Colonial taxation and government spending in British Africa, 1880–1940: Maximizing revenue or minimizing effort?

Colonial state institutions are widely cited as a root cause of sub-Saharan African underdevelopment, but the opinions differ on the channels of causation. Were African colonial states ruled by near absolutist governments who strived to maximize revenue extraction in order to strengthen their grip on native African societies? Or did European powers build ‘states without substance’, governed with minimal resources and effort, failing to invest in basic public goods? This paper develops an analytical framework for comparing colonial tax and spending patterns and applies it to eight British African colonies (1880–1940). We show that colonial fiscal systems did not adhere to a uniform logic, that minimalism prevailed in West Africa, extractive features were more pronounced in East Africa, and that Mauritius revealed characteristics of a developmental state already before 1940.     

The Pricing of Critical Applications in the Internet

A number of authors have recently proposed techniques for pricing access to Internet resources in the case of congestion. However, these approaches do not take into account the fact that some applications necessitate guaranteed capacity over a relatively long period of time. This paper discusses some elements of the theory of a mechanism that would accommodate such applications. We begin by reviewing both current practice and theory. We then build infinite horizon stationary models with asymmetry of information, which we first use to show the limits of smart markets (McKie-Mason and Varian). Finally, in a very simplified model, we compute the optimal mechanism, and in a specific example, we show that the optimal mechanism favors the high-type long-term user. J. Japan. Int. Econ., December 1999, 13(4), pp. 281–310. CNRS, IDEI, and GREMAQ, University of Toulouse 1, Toulouse F-31042, France; and University of Toulouse 1, Toulouse F-31042, France. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: C73, D44, D82, L96.     

Deficit Spending in the Nazi Recovery, 1933–1938: A Critical Reassessment

This paper examines the effects of deficit spending and work-creation on the Nazi recovery, employing archival data on the public deficit and modern time series techniques. Although deficit spending was tried and full employment was reached within four years, the fiscal impulse generated by the deficits does not appear to have driven the speed of recovery. VAR forecasts of output using fiscal and monetary policy instruments suggest only a minor role for active policy during the recovery. Nazi policies deliberately crowded out private demand to ensure high rates of rearmament. Military spending dominated civilian work-creation already in 1934. Investment in autobahn construction was minimal during the recovery and gained momentum only in 1936 when full employment was approaching. Continued fiscal and monetary expansion after that date may have prevented the economy from sliding back into recession. We find some effects of the Four Years Plan of late 1936, which boosted government deficits further and tightened public control over the economy. J. Japan. Int. Econ., December 2002, 16(4), pp. 559–582. School of Business and Economics, Humboldt University of Berlin, Spandauer Strasse 1, D-10178 Berlin, Germany; and CEPR. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: N44, N14, E52, E47, E65, E27.     

The End of Lifetime Employment in Japan?: Evidence from National Surveys and Field Research

Using both quantitative data from national surveys and qualitative data from our recent field research, this paper provides evidence on the recent transformation of Japan's celebrated practice of lifetime employment (or implicit long-term employment contracts for the regular workforce). Overall, contrary to the popular rhetoric of the end of lifetime employment, evidence points to the enduring nature of this practice in Japan. Specifically, we find little evidence for any major decline in the job retention rates of Japanese employees from the period prior to the burst of the bubble economy in the late 1980s to the post-bubble period. In general, our field research corroborates the main finding from the job retention rates by describing vividly that large firms in Japan have been trying to accomplish their restructuring and downsizing targets by relying heavily on transfers of their employees to their subsidiaries and related firms and hiring cuts, thus avoiding layoffs. Last, the burden of downsizing appears to fall disproportionately on young workers and middle-age workers with shorter tenure. J. Japan. Int. Econ., December 2001, 15(4), pp. 489–514. Department of Economics, Colgate University, Hamilton, New York 13346; Center on Japanese Economy and Business, Columbia Business School, New York; and TCER. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J63, J64, J41, O53.     

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.     

Unemployment and Labor Market Institutions: An Empirical Analysis

The development of the unemployment rate differs substantially between OECD countries. In this paper we investigate to what extent these differences are related to labor market institutions. In our analysis we use data of eighteen OECD countries over the period 1960–1994 and show that the way in which institutions interact is important. J. Japan. Int. Econ., December 2001, 15(4), pp. 403–418. Department of Economics, CentER, Tilburg University and Institute for Labour Studies (OSA), The Netherlands. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E24, J68.     

COLONIALISM AND INDUSTRIALISATION: FACTORY LABOUR PRODUCTIVITY OF COLONIAL KOREA, 1913–37

Unlike other colonial economies, Korea industrialised rapidly during its colonial period, which past scholars attributed to the industrialisation policy directed by the Japanese colonial government between 1930 and 1945. Our analysis of factory labour productivity from 1913 to 1937 suggests significant revisions to this claim. Factory labour productivity as well as total production grew rapidly before the active intervention of the colonial government. In addition, Korean entrepreneurs invested heavily in their firms and successfully competed with Japanese entrepreneurs. We conjecture that the pre-war experience of Korean entrepreneurs provided a critical foundation for the post-colonial economic growth.     

Monetary Policy, Credit, and Real Activity: Evidence from the Balance Sheet of Japanese Firms

We analyze the mechanism of monetary transmission in the Japanese economy by using the quarterly time series data disaggregated by firm size. In particular we examine the channels through which monetary policy influences the firm's fixed investment with special focus on the firm's land. We estimate the vector autoregressive model where we encompass two competing hypotheses on the monetary transmission: monetary and credit channels. Our evidence is in support of the credit channel. We find that land has played a vital role in the monetary transmission, especially for small firms. Moreover, we find that fall of land value in 1990s weakened the efficacy of monetary policy considerably. J. Japan. Int. Econ., December 2000, 14(4), pp. 385–407. Institute of Social and Economic Research, Osaka University, Osaka, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E22, E32, E44, E51.     

The Role of Monetary Policy in Japan: A Break in the 1990s?

This article documents time series evidence suggesting the case for a possible structural break in the role of Japan's monetary policy during the 1990s. It uses a simple vector autoregressive framework and offers some suggestive results: While a persistent effect of monetary policy on real output is detected over the full sample of 1975–1998 and the subsample that ends in 1993, such effect disappears with the recent subsample of the 1990s. The stability analysis also provides more specified evidence that there is a break in the reduced form dynamic system in 1995. Some interpretations are offered to intuitively support these findings. J. Japan. Int. Econ., December 2000, 14(4), pp. 366–384. Research Institute for Economics and Business Administration, Kobe University, Rokko, Nada, Kobe 657-8501, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E32.     

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.     

Government Deficit, Public Investment, and Public Capital in the Transition to an Aging Japan

This paper examines the effects of government deficits, public investment, and public capital on welfare in the transition to an aging Japan by applying a simulated general equilibrium growth model. One of the main results of this paper is that targeting only high economic growth would mislead us as to economic policies, and that a policy to reduce future government deficits is most preferable for almost all generations, even though a cut in future deficits must be followed by a decrease in public investment, thus a decrease in public capital in the future. J. Japan. Int. Econ., December 2002, 16(4), pp. 462–491. Faculty of Economics, Shiga University, Japan; and Management School, Imperial College, United Kingdom. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: H55, H54, H62, C68, J10.     

Fluctuations in Unemployment and Industry Labor Markets

Throughout the 1990s, and particularly in the mid- to late-1990s, the Japanese employment situation went from bad to worse. We investigate the causes of rising unemployment in Japan, using data on individual workers from the “Special Survey of the Labor Force” between 1988 and 1999. This research focuses on the effect of labor market segmentation by industry on labor flows. Our findings reveal that unemployment in the construction industry and, more recently, in the service industry has contributed greatly to the national unemployment rate. We also find that most successful job transfers occur within the same industry, even though workers may experience some periods of unemployment. Finally, our results show that labor market conditions in each industry affect the probability that a worker will fall into unemployment as well as the probability that an unemployed worker will find new employment. These findings suggest that the Japanese labor market is segmented by industry and this segmentation contributed to the worsening unemployment in Japan. J. Japan. Int. Econ., December 2001, 15(4), pp. 437–464. Department of Economics, Dokkyo University, 1-1 Gakuen-cho, Soka-shi, Saitama 340-0042, Japan; Graduate School of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya, 464-8601, Japan. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J63, J64.     

Output-Inflation Trade-Off at Near-Zero Inflation Rates

The purpose of this paper is to provide new evidence about the cost of near-zero inflation using Japanese data. We test the hypothesis that the short-run Phillips curve becomes flatter as the rate of inflation approaches zero. In implementing the test, we pay special attention to how to control for other factors affecting the rate of inflation. First, we use the skewness of the distribution of relative-price changes as a measure of supply shocks. Second, we use information contained in the cross-prefecture Phillips curve to control for changes in the expected rate of inflation. Through a series of empirical analyses, we find evidences consistent with the hypothesis. In particular, we find that the estimated slope in the 1990s is smaller than before. J. Japan. Int. Econ., December 2000, 14(4), pp. 304–326. Research and Statistics Department, Bank of Japan and Institute of Economic Research, Hitotsubashi University. Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E31, E50     

To Spend the U.S. Government Surplus or to Increase the Deficit? A Numerical Analysis of the Policy Options

This paper provides a numerical analysis of the likely benefits from adopting alternative ways of reducing the projected fiscal surplus (as of the summer 2001) in the United States economy. Calibrating a small growth model, our results suggest that investing the surplus in public capital is likely to yield the greatest long-run welfare gains, although decreasing the capital income tax is only marginally inferior. Both these options dominate increasing government consumption expenditure or decreasing the tax on labor income. By shifting resources from consumption toward capital the two superior policies involve sharp intertemporal tradeoffs in welfare; significant short-run welfare losses are more than compensated by large long-run welfare gains. By contrast, the two inferior options are gradually welfare-improving through time. A crucial factor in determining the benefits of reducing the government surplus through spending is the size of the government sector relative to the social optimum. We find that the second-best optimum is to increase both forms of government expenditure to their respective social optima, while at the same time restructuring taxes by reducing the tax on capital and raising the tax on wage income to achieve the targeted reduction in the surplus. J. Japan. Int. Econ., December 2002, 16(4), pp. 405–435. Department of Economics, University of Washington, Seattle, Washington; and Department of Economics, Terry College of Business, University of Georgia, Atlanta, Georgia. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E62, O41.     

Was Malthus right? The relationship between population and real wages in Italian history, 1320 to 1870

In this article we investigate the relation between population and real wages in the Italian economy during the period 1320–1870. The main result is that the positive check is strong and statistically significant but the other equilibrating mechanism in the Malthusian model – the preventive check – based on the positive relationship between fertility and real wages does not operate in pre-industrial Italy. In contrast to the Malthusian hypothesis, we find a negative feedback from wage to population. The empirical result is clearly consistent with the theoretical framework of the “old age security motive”. We show, with a simple overlapping-generation model, that by allowing for substitution in a pre-industrial economy between child quantity and other assets (such as new seeds, better soybean quality, and new cultivation and irrigation methods) fertility may be negatively affected whenever income rises.     

Efficient Monetary Policy Design near Price Stability

Using dynamic programming methods, we study the design of optimal monetary policy in a simple, calibrated open-economy model and evaluate the effect of the liquidity trap generated by the zero bound on nominal interest rates. We show that the optimal policy near price stability is asymmetric. As inflation declines, policy turns expansionary sooner and more aggressively than would be optimal in the absence of the zero bound. This introduces an upward bias in the average level of inflation. We also discuss operational issues associated with the interpretation and implementation of policy at the zero bound in relation to the recent situation in Japan. J. Japan. Int. Econ., December 2000, 14(4), pp. 327–365. Board of Governors of the Federal Reserve System, Washington, D.C. 20551 Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E31, E52, E58, E61.     

A note on the CERU-MoA grain farm household survey in China

During the period 1994–1995 the Chinese Economy Research Unit (CERU), University of Adelaide, Australia and the Department of Policy, Reform and Law, Ministry of Agriculture (MoA),¹ the People's Republic of China, jointly designed and conducted an annual sample survey of about 1000 farm households in five Chinese provinces: Guangdong, Jilin, Jiangxi, Sichuan and Shandong. The CERU-MoA survey is a part of the ACIAR (Australian Centre for International Agricultural Research) project on China's grain production and marketing during 1994–1996.² Based on this survey a large database has been established which contains cross-household data on population and labour, land, grain production and marketing, food consumption, income and related policy issues.³     

Transition from School to Work in Japan

Using retrospective data of young people's work experience in Japan, this paper found that initial labor market conditions, i.e., when workers first enter the labor market after permanently leaving school, have a significant lasting impact on the employment experiences of workers in their teens and twenties. An increase in the unemployment rate at the time of labor market entry reduces the probability of gaining full-time regular employment and, more important, increases the future probability of workers of leaving employers by lowering the quality of job matches. It was also found that the vocational guidance or recommendations workers received at school could be effective in raising the quality of job matches. The adverse effect of initial unemployment rates on employment opportunities was most profoundly observed among female college graduates. J. Japan. Int. Econ., December 2001, 15(4), pp. 465–488. Faculty of Economics, Gakushuin University, 1-5-1 Mejiro Toshima-ku, Tokyo 171-8588, Japan; and Faculty of Economics, Meiji Gakuin University, 1-2-37 Shirokane-dai Minato-ku, Tokyo 108-8636, Japan. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J24, J63, J64.     

The health cost of living in a city: The case of France at the end of the 19th century

Despite a long standing debate over urban living conditions during industrialization, the impact of rural–urban migrations on health and mortality remains an open question. We observe both mortality and geographical mobility in a large longitudinal dataset of French males and show that rural–urban migrants benefited from clear advantages over those who already lived in the city. However, this benefit fades in a few years. Further we find no evidence of a spike in mortality among rural migrants as they encountered the more severe disease environment of cities, instead it seems their initially superior physical human capital was depleted over time.     

The Competitive Impact of International Trade: The Case of Import Liberalization of the Japanese Oil Product Market

This paper analyzes the competitive impact of the recent import liberalization of the Japanese oil product market. In response to the import liberalization in March 1996, not only did the market price of gasoline decline sharply but also its domestic production kept rising and did not decline relative to imports. Moreover, its price fell substantially before the actual liberalization of the import. This paper demonstrates both theoretically and empirically that the theory of implicit cartel can explain such features of the impact of import liberalization very well. The paper also identifies the significantly positive welfare impact of such liberalization due to the expansion of supply in a market with a large tax wedge between price and cost and, possibly more importantly, due to the transformation of competitive conduct from unproductive investment for cartel-rent shifting into price cuts. J. Japan. Int. Econ., December 1999, 13(4), pp. 397–423. Hitotsubashi University; and Keio University. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L40, F12, K21.