, and the Bank's commitment to sustaining both public and private credit. In this paper we focus on the latter, and in particular on the matter of how by the late eighteenth century the Bank managed to implement a set of monetary policies that were highly unconventional by the standards of the time, with a good measure of success. 

The Bank of England shifted gears with the Restriction Period, but it would be wrong to assume that after 1821 there was a return to the previous status quo. Figure 3 presents the data of Figure 1 as a ratio, and extends its horizon to the mid-nineteenth century. The figure shows three important facts about this period. First, as we have previously seen, after a long period of stability, there was a spike in Bank of England notes at the time of the Restriction Period. Second, and importantly, when the supply of notes was later reduced, the reversal was only partial: the level did not return that of the 1790s. Third, and crucially, the previously stationary distribution then gained an upward trend – the growth which started in the 1790s continued into the nineteenth century. The regime change to the system caused by the Bank Restriction in the 1790s persisted well into the future, long after that act was repealed. Through a process of path-dependence, it caused a permanent shift to a fiat-based monetary system, which – despite the later imposition of the classical gold standard – allowed for continuous growth of fiat money relative to slower-growing quantities of precious metals well into the nineteenth century.

Figure 3 The ratio of bank of England notes to coin supply, 1696-1844

Which factors interacted with the Bank of England’s initial reputation to make the policy a success? Three reasons stand out. First, the Bank of England’s expansion of banknotes during the restriction was of a much smaller magnitude than had been the case in France a few years before. In 1797, the ratio of Bank of England notes over nominal GDP was just under 23%, and in the next few years issues were never such that the 20% percent mark was crossed again, a target made easier by the economic growth performance of the British economy during those years (Bank of England 1967, Broadberry et al 2015). This strongly contrasts with the case of France during the assignats debacle, where the expansion of fiat was eventually exponential (Sargent and Velde 1995). In contrast with France, the Bank of England’s policies were subject to a series of checks and balances, being closely monitored, as exemplified by the “Bullion report”, and related controversies and debates (see for instance Feavearyear 1931, pp. 190-2). Second, not only did Britain’s already have a comparatively high level of fiscal capacity, being able to credibly borrow, but the policies of the Bank were also at this time accompanied by a series of fiscal reforms. An example was the introduction of an income tax in 1798, which complemented the monetary reforms and allowed for the sustainability of the government’s budget constraint, while ruling out hyperinflation. Finally, the policy was promised (and believed) to be a temporary, wartime measure.

This blog post was written by:
Patrick O'Brien (Professor Emeritus of Global Economic History, Department of Economic History, London School of Economics)

Nuno Palma (Assistant Professor, Department of Economics, Econometrics, and Finance, University of Groningen)

The working paper can be downloaded here: http://www.ehes.org/EHES_100.pdf


Bank of England (1967). Bank of England Liabilities and Assets: 1696 to 1966. Quarterly Bulletin, June edition. Available at http://www.bankofengland.co.uk/archive/Documents/historicpubs/qb/1967/qb67q2appendix159163.pdf, Accessed August 13, 2014

Bordo, M., and White, E. (1991). A tale of two currencies: British and French finance during the Napoleonic Wars. The Journal of Economic History 51(02): pp. 303-316

Broadberry, Stephen, Bruce Campbell, Alexander Klein, Mark Overton, and Bas van Leeuwen (2015). British Economic Growth, 1270-1870. Cambridge University Press

Feavearyear, A. (1931). Pound Sterling: A History of English Money. Oxford

Palma, Nuno (2016). Reconstruction of annual money supply over the long run: the case of England, 1279-1870. EHES Working Papers in Economic History No. 94

Sargent, T. and F. Velde (1995). Macroeconomic features of the French Revolution, Journal of Political Economy, 103

Schumpeter, J. A. (1987/1954). History of Economic Analysis. Routledge

Monday, 17 October 2016

You Reap What You Know: Observability of Soil Quality, and Political Fragmentation

Thilo Hunig is  PhD student at
Humboldt University, Berlin

New EHES working paper

Geographic conditions limited medieval rulers in their attempts to extract their peasants’ agricultural product. Soil quality determines agricultural output, and a high spatial variation of the quality makes it hard to observe what peasants could potentially harvest.

If observability is bad, peasants can cheat rulers. Therefore, states with a lower soil observability should have relatively more volatile and lower  income, and in the end have a weaker military. We can show that this mechanism explains parts of the large differences in territories’ areas in the late medieval Holy Roman Empire. Among the over 600 territories we count on a map of the HRE in 1378, we find a robust and significant link between observability of soil quality, and the political fragmentation of an area.

Fabian Wahl is Assistant Professor
at the University of Hohenheim

We digitized a map of 1378 Holy Roman Empire featuring over 700 territories. Roman and Carolingian legacy did not leave a unified German state, and despite technologically determined economics of scale in public goods provision (Alesina and Spolaore, 1997), especially military, these territories persisted with a high degree of sovereignty until the 19th century. This, historically unprecedented political fragmentation is still visible ,e.g. in today’s Germany many different dialect areas, whose borders are still constitute barriers to trade by causing significant border effects (Lamelli et al., 2015). We provide a model why an equilibrium with many small states was stable for centuries, and why variation in soil quality can explain parts of the equilibrium variation in state sizes.

We extend the theoretical model on geography, transparency and institutions outlined by Mayshar et al. (2013).  We make the model empirically testable by proposing a continuous observability measure, and connect observability to state size, assuming that states’ income determines military spending. We hypothesize that states on soils which are more spatially homogenous concerning their soil quality are usually larger, despite the effect of the level of soil suitability. Furthermore, we argue that city states primarily occurred in areas with a high variation in soil quality, as the territorial states were weak in this area, and furthermore, the specialization of cities on trade and proto-industry made their tax revenue independent from agricultural conditions what enabled them to survive.

1378 Holy Roman Empire
This provides evidence for the foundations of state building during the middle ages and hence the origins of modern territorial states. We develop a GIS measure, the soil observability index, which captures this theoretical idea, and find a robust positive relationship between soil observability, and sizes of medieval German territories and between low observability and the existence of city states.

The blog post was written by Thilo Hunig and Fabian Wahl.
The working paper can be downloaded here: http://www.ehes.org/EHES_101.pdf

Alesina, A. and Spolaore, E. (1997). On the number and size of nations. Quarterly Journal of Economics, 112(4):1027–1056.
Mayshar, J., Moav, O., and Neeman, Z. (2014). Geography, transparency and institutions. Mimeo.
Lameli, A., Nitsch, V., Südekum, J., and Wolf, N. (2015). Same same but different: Dialects and trade. German Economic Review, 16(3):290–306.

Wednesday, 12 October 2016

Sound for Seniors Workshop, August 23-24 in Gothenburg

Group photo, participants of the workshop

This new series of workshops builds upon the concept of the Sound Economic History Workshop, which is aimed at PhD students and post-docs, primarily from the Scandinavian countries, but instead, it targets researcher who may no longer claim for themselves the label “young”. It held its first event September 23–24, at the Unit for Economic History, Department of Economy and Society, University of Gothenburg. The event was organised by Jacob Weisdorf (SDU), Joacim Waara (Gothenburg), and Svante Prado (Gothenburg), who are also responsible for the initiative and the organisation of future workshops. Scandinavian scholars interested in hosting future workshops are encouraged to contact the organisers.

Keynote by Tommy Bengtsson

The conference accommodated nine speakers and Tommy Bengtsson from Lund University was invited to give a keynote. We also enjoyed the company of a guest from far away, namely Martin Shanahan from the University of South Australia, who happened to be staying at the department at the time of the conference.

The conference started with lunch at the Department of Economy and Society.

The first speaker was Kerstin Enflo, who presented a paper titled, “From conflict to compromise: The importance of mediation in Swedish work stoppages, 1907–1927”, co-authored with Tobias Karlsson. The paper deals with the role of mediation in labour market conflict resolution during first 20 years of state-sponsored intervention. The empirical evidence consisted of a geocoded panel dataset comprised of all reported work stoppages in Sweden from 1903 to 1927. The result suggests that the presence of mediation in a conflict resulted in an approximate 30% higher probability of a compromise outcome. Thus, mediation could have paved the way for a cooperative atmosphere in the local labour market.

The second speaker was Jørgen Modalsli, with the paper, “Multigenerational persistence: Evidence from 146 years of administrative data”. He used Norwegian census data on occupational associations among grandfathers, fathers and children between 1865 and 2011. He found significant grandparental influence throughout the period. In particular, the excess grandparental influence is strong for white-collar occupations. Grandparental effects remained when he restricted the study to grandparents who were not present in their grandchildren’s neighbourhoods, suggesting that mechanisms other than direct grandparent–grandchild interaction are part of the explanation for the observed associations.

The third speaker was Stefan Öberg, who presented a new research project called “Socioeconomic dimensions of diet and health during the 20th century: A longitudinal study”. This was a joint effort with Christer Lundh, Paul Nystedt, Kjell Torén, and Hanna Augustin. The members of the group belong to the fields of economic history, economics, clinical nutrition and environmental and social medicine. The overarching research problem is socioeconomic variations in diet and health. The research task is to examine the social patterns of health-related behaviours, living conditions and diet, as well as their consequences for health later in life. The project will create create a historical cohort, with rich information on health-related behaviours, living conditions and diet at baseline, and it will include a very long follow-up time. The information on socioeconomic background and consumption comes from household budget surveys carried out by the Swedish Social Board between 1913 and 1934 (N≈2,500). The authors will link this household level data to information on longevity and cause of death (and height and weight for men) of the members of the households (N≈10,000).

The fourth speaker was Jacob Weisdorf, who presented a paper named “Unreal wages?
A new empirical foundation for the study of growth and living standards in England, 1260–1860”, co-authored with Jane Humphries. The paper begins by recognising that we know very little about the length of the working year, which makes previous estimates of historical living standards, based on daily wages, very uncertain. The novel part of the paper is to present a new series for unskilled male workers employed by the year. This new series of annual estimates tracks trends in per capita GDP, unlike estimates of wages grossed up from daily rates through an assumption about days worked. By implication, the new annual estimates give us the number of workdays since the year 1260. It turns out that previous studies overestimated the medieval working year, but underestimated the industrial one.
Christer Lundh and Tommy Bengtsson
The final speaker of the first day was Tommy Bengtsson, delivering the keynote, titled “From hunger and disease to modern economic growth”. His presentation traced the rise of a new research field of historical demography, health and living standards, using combined time-series and event-history analyses of longitudinal, nominative, and microlevel data. For him, it started with a growing interest in the issues of health and living standards that were conventionally measured in the 1980s. An important point of departure in Tommy’s presentation was Robert Fogel’s (and Fogel and Costa 1997) description of the evolution of human physiology the last 300 hundred years as “techno-physio evolution”, made possible by advances in technology: “a synergism between technological and physiological improvements that is biological, but not genetic, rapid, culturally transmitted, and not necessarily stable”. In this model, nutritional status is a function of diet, disease and lifestyles, and nutritional status is measured as length of life and height. Improved nutritional status increases output, which in turn increases nutritional status, increasing output, and continuing endlessly. The early trigger of improved nutritional status is improved diet. Poor people, whether in pre-modern Europe or in todays less developed countries, are caught in a nutritional trap, preventing them from improvements in nutritional status and thereby stunting economic growth.

However, historical evidence did not provide unambiguous support for the idea of nutritional traps. Part of the problem, Tommy argues, pertained to the different concepts and measures of standards of living used to investigate the presence of nutritional traps historically: wage and price data, family budgets, mortality rates, heights, food prices and population totals etc. No wonder there is a lack of consensus. The time was ripe to develop a new and different concept of standard of living, designed for longitudinal and microstudies, as well as for comparative purposes. The new concept was borrowed from Amartha Sen’s ideas of functioning and capabilities. In short, demographic responses of individuals and households to short-term economic stress depend on access to resources. Effects of short-term economic stress on migration, nuptiality, fertility, and mortality can therefore be used as in indirect measure of individual living standards. Instead of looking at the relationship between economic conditions and demographic behaviour at the aggregate level, this research approach requires combined time-series and event-history analyses of longitudinal, nominative, microlevel data. These data allow for the finely grained differentiation of mortality, fertility, and other demographic responses by social class, household context, and other dimensions at the individual level a data-demanding framework, indeed.

Tommy formed a Swedish team to collect these data from family reconstitutions, in combination with population registers in a handful of parishes in Southern Sweden (Scania). Then, they collaborated with scholars from Belgium, China, Italy and Japan, in which appropriately detailed historical population register data exist for selected communities. This international collaboration, started in 1994, was coined EurAsia Project on Population and Family History – from macro to micro. Since the early 1990s, several books and many articles have examined the demographic responses mortality, fertility and marriage to social and economic pressures. Some of the conclusions that have emerged from this body of research are that (i) public welfare systems were more developed in the East; (ii) land was more unequally distributed in the West; (iii) households were more complex in the East, and were larger in China; (iv) marriages were planned and dependent on economic factors, both in the East and the West, as was fertility; and (v) living standards and life expectancy were about the same in the West and the East.

But what about the role of diet in the improvements of nutritional status? Was Robert Fogel right in assigning diet as the chief trigger for improvements? Although the jury is still out on that, Tommy seems to have gravitated towards a response in the negative. Mortality has not seemed to vary systematically with income in the past. Only after 1950 has the socioeconomic gradient become visible. This would question whether food intake is as important as what was posited. His recent research, as well as the research of others, places great emphasis on life conditions during very early life stages, because development of organs and cells are fastest during the foetal stage and early in life, and then gradually slows. The disease burden early in life seems to be important, more so than diet.

After the keynote, the participants finished off with a glass of wine at the Department of Economy and Society. Then, everyone walked across the city centre to Fiskekrogen, a restaurant famous for serving gourmet food, in particular fish and shellfish.

Christopher Lloyd

Christopher Lloyd’s presentation sparked off the second day of the conference. The title of his presentation was “From old extractive capitalism to generalised new extractivism: Continuity, transformation, and globalisation in the resource grab settler world”. He begins by recognising that all settler societies were, and many still are, commodity–dependent export economies with peculiar structural connections to the world economy. This is a remarkable fact in the 21st century, especially considering the long history of import-substitution protection of manufacturing that they all employed from the late 19th and early 20th centuries, with varying success. His paper aims to add to the analysis of export dependence the important concepts of generalised neo-Ricardian and imperialist rent. The use of these concepts will help to reveal the totalising social nature of rent extraction in these zones today, especially those without strong states and well-organised labour movements to resist the generalisation of rent extraction.

Klara Arnberg

The second speaker of the second day was Klara Arnberg, with a paper called “Advertising to advertisers: Intersectional perspectives on the development of Swedish market segments, 1880–1939.” Her paper examines the history of the expansion of a market for consumer goods and the history of the expansion of the press in the late 19th and early 20th centuries. When press publishers tried to convince advertisers to put ads in their newspapers and magazines, they not only tried to attract with circulation figures, but they also tried to reach specific consumer groups, as in the above quotation. Her paper follows how these ads framed and formulated different consumer groups in terms of intersections of class and gender in the industrialisation process when the purchasing power of different groups changed rapidly, when new consumer goods were introduced at the market, and when ideas about consumer behaviour were introduced in Swedish advertising. By studying how segments were formulated to the advertisers by the press, she can trace early ideas about consumption, gender and class.

The third speaker was Erik Bengtsson, presenting his paper “The wealth of the richest:
Inequality and the nobility in Sweden, 1750–1900”. This paper, co-authored with Anna Missiaia, Mats Olsson and Patrick Svensson, explores the wealth of the Swedish nobility from agrarian society to industrial society by using a sample of 200+ probate inventories of nobles for each of the benchmark years of 1750, 1800, 1850 and 1900. The paper shows that the nobility 0.5% of the population was very dominant in 1750: the average noble was 60% richer compared to the average person, and the nobles held 29%of private wealth. In addition, 90% of the nobles were richer than was the average person. On the other hand, in 1900, the nobles’ advantage had decreased and the stratification within the nobility had increased dramatically. There was a group of super-rich nobles, often old nobility with lots of land, but there was also a large minority who were not richer compared to the average Swede. This goes against the older interpretation of mediaeval and early modern Sweden, which has tended to downplay the political and economical importance of the Swedish nobility relative to elsewhere in Europe.

The fourth speaker was Sakari Saaritsa, who talked about a research project titled “Socioeconomic capital, physiological capital and human capital: An anthropometric perspective on schooling and social mobility in early 20th century Finland”. The project will exploit school-based statistics on height and weight by age to analyse the linkages between social inequality, physiological development, and evolving mass education in early 20th century Finland. Available aggregate statistics were available on height by age for a sample of thousands of pupils of both sexes by educational track between ages 7 and 20, from the turn of the 1920s and the mid-1930s, enable the incorporation of physiological capital into the analysis. Applying modern Finnish and WHO benchmarks makes it possible to estimate the extent of stunting by group and by sex in the two periods. In addition to measuring differences in height at age of tracking, it is possible to analyse gender differences in the degree of physiological inequality between secondary and non-secondary schooled children. The analysis adds an important dimension to the dynamics of pre-welfare-state inequality.

The fifth, and final, speaker was Cristián Ducoing Ruiz, who presented joint work with Sara Torregrosa Hetland, called “Voting for welfare? Comparative performance in Ibero-American democratisations”. The paper asks whether or not democracy leads to achieving economic and human development. Do dictatorships leave long-run legacies behind? The paper explores the cases of four Ibero-American countries having common histories, but under different contexts: Spain, Portugal, Brazil, and Chile. The two Iberian countries suffered long periods of autocratic regimes, while the South American cases had relatively later and shorter dictatorships. The authors intend to assess the extent to which these democratisations brought about improvements in societal welfare, looking at several indicators. As an indicator combining both of these dimensions, they propose the applicability of the concept of Inequality Extraction Ratio, initially suggested for ancient societies, but adapted by Milanovic (2013b) to the analysis of contemporary economies. The idea is that democratisations might not have been able to achieve reductions in inequality, but could have promoted decreases in the appropriation of economic surplus by the national elites.

Svante Prado, Jacob Weisdorf, Sakari Saaritsa, Chistoffer Collin
The conference ended with lunch at the Department of Economy and Society.
This blog post was written by: Svante Prado, University of Gothenburg

Sunday, 2 October 2016

Remembering Gunnar

By: Cormac Ó Gráda, Dublin

Karl Gunnar Persson
19 March 1943 – 14 September 2016
In last his email to me Gunnar Persson was full of the joys of life, looking forward to his trip to Buriano (where he died suddenly a few days later) and explaining how his sons had discovered a way of getting cheap tickets to the QPR-Fulham game all three planned to attend together in late September.
He also appended the anecdote below, which is told in typical Gunnar style.  I corrected a few typos, that is all.
Missing Gunnar, a proverb in Irish comes to mind: Ní bheidh do leithéid arís ann (You were special, one of a kind).

Barter trade between economic historians and a playwright: 

the Brecht- Kuczynski - Postan triangular trade in the early 1950s

As a research student in the early 1970s at the Department of Economic History, Lund University, I had the opportunity to meet Jürgen Kuczynski, the then director of Abteilung Wirtschaftsgeschichte  at the (East) German Academy of Sciences, when he was visiting Lund, invited by Lennart Jörberg. Kuczynski directed a large team of historians producing about 55 volumes of social and economic history, most of them in the 40 volumes series Geschichte der Lage der Arbeiter unter dem Kapitalismus, and other series from the late 1940s and onwards.  During the Cold War many academics in the West were often slightly and sometimes strongly dismissive of the quality of this research project. I really cannot tell if it was seriously tainted by submission to political orthodoxy or whether Western scholars automatically depreciated it. Perhaps it is time to have a fresh look at these books now, when that war is over.
Jürgen Kuczynski
Jürgen Kuczynski was a German communist and Jew, educated in Germany and the US, who fled Hitler in 1936 to England and returned to Germany with the allied forces and worked for them in 1944/45, then a short time as a civil servant in the Soviet zone of Germany. He was a parliamentarian in DDR until the mid 1950s, but published his first books on German working class conditions a couple of years after the war. After his retirement he became a tolerated dissident.
He was a larger than life personality and a good story teller. I remember more stories than the one I am going to tell now. However, I cannot guarantee that all the details in what follows are true. Perhaps it is just a play imagined but never written by Bertold Brecht.  This is what I remember Jürgen Kuczynski told me at that dinner in Lund many years ago. The story refers to a problem with barter trade which occurs when there is lack of convertible currency, pair-wise non-coincidence of wants and restrictions to trade. And amazingly pulp fiction (crime novels), enters as a means of exchange.

The plot and leading actors:
Bertold Brecht
Bertold Brecht, playwright and director of Berliner Ensemble with a keen desire for pulp fiction, say, Mickey Spillane, unavailable in east Berlin bookshops. However, as a cultural protégée in the new DDR regime Brecht had access to luxuries denied to ordinary east Germans, such as cigars. Being the creator of among other plays Mutter Courage and the Three Penny Opera (with Kurt Weil) did not make him a monetary theorist, but he certainly understood the mechanism of barter exchange and how to handle a situation when there was no access to convertible currency.
M. M. Postan economic historian at Cambridge who would like to see what the first volumes of the Lage der Arbeiter looked like and if they could be useful for the volumes of the Cambridge Economic History of Europe he was editing.
Jürgen Kuczynski, who had published the first couple of volumes in the long series of books on working class conditions and lacked access to foreign luxuries, such as cigars, that he was used to.
 The unfolding of the plot: triangular barter trade
1. Kuczynski offered a number of copies of his most recent book to Postan and asked him to pay back in a means of exchange as good as gold: pulp fiction.
2. Postan replied with a selection of pulp fiction, say Mickey Spillane, sent to Kuczynski.
3. Kuczynski exchanged the pulp fiction with Bertold Brecht, who paid Kuczynski in kind with cigars.
Happy End: Pareto optimal trade? Possibly.