The Paris financial market in the nineteenth century: complementarities and competition in microstructures1

This article sets out to explain why the Paris Bourse was highly successful in the nineteenth century in spite of the supposedly inefficient monopoly of the official market, the Parquet. The literature argues that the official monopoly was sidelined by a free, innovative market known as the Coulisse, but it fails to explain how the Coulisse emerged despite the monopoly and how the two markets persisted alongside each other during the entire century. We provide a detailed history of how these two markets emerged and interacted. The Parquet increasingly developed as a high‐end market, providing security, transparency, and effective settlement‐delivery to unsophisticated investors trading on the spot market. The Coulisse provided liquidity, immediacy, and opacity to professional investors trading mostly forward. In line with recent theoretical developments, we argue that the juxtaposition of heterogeneous organizations had important virtues for market participants, since it allowed the exchanges to specialize in different investors and services and made the exchanges complementary to each other. We demonstrate our claim by looking at both the formal rules and the actual functioning of the Parquet, drawing on its archives which we have recently classified.     

Efficiency, competition, and the development of life insurance in France (1870-1939): Or: should we trust pension funds?

French life insurance remained underdeveloped in comparison with other countries of similar financial development during the period between 1870 and 1939. We show that technical peculiarities of the contracts used and their interaction with macroeconomic fluctuations explain the wide fluctuations we observe in insurance operations. Nevertheless, these fluctuations are not sufficient to explain the industry’s long-term stagnation. Low returns paid to clients, resulting from very conservative investment strategies, were the main reason for that stagnation, since only those interested by the life-cycle related aspects of insurance contracts continued to put money in these institutions, while most savers invested directly in the market or through State-owned financial institutions. The main reason for such an investment (and then low-growth) strategy is the existence of a set of conservative regulations and a stable oligopoly in the industry from the 1880s onwards. We suggest that established insurance companies were able to impose regulations and barriers to entry blocking the access of competitors to their market, so maintaining a hold on a small but very profitable market.