Evading the ‘Taint of Usury’: The usury prohibition as a barrier to entry

The development of capital markets in medieval Europe was shaped for centuries by the religious ban on lending money at interest. This paper examines how this prohibition developed as the outcome of strategic behavior by religious, commercial and political elites. A model is developed to analyze this hypothesis and to examine how the usury prohibition developed over time. It suggests that an important reason for the persistence of the ban was that it created a barrier to entry that enabled secular rulers, the Church, and a small number of merchant-bankers to earn monopoly rents.     

Income inequality in central Spain, 1690–1800

This paper studies the evolution of income inequality in central Spain during the late seventeenth and eighteenth centuries, taking as case study the province of Guadalajara. The first part of the paper presents the sources and the dataset that was created to estimate income inequality using grain tithes. The second section shows that through the period grain represented the lion share of total income and therefore that it can be used as a reliable proxy. The following part of the paper introduces an analysis of income inequality in the province during the period 1690–1800 and concludes that inequality decreased during the last third of the eighteenth century. Finally the paper addresses this unexpected result and concludes that it was consequence of the success of the land reform carried out by the central government in the late 1760s. The reform was a success in Guadalajara, thanks to the characteristics of its population and the lack of bargaining power of pressure groups.     

Fertility decline and the heights of children in Britain, 1886–1938

In this paper we argue that the fertility decline that began around 1880 had substantial positive effects on the health of children, as the quality–quantity trade-off would suggest. We use microdata from a unique survey from 1930s Britain to analyse the relationship at the household level between the standardised heights of children and the number of children in the family. Our results suggest that heights are influenced positively by family income per capita and negatively by the number of children or the degree of crowding in the household. The evidence suggests that family size affected the health of children through its influence on both nutrition and disease. Applying our results to long-term trends, we find that rising household income and falling family size contributed significantly to improving child health between 1886 and 1938. Between 1906 and 1938 these variables account for 40% of the increase in heights, and much of this effect is due to falling family size. We conclude that the fertility decline is a neglected source of the rapid improvement in health in the first half of the twentieth century.     

Exchange rate movements and foreign direct investment (FDI): Japanese investment in Asia, 1987–2008

The paper estimates the impact of exchange rate movements on foreign direct investment (FDI). By using the panel data of Japanese FDI flows to nine dynamic Asian economies during 1987–2008, the paper finds that (i) FDI declined with a depreciation of the yen against host country currencies; (ii) it increased with exchange rate volatility; and (iii) it was little affected by the Asian financial crisis, especially when disguised financial flows were removed from the data. A novel result concerns the negative response of FDI to the third moment of monthly exchange rate changes: the volume of FDI was smaller when the distribution was positively skewed (i.e., when the yen was biased towards relatively large depreciation shocks). If skewness proxies for expected mean-reverting changes, this supports the idea that source country investors care about the future stream of revenues and returns denominated in their own currency. These results are robust, with other standard control variables having statistically significant coefficients with expected signs.     

Testing contagion of the 1997–98 crisis in Asian stock markets with structural breaks and incubation periods

This study tests for the existence of financial contagion, using a method that allows an incubation period before contagion takes effect. We define contagion as an increase in cross-market linkages following shocks. With daily data on Asian stock markets during the 1997–98 crisis, we find significant upward shifts in the linkages between the Asian markets of both crisis and non-crisis countries. The upward shifts are maintained even after controlling for heteroskedasticity and common world and regional factors, providing strong evidence for financial contagion.     

Long-term changes in social mortality differentials, Geneva, 1625–2004

In this paper we argue that in order to test competing hypotheses on the emergence of social mortality differentials, one has to adopt a long-term perspective. Studying social inequality in mortality in Geneva from 1625 to 2005, we use historical mortality data published by different authors and contemporary data drawn from an ongoing research project. The comparison over four centuries gives evidence to both the constancy and convergence hypotheses. Mortality is systematically lower-than-average among elites on the one hand, but on the other hand the difference between the top and the bottom of the social ladder is decreasing over time.     

Responding to the global financial crisis: Vietnamese exchange rate policy, 2008–2009

The paper presents an analysis of exchange rate policy in Vietnam during 2008–2009. In early 2008, the country faced a sudden reversal of capital flows as signs of developing domestic vulnerabilities became evident. The downward pressure on the dong then intensified with the onset of the global financial crisis in the fall. In these environments, the Vietnamese authorities responded with various exchange rate policy measures. The paper documents a shift in Vietnam's de facto exchange rate regime, from a basket peg to a simple US dollar peg, when the domestic vulnerabilities became compounded by the evolving global crisis. The authorities utilized additional measures to relieve pressure on the parallel exchange rate. An event study methodology finds little evidence of systematic effectiveness for these policy actions; any effectiveness was short-lived. A close examination of individual actions suggests that the impact of foreign exchange market intervention appeared more consistent than any other type of measure and most effective when combined with other measures.     

Commercialization as exogenous shocks: The effect of the soybean trade and migration in Manchurian villages, 1895–1934

The effects of commercialization and migration in traditional agrarian economies such as China's during the nineteenth and twentieth centuries have been a subject of ferocious debate. Using data from Manchuria on soybean cultivation and exports, we employ difference-in-differences and instrumental variable approaches to demonstrate a significantly positive relationship between growing soybeans for export and the returns to migration. Those who migrated to Manchuria in response to high market prices, and to villages more suitable for cultivating soy prospered most; they owned approximately two-thirds more of the arable land and one-third more of houses than those who failed to do so. Evidence suggests that the positive welfare effect of commercialization-cum-migration was confined not only to the rich, who seek to relieve the “land constraint” at home, but possibly also to the poor.     

Danger on the exchange: How counterparty risk was managed on the Paris exchange in the nineteenth century

In the nineteenth century, the Paris Bourse struggled to manage counterparty risk, revealing the awkward choices for the regulation of derivatives markets. The exchange, primarily a forward market, instituted a mutual guarantee fund to prevent broker failures from snowballing into a liquidity crisis. The fund then forced the Bourse to search for mechanisms to control moral hazard. With new archival data, we describe the evolving regulatory regime and analyze the determinants of broker failures. The Bourse faced a conundrum; when it finally imposed a tight regulatory regime that limited risk, trading began to migrate off the exchange to less regulated markets.     

The usefulness of earnings versus book value for predicting stock returns and cross corporate ownership in Japan

Using a sample of Japanese firms, this paper evaluates the usefulness of the two fundamental products of an accrual accounting system, namely accrual earnings and book value of equity for predicting stock returns. Our analysis shows that both earnings and book value for Japanese firms have the ability to provide for profitable trading strategies or improved portfolio decisions, and that relative to the trading strategy based on earnings or book value alone, the trading strategy based on a combination of both earnings and book value generates substantially higher returns for all cases. This suggests that book value (or earnings) captures certain aspects of equity values that are not captured by earnings (book value). Our multivariate regression results further indicate that the predictive ability of earnings is dominated by that of book value. Finally, it is found that the predictive ability of book value is sensitive to the degree of cross corporate ownership, while it is insensitive to the degree of real estate holding.     

China's grain marketing system reform in 1993–1994: empirical evidence from a rural household survey

By utilizing a rural household survey, this paper domonstrates the progress in China's grain marketing reform in 1993 and evaluates to what extent the reform was reversed in 1994. Specifically, we investigate the degree of commercialization, changes in state's contract procurement quota and changes in the marketing channels. Overall, the grain market has been liberalized to a very large extent. Participation of the private traders have already grown to a significant level, occupying more than one-third of the market share for wheat and rice and more than half for maize. For minor crops, the share of private traders were even bigger. Despite the reversal in 1994, the grain market was still very “open.” Counting all grain types, the state was controlling only about one-third of the marketed surplus. However, if the central leadership perceived any serious instability in the market for a certain grain, examples provided illustrate how the state's control could certainly be strengthened significantly.     

Once were farmers: Occupation, social mobility, and mortality during industrialization in Saguenay-Lac-Saint-Jean, Quebec 1840–1971

We study men's adult mortality and longevity by socio-occupational status during industrialization in Saguenay-Lac-Saint-Jean, Quebec. Data were extracted from the BALSAC database (Université du Québec à Chicoutimi), which comprehensively traces the demographic history of the region since the beginning of the French Canadian settlement in 1840 up to the early 1970s. Using five occupational classes and controlling for year, age at marriage, urban/rural residence, and literacy, we found no evidence for the emergence of a socioeconomic gradient in mortality. At least until the early 1970s, mortality in the region is the lowest for farmers and appears to be driven by occupational risk rather than fundamental social causes.     

Social class, social mobility and mortality in the Netherlands, 1850–2004

This study uses data from a random sample of births in the Netherlands during the period 1850–1922 to examine the relationships between social class, social mobility and mortality at middle and old age. Population registers and personal cards covering the period from 1850 to 2004 for all Dutch provinces were used to reconstruct individual life histories of 14,900 births. For men we did not find an effect of the social class of origin (using two different SES-classifications) on mortality in age group 18 to 35. We also did not observe an effect of own social class on mortality after age 35. For women effects of social class of origin and social class of husband were generally absent as well. Our conclusion is that the standard ideas about the negative effects of processes of industrialization and urbanization on the duration of life do not seem to apply to the Netherlands. Where one lived mattered more for survival than the social class one belonged to.     

Globalization, industrialization and urbanization in Pre-World War II Southeast Asia

This article uses new data to analyze the impact on Southeast Asian urbanization of globalization and industrialization in the world economy's core countries between the 1870s and World War II. Dramatic falls in transport costs and free trade, enforced, if necessary, by colonial rule, combined to open vast frontier areas throughout Southeast Asia to global commerce and create a handful of large urban centres. These cities, through linking Southeast Asian primary commodity exporters to world markets, grew predominantly as part of the global economy. Our econometric analysis shows that measures of globalization — in particular industrial production in the world core and international transport costs — are much better predictors of the size of Southeast Asia's main cities than domestic factors such as total population, GDP per capita, land area or government expenditure.     

The late emergence of socioeconomic mortality differentials: A micro-level study of adult mortality in southern Sweden 1815–1968

This paper deals with socioeconomic differences in adult mortality in southern Sweden 1815–1968, a period of transformation from an agricultural to a modern industrial society and increasing life expectancy. We use longitudinal micro-level data with information on demographic events, household structure and socioeconomic status. The main finding is that the socioeconomic gradient is a very recent phenomenon. While mortality fell in all socioeconomic groups it was not until the 1950s that a socioeconomic gradient appeared, and then only among adults in working ages. For the elderly, we find no significant mortality differentials between various social groups at any time. These results are consistent with the divergence hypothesis, although this process started much later than previously thought, and was not an immediate consequence of industrialization.     

Restructuring of financial institutions and the corporate sector in Korea

This paper explores causes of the Korean currency crisis which started in November 1997. This paper also presents restructuring proposals and introduces the progress made so far. The urgency for quick restructuring and the necessity of the injection of money from both the government and foreign investors are emphasized. Restructuring of financial and corporate sectors should be pursued simultaneously. In the financial sector, the restructuring of banks should take precedence over other financial institutions. The key task in terms of bank restructuring involves the resolution of bad loans, recapitalization and the expedited reorganization of nonviable banks. Corporate reform is also important. Banks should play a central role in corporate workouts, especially in lowering excessive corporate debt and triggering corporate restructuring based on core competence. Transparency of corporate management, internationally accepted accounting practices, fuller disclosure requirements and stronger monitoring by minority shareholders are prerequisites for effective market discipline. Reform of ownership and governance structure are also important in enhancing managerial accountability of corporates as well as financial institutions.     

Global outsourcing or foreign direct investment: Why apple chose outsourcing for the iPod

A simple model is presented, where a firm's productivity is endogenized by its R&D investment. It shows that the most productive firms may prefer international outsourcing to foreign direct investment (FDI) in industries with a high innovation share. The high innovation share motivates the firms to economize on organizational cost in order to save resources for R&D investment, making outsourcing preferable to FDI because the former incurs a smaller organizational cost. This model helps explain why Apple Inc., belonging to the electronics industry, which has a particularly high innovation share, launched its innovative iPod through international outsourcing instead of FDI.     

The rise and fall of spatial inequalities in France: A long-run perspective

This paper studies the evolution and determinants of spatial inequalities in France. To this end, we use a unique database providing data on value-added, employment, and population over the entire set of French “Départements” in 1860, 1896, 1930, 1982, and 2000. These data cover three sectors: Agriculture, Manufacturing, and Services. Firstly, we confirm the existence of a bell-shaped process of spatial concentration in Manufacturing and Services over time. In contrast, labor productivity has been converging across departments. Secondly, we find considerable agglomeration economies over the whole period. The spatial distribution of these gains is determined mainly by market potential in the first sub-period, 1860–1930, and higher education in the second, 1930–2000.     

Real interest parity: A note on Asian countries using panel stationarity tests

Existing panel data studies of real interest parity are either unable to identify which panel members are characterised by stationary real interest differentials, or are subject to size distortion resulting from the presence of structural breaks and cross-sectional dependencies. Using a panel stationarity testing procedure recently advocated by Hadri and Rao (2008) that allows for structural breaks and cross-sectional dependency, we are unable to reject the stationarity of Asian real interest rate differentials.