Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution

Why did England industrialize first? And why was Europe ahead of the rest of the world? Unified growth theory in the tradition of Galor and Weil (2000, American Economic Review, 89, 806–828) and Galor and Moav (2002, Quartely Journal of Economics, 177(4), 1133–1191) captures the key features of the transition from stagnation to growth over time. Yet we know remarkably little about why industrialization occurred much earlier in some parts of the world than in others. To answer this question, we present a probabilistic two-sector model where the initial escape from Malthusian constraints depends on the demographic regime, capital deepening and the use of more differentiated capital equipment. Weather-induced shocks to agricultural productivity cause changes in prices and quantities, and affect wages. In a standard model with capital externalities, these fluctuations interact with the demographic regime and affect the speed of growth. Our model is calibrated to match the main characteristics of the English economy in 1700 and the observed transition until 1850. We capture one of the key features of the British Industrial Revolution emphasized by economic historians — slow growth of output and productivity. Fertility limitation is responsible for higher per capita incomes, and these in turn increase industrialization probabilities. The paper also explores the availability of nutrition for poorer segments of society. We examine the influence of redistributive institutions such as the Old Poor Law, and find they were not decisive in fostering industrialization. Simulations using parameter values for other countries show that Britain’s early escape was only partly due to chance. France could have moved out of agriculture and into manufacturing faster than Britain, but the probability was less than 25%. Contrary to recent claims in the literature, 18th century China had only a minimal chance to escape from Malthusian constraints.     

On political business cycles with endogenous election dates

The pattern of policy-generated cycles which result in the Nordhaus model is examined under different hypotheses regarding election date determination.     

Exchange rates and bertrand oligopoly

The impact of exchange-rate changes on industrial prices seems ambiguous. Incomplete and even perverse pass-through has been observed: the import prices in the depreciating country decrease while those in the appreciating country increase. To explain these counterintuitive price reactions we consider a situation of international Bertrand competition: two firms, based in different countries, are selling in both countries simultaneously. The profit-maximizing duopolists set the prices for their products in each of the two markets which are segmented on the demand side. We then study the qualitative effect of an exogenous exchange-rate change on the Bertrand-Nash equilibrium. Under the strong assumption of linear demand and cost functions we have normal exchange-rate pass-through. However, allowing for more general cost structures in this simple static model enables us to show that the import prices in both countries might move in counterintuitive directions.     

EEC action in regard to consumer safety,particularly in the food sector

The paper discusses trends and actions of the European Economic Community (EEC) in the field of consumer safety. EEC law has no fast principle of consumer safety nor special agencies responsible for it. EEC actions are restricted to specific measures, especially in the area of foodstuffs (additives, colouring agents etc.). EEC law suffers a number of deficiencies. There is — with the exception of pharmaceutical products — no regulation on EEC-wide market withdrawals. Member state safety decisions may be in conflict and put strain on the EEC principle of free movement of goods. Certain directives contain only minimum standards and therefore do not make for common safety regulations in the EEC. There are gaps in the information exchange systems among the EEC and member states even though an EEC decision of 1984 improved the situation. The author goes on to make some suggestions for future action.

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Gemeinschaftsaktionen zugunsten der Sicherheit des Verbrauchers unter besonderer Berücksichtigung des Lebensmittelrechts

Zusammenfassung Die Europäischen Gemeinschaften (EG) haben nur begrenzte Kompetenzen im Bereich der Verbrauchersicherheit. Deshalb ist dem EG-Recht ein allgemeines Prinzip unbekannt, das die Sicherheitsinteressen des Verbrauchers produktunabhängig schützt. Vielmehr geht die EG problembezogen vor; das Einstimmigkeitsprinzip und die fehlende Öffentlichkeit erzwingen eine Beschränkung auf sehr konkrete und sehr spezifische Maßnahmen. Umfängliche Regelungen gibt es vor allem im Bereich von Lebensmitteln, insbes. hinsichtlich von Zusatzstoffen.Das EG-Recht weist eine Reihe von Lücken auf. Es fehlt — bis auf die Ausnahme der Arzneimittel — eine Regelung über den Rückruf von Produkten. Konflikte zwischen dem freien Warenverkehr und mitgliedstaatlichen Schutzinteressen aus Gründen tatsächlicher oder vermeintlicher Verbrauchersicherheit sind an der Tagesordnung. Der Informationsaustausch über Produktrisiken ist unzureichend; eine entsprechende Gemeinschaftsinitative erfaßt nicht freiwillige Maßnahmen.Der Beitrag erörtert schließlich die Möglichkeiten für künftige Gemeinschaftsaktionen.The paper is a slightly changed and updated version of a paper given at a seminar in Paris on 8 November 1983, organized by the Association Française pour le Droit de l'Alimentation and dealing with safety and food.

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Ludwig Krämer works at the EC Commission, Directorate General XI (Environment, Consumer Protection, and Nuclear Safety), 10 rue Guimard, B-1049 Brussels, Belgium. The views expressed in this paper are purely personal.     

Investments,Credit, and Corporate Financial Distress: Evidence from Central and Eastern Europe

Although they are instrumental for economic development, productivity-enhancing corporate investments may increase the financial vulnerability of companies, especially in an economic and financial crisis. We employ an instrumental probit model with the aim of finding evidence for the investment and credit patterns that led companies into financial distress during the global financial crisis 2009–2010. The company-level micro-data for our study on three Central and East European countries—Hungary, Bulgaria, Romania and two Baltic countries, Latvia and Lithuania—originates from two independent surveys, the Business Environment and Enterprise Performance Survey conducted in 2008 and the Financial Crisis Survey conducted in 2009/2010. Both were carried out jointly by the EBRD and the World Bank. Our results emphasize a substantial adverse impact from investment intensity and debt financing on company financial soundness during a crisis. On top of that, we discover a strong non-linear pattern in the sensitivity of company distress to its investment-financing nexus.     

Performance of Moving Average Trading Rules in a Volatile Stock Market: The Russian Evidence

This article examines the profitability of dual moving average crossover (DMAC) trading strategies in the Russian stock market over the 2003–12 period. It contributes to the existing technical analysis (TA) literature by testing, for the first time, the applicability of ordered weighted moving averages (OWMA) as an alternative calculation basis for determining DMACs. In addition, this article provides the first comprehensive performance comparison of DMAC trading rules in the stock market that is known as one of the most volatile markets in the world. The results show that the best trading strategies of the in-sample period can also outperform their benchmark portfolio during the subsequent out-of-sample period. Moreover, the outperformance of the best DMAC strategies is mostly attributable to their superior performance during bearish periods and, particularly, during stock market crashes.     

Investigating Adoption of Free Beta Applications in a Platform‐Based Business Ecosystem

Planning new product development (NPD) activities is becoming increasingly difficult, as contemporary businesses compete at the level of business ecosystems in addition to the firm‐level product‐market competition. These business ecosystems are built around platforms interlinking suppliers, complementors, distributors, developers, etc. together. The competitiveness of these ecosystems relies on members utilizing the shared platform for their own performance improvement, especially in terms of developing new valuable offerings for end users. Therefore, managing the development of the platform‐based applications and gaining timely end‐user input for NPD are of vital importance both to the ecosystem as a whole and to the developers. Subsequently, to succeed in NPD planning developers utilizing beta testing need a thorough understanding of the adoption dynamics of beta products. Developers need to plan for example resource allocation; development costs; and timing of commercial, end‐product launches. Therefore, the anticipation of the adoption dynamics of beta products emerges as an important antecedent in planning NPD activities when beta testing is used for gaining end‐user input to the NPD process. Consequently, we investigate how free beta software products that are built upon software platforms diffuse among their end users in a cocreation community. We specifically study whether the adoption of these beta products follows Bass or Gompertz model dynamics used in the previous literature when modeling the adoption of stand‐alone products. Further, we also investigate the forecasting abilities of these two models. Our results show that the adoption dynamics of free beta products in a cocreation community follow Gompertz's model rather than the Bass model. Additionally, we find that the Gompertz model performs better than the Bass model in forecasting both short and long out‐of‐sample time periods. We further discuss the managerial and research implications of our study.