Strategic colonies and economic development: real wages in Cyprus,Gibraltar, and Malta, 1836–1913

What if a colony is neither extractive nor settler material? European powers colonized some areas for military reasons: to keep those areas out of rivals' hands or to have geographically strategic outposts. In these cases, European settlement was low and there was nothing to extract. This article examines the extent to which living standards, as measured by real wages, among three such examples—Cyprus, Gibraltar, and Malta—can be explained by British rule. These highly comparable Mediterranean islands did not enjoy democratic governments nor did they endure authoritarian ones. Colonial institutions worked through ensuring an environment in which Mediterranean trade could flourish. This adds another layer to our understanding of the economic impact of colonization, extending the simple settler versus extractive dichotomy. It also contradicts the historiography's claims that living standards were low, and determined by British military expenditure. Living standards in these countries were in fact at the European average.     

Employment adjustment in two countries with poor reputations: Analysis of aggregate, firm, and flow data for Portugal and Germany

This paper supplements aggregate time-series analysis of the speed of employment adjustment with evidence from firm panel and flow data for two countries – Portugal and Germany – sharing unenviable labor market reputations. The Portuguese labor market is often portrayed as terminally inert, while that of Germany as badly ailing. We report broad consistency in the results across data sets in favor of Portugal. In benchmarking Portugal against Germany, the adverse reputation of the former – if not necessarily that of the latter country – may have been exaggerated in contemporary policy debate.We thank, without implicating, two anonymous reviewers of this journal for their helpful remarks on an earlier version of the paper.     

Nea presidential address, 1991: Sixteenth-century European expansion and the economic decline of Africa (in honor of Walter Rodney)

Prior to the sixteenth century, the Indian Ocean trading network was one of the wealthiest commercial regions in the world. It included states of East Africa, the Arabian peninsula, the Indian subcontinent, Southeast Asia, China and Japan. By circumnavigating Africa, Portugal was the first European nation to gain access to the region. Through the exercise of naval superiority, blockading of strategic shipping lanes, imposition of duties and expulsion of Swahili and Muslim merchants, Portugal exercised a mercantile monopoly which ultimately led to the region’s rapid economic decline. Using rare historical documents from Po rtugal and Africa, this study traces the effects of Portuguese expansion on the economies of East Africa and trade in the Indian Ocean.     

A ‘blank cheque'? Portuguese Second World War sterling balances, 1940–73

The British effort in the Second World War required massive external financing which depended on Lend‐Lease and the accumulation of sterling balances. Indebtedness in sterling balances corresponded to almost 38 per cent of this total at the end of the war. Portuguese sterling balances, although a small share of the total, were important because of pre‐emptive purchases, especially of wolfram, and because of the ‘gold clause’ which was to be applied to outstanding balances. Portugal's willingness to finance British purchases contrasts with the requirement of German payments in goods or cash for their purchases in Portugal. The settlement of Portuguese sterling balances in August 1945 was singular as it preceded the Anglo‐American settlement of December 1945 which had important consequences for sterling balance holders, as the US insisted that the US$3.75 billion loan should not be used to settle British war debts. Postwar settlement of British debt through a long‐term loan from Portugal to Britain contrasts with settlements that involved the sale of British assets. Salazar's concerns about the postwar international position of Portugal, the Portuguese Empire, and the survival of the Portuguese regime are relevant in explaining his pro‐British stance during and after the war.     

Top incomes and earnings in Portugal 1936–2005

This paper analyzes income and earnings concentration in Portugal from a long-run perspective using personal income and wage tax statistics. The results suggest that income concentration was much higher during the 1930s and early 1940s than it is today. Top income shares estimated from reported incomes deteriorated during the Second World War, even if Portugal did not take active participation in the conflict. However, the magnitude of the drop was less important than in other European countries. The level of concentration between 1950 and 1970 remained relatively high compared to countries such as Spain, France, UK or the United States. The decrease in income concentration, started very moderately at the end of the 1960s and which accelerated after the revolution of 1974, began to be reversed during the first half of the 1980s. During the last 15 years top income shares have increased steadily. The rise in wage concentration contributed to this process in a significant way. The evidence since 1989 suggests that the level of marginal tax rate at the top has not been a primary determinant of the level of top reported incomes. Marginal rates have stayed constant in a context of growing top shares.     

Historical gender discrimination does not explain comparative Western European development: evidence from Portugal, 1300-1900

Gender discrimination has been pointed out as a determining factor behind the long-run divergence in incomes of Southern vis-à-vis Northwestern Europe. In this paper, we show that women in Portugal were not historically more discriminated against than those in other parts of Western Europe, including England and the Netherlands. We rely on a new dataset of thousands of observations from archival sources covering six centuries, and we complement it with a qualitative discussion of comparative social norms. Compared with Northwestern Europe, women in Portugal faced similar gender wage gaps, married at similar ages, and did not face more restrictions on labor market participation. Consequently, other factors must have been responsible for the Little Divergence of Western European incomes.     

Is 2?% the optimal inflation rate for the Euro Area?

According to the relevant literature, monetary policy implications concerning the optimal inflation rate can be derived by examining the relationship between inflation and the Relative Price Variability (RPV). This paper studies this issue for selected Euro Area (EA) countries, using monthly data for the Harmonized Index of Consumer Prices. In particular, semi-parametric estimations are employed so as to find the accurate form of the inflation-RPV relationship. The results indicate that this relationship exhibits a U-shape functional profile. Furthermore, the optimal inflation rates for the EA, France, Germany and Spain are also calculated. For all countries and the EA, we find that although the European Central Bank’s “below but close to 2?%” inflation target is optimal for the EA average, it is not the optimum inflation rate for the individual counties.     

English mercantilist influences on the foundation of the Portuguese School of Commerce in 1759

The Portuguese School of Commerce, founded in 1759, is promoted frequently as the world's first official, government-sponsored school to offer formal instruction in commerce. This paper contends that Sebastião Carvalho e Melo (1699–1782), the Marquis of Pombal, was responsible for the transfer, from England to Portugal, of the educational “know how” instrumental to the School's success. Pombal was influenced by the English mercantilism he observed as the Portuguese ambassador to England (1738–43), particularly proposals by a writer on mercantilism, Malachy Postlethwayt, for academy-based commercial education in England. Another influence on Pombal was former East India Company employee, John Cleland. Pombal's motives were to imitate the success of British mercantilism, develop trade and economic activity in Portugal, and improve and expand Portugal's merchant class.     

Monetary Policy,the Composition of GDP and Crisis Duration in Europe

This paper analyzes the effects of changes in interest rates on the composition of production in 10 European countries during the boom period of the 2000s. We find that output elasticity differs across industries and across countries for similar industries. The paper suggests that in the run-up to the 2008 crisis, the European Central Bank's low interest rate policy affected the allocation of resources across industries. This may explain the sluggish overall recovery from the crisis in Europe.     

Vertical Intra-Industry Trade and Foreign Direct Investment between Japan and European Countries

In this paper, we provide an overview of the development of vertical intra-industry trade (VIIT) between Japan and various European countries, including both old and new EU members, as well as emerging Central and Eastern European countries. VIIT indices constructed in this paper cover a much wider range of margins of unit price ratio than existing studies. Our empirical model attempts to explain the distributional characteristics of VIIT through foreign direct investments (FDI), in addition to traditional determinants of IIT, such as differences in GDP per capita, average GDP, and smaller and larger GDPs. Our sample covers the period from 1988 to 2004 for bilateral trade between Japan and 31 European countries. Our econometric methodology for these panel data uses fixed-effect model estimation with a variable transformation determined by a Box-Cox approach. We find that intra-industry trade between European countries and Japan increases with their corresponding Japanese FDIs, especially for new EU member countries. Our results also indicate that it is important to measure a wider range of quality based on relative prices rather than the traditional ratio used in the literature.     

Did the European unification induce economic growth? In search of scale effects and persistent changes

Did the European Unification Induce Economic Growth? In Search of Scale Effects and Persistent Changes. — In this paper we investigate whether the European unification has had an impact on the Union’s average labor productivity growth. Based on a time-series approach we do not find a scale effect as suggested by new growth theory. However, the data do not reject the hypothesis that the EU growth experience is well described by a textbook Solow model. Panel data estimations moreover firmly reject the idea of a growth bonus associated with EU membership.     

Driving forces of vertical intra-industry trade in Europe 1996–2005

A common feature in the empirical literature of intra-industry trade is the analysis of trade between a given reference country and a set of partners. This article differs from previous studies by examining the bilateral trade among all trading partners within a set of partners. Using a panel data approach, we find that differences in factor endowments seem not to be important as a driving force behind vertical intra-industry trade for European countries over the chosen period. More important driving forces are production size, geographical proximity, average income per capita and income distribution overlap.     

“Weak” Trade,European States in the International Arms 1920–1937: The impact of external threats,market forces,and domestic constraints

Abstract

This article analyses the small- and medium-size arms trade behaviour of nine “weak” (that is, limited political and economic influence) European states in the interwar period: Belgium, Czechoslovakia, Finland, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland. In particular, the significance of external threats, market forces and domestic constraints is assessed for these states' military trade. Firstly, the hypothesis that there might be fewer domestic constraints on the military trade behaviour of these states was not supported by the analysis. The increased military spending of the 1930s seemed to benefit the domestic producers. Secondly, most of these countries were dependent on their aggregate military trade, especially military exports. Thirdly, the hypothesis that the differences between these states might be explained by geographical, strategic or economic factors was found too simplistic. Only proximate groupings could be developed based on various types of categories. Fourthly, “weak” states were found to benefit from the intense international political and economic competition of the 1930s, enabling the pursuit of new military export markets amidst increasing threats.     

Does Public Country-by-Country Reporting Deter Tax Avoidance and Income Shifting? Evidence from the European Banking Industry*

In this study, we examine the effect of increased tax transparency on the tax planning behavior of European banks. In 2014, the European Union introduced public country-by-country reporting requirements to the banking industry. Treating this new requirement as an exogenous shock, we find limited evidence consistent with a decline in income shifting by the banks' financial affiliates in the post-adoption period (starting from 2015). We do not, however, find robust evidence of a significant change in the consolidated book effective tax rates among the affected banks. Our findings suggest that increased transparency from public country-by-country reporting can deter tax-motivated income shifting but that it did not appear to materially influence the banks' overall tax avoidance. Our findings have policy implications for the ongoing debate between the European Parliament, the Organisation for Economic Co-operation and Development, and accounting standard-setting bodies on whether to require multinationals to publish country-by-country reports.     

How much did China's WTO accession increase economic growth in resource-rich countries?

We provide an estimate of China's impact on the growth rate of resource-rich countries after its WTO accession on 11 December 2001. Our empirical approach follows the logic of the differences-in-differences estimator. In addition to temporal variation arising from the WTO accession, which we argue was exogenous to other countries' growth trajectories, we exploit spatial variation arising from differences in natural resource wealth. This allows us to compare changes in economic growth in the post-accession period relative to the pre-accession period between countries that were able to benefit from the surge in demand for industrial commodities brought about by China's WTO accession and countries that were less able to do so. We find that roughly one tenth of average annual post-accession growth in resource-rich countries was due to China's increased appetite for commodities. We use this finding to inform the debate about what will happen to economic growth in resource-rich countries as China rebalances and its demand for commodities weakens.     

International competition in the first wave of globalization: new evidence on the margins of trade

We pose a seemingly ageless question in economic history. To what extent did new entrants in the late nineteenth‐century cotton‐textile industry threaten the customary markets of the European core? Exploiting a newly constructed dataset on textile imports to Spain, we find that as trade costs fell, new rivals began to sell a greater variety of products. Along this dimension, competition can be said to have increased. In response, producers in Europe adjusted the type and number of goods exported. By 1914, specialization mapped onto endowments of skilled labour, capital, and access to raw materials. While firms in new industrializing countries exported low‐end varieties, incumbents in the core shipped high‐end goods, unit values increasing with levels of development.     

Female Access and Rights to Land,and Rural Non‐farm Entrepreneurship in Four African Countries

This paper examines the relationship between female access to land, rights to such land, and engagement in non‐farm entrepreneurship in rural Africa. We used data from the four countries (Ethiopia, Nigeria, Tanzania and Malawi) that were featured in the Living Standards Measurement Study—Integrated Surveys in Agriculture dataset for the period 2013–15. To estimate the relationship, we compute the marginal effect from the logistic regression, while controlling for other important covariates that explain non‐farm activities at the individual/household level. We find that overall, women's access to land and rights to such land significantly explain their likelihood to engage in non‐farm enterprises. However, this relationship is not seen across the sampled countries. In Nigeria, for instance, we find that though the relationship is positive, it was not significant. While for Ethiopia, Tanzania and Malawi, we find a positive and significant relationship. We explain our result based on two important perspectives. The policy implications of our result are included in the paper.     

Between Malthus and the industrial take-off: regional inequality in Sweden, 1571–1850

The causes and extent of regional inequality in the process of economic growth are at the core of historical economic research. So far, much attention has been devoted to studying the role of industrialization in driving regional divergence. However, empirical studies on relatively unequal countries such as Italy and Spain show that inequality was already high at the outset of modern industrialization. Using new estimates of Swedish regional GDP, this article looks for the first time at regional inequality in a pre-industrial European economy. Its findings show that inequality increased dramatically between 1571 and 1750 and stayed high until the mid-nineteenth century. This result refutes the classical view that the industrial take-off was the main driver of regional divergence. Decomposing the Theil index for GDP per worker, we find that the bulk of inequality from 1750 onwards was driven by structural differences across sectors rather than different regional productivity within sectors. We show that counties with higher agricultural productivity followed a classic Malthusian pattern when experiencing technological advancement, while those with higher industrial productivity did not. We suggest that institutional factors, such as the creation of the Swedish Empire, Stockholm's trading rights, and a protective industrial policy, amplified this exceptional pattern.     

War,food rationing,and socioeconomic inequality in Germany during the First World War

Germany experienced a devastating period during the First World War due to severely restricted import possibilities and a general shortage of foodstuffs. This study uses the heights of some 4,000 individuals who served during the Second World War to quantify biological living standards from the 1900s to the 1920s, and focuses primarily on socioeconomic inequality during this period. The results suggest that generally the upper social strata, measured by fathers' occupation, exhibited the tallest average height, followed by the middle and lower classes. These socioeconomic differences became more pronounced during the First World War when the rationing system provided a limited food supply. Wealthier individuals were able to purchase additional foodstuffs on black markets. Therefore, children from upper‐class families experienced only a small decline in average height compared to their counterparts from the middle and lower social strata.