A Model of Later Nineteenth Century European Economic Development

Editada en la Fundación Empresa PúblicaEn este trabajo se desarrolla y estima un modelo para explicar los motivos por los cuales algunos países europeos prosperaron más rápidamente que otros en el período 1860- 1910. El modelo cuantifica por dos vías distintas los factores que contribuyeron a las diferencias de ingreso entre España y Gran Bretaña. Los determinantes que se consideran más significativos son los recursos naturales, la política económica y la herencia cultural reflejada en los niveles educativos.A model is developed and estimated to explain why some European countries were richer than others between 1860 and 1910 and why some increased their prosperity faster in the period. The model quantifies by two methods some of the contributors to the income gap between the economies of Spain and Britain in 1880 and 1910. Determinants of European nations' output per head included natural endowments (climate and coal deposits), economic policy (tariff protection and very marginally the gold standard), and cultural heritage as reflected in literacy. Measurement errors, country specific factors and perhaps variables not considered in this analysis account for less than half Spanish-UK income differences at the dates estimated.Publicad

Lessons from Italian Monetary Unification

This paper examines whether the states brought together in the Italian monetary union of the nineteenth century constituted an optimum monetary area, either before or after unification. Interest rate shocks indicate close relations between states in northern Italy but negative correlations between the North and the South before unification, suggesting some advantages of continued Southern monetary independence. The proportion of Southern Italian trade with the North was small, in contrast to intra- Northern trade, and therefore monetary independence imposed a light burden. Changes in the wheat market indicate that the South and North after unification (though not probably because of it) increasingly specialised according to their comparative advantages. Coupled with differences in economic behaviour of the Southern economy, this meant that monetary policies appropriate for the North were less so for the South. In the face of agricultural shocks originating in the New World and in France, the South would have gained from depreciating its exchange rate against the North or against the non-Italian world. As it was, nineteenth century Italian monetary union did not create the conditions for its own success, contrary to the findings of Frankel and Rose (1998) for the later twentieth century

Business cycles and economic policy, 1945-2007.

We explain how governments contributed and responded to fluctuations in economic activity in Europe during the second half of the twentieth century. In the second section we sketch the basic ideas essential to understanding the relationship between economic policy and business cycles. They include the notion that monetary and fiscal policies influence fluctuations in output, employment, and inflation according to the financial openness of the economy (free capital flows versus capital controls), as well as the currency regime chosen by policy makers (pegged versus flexible exchange rates). We also document the timing of financial liberalization in Europe and the persistent preference of most European governments for pegged exchange rate regimes over the entire period. We then examine the evolution of basic features of cycles in Europe, such as volatility and synchronization. We note the falling volatility of cycles in the 1960s and from the mid-1980s until 2007, explaining why changes in economic policy making were a fundamental driver. In the next section we support this analysis with narratives of the responses of national governments and central bankers to cyclical fluctuations before and after the global recession of 1974-5. Finally we look briefly at the historical and recent experience of eastern Europe, assessing the area's reintegration from 1989 after the long economic decoupling from the rest ofthe continent in 1945Ciclos económicos; Política económica; Europa;

The western European marriage pattern and economic development

For several centuries, women's age at first marriage in Western Europe was higher than in the east (and in the rest of the world). Over the same period Western Europe began slow but sustained economic development relative to elsewhere. A model based on the economics of the household explains this association in two related ways. Both connect mortality, and the exercise of fertility restraint through higher marriage age, with greater human capital accumulation. The first explanation is simply an association but the second proposes a causal link where higher age of motherhood reduced the cost of investment in children. Evidence is provided that the causal process was operative in later nineteenth century Europ

Brexit could be an opportunity for the Welsh economy

Brexit could be good for Wales, writes James Foreman-Peck (Cardiff Business School). EU models of regional aid relied on a stand-alone conception of the Welsh economy, but in fact the country is deeply interlinked with the neighbouring English regions and cities. In a European Free Trade Area like the one Britain originally wanted to create, Wales’ strengths – such as manufacturing productivity – could flourish in the long term

Lessons from Italian monetary unification

This paper examines whether the states brought together in the Italian monetary union of the nineteenth century constituted an optimum monetary area, either before or after unification. Interest rate shocks indicate close relations between states in northern Italy but negative correlations between the North and the South before unification, suggesting some advantages of continued Southern monetary independence. The proportion of Southern Italian trade with the North was small, in contrast to intra-Northern trade, and therefore monetary independence imposed a light burden. Changes in the wheat market indicate that the South and North after unification (though not probably because of it) increasingly specialised according to their comparative advantages. Coupled with differences in economic behaviour of the Southern economy, this meant that monetary policies appropriate for the North were less so for the South. In the face of agricultural shocks originating in the New World and in France, the South would have gained from depreciating its exchange rate against the North or against the non-Italian world. As it was, nineteenth century Italian monetary union did not create the conditions for its own success, contrary to the findings of Frankel and Rose (1998) for the later twentieth century

The Mincer human capital model in Pakistan: Implications for educational policy

This paper estimates and interprets returns to education for three sub-sectors of labour market by gender in Pakistan, using the most recent data set of Pakistan Social and Living Standards Measurement (PSLM) Survey 2004-05. The results show two distinctive features of Pakistani education, the high apparent returns to female education outside agriculture, and the remarkable increase of returns with successive levels of education, are to be explained primarily by two departures from the basic Mincer model; generally poor quality primary schooling and family unwillingness to invest in female education because of lack of earning opportunities. There is some signaling in Pakistani education investment but mainly the education is productivity-enhancing investment in human capital, according to a comparison of self-employed and paid employed earnings equations. Returns to public spending of education are extremely high, suggesting very considerable state underinvestment. The policy challenge is in the low wages and high education in the female paid employment sector, and the low participation rate

The Western European marriage pattern and economic development

For several centuries, women’s age at first marriage in Western Europe was higher than in the east (and in the rest of the world). Over the same period Western Europe began slow but sustained economic development relative to elsewhere. A model based on the economics of the household explains this association in two related ways. Both connect mortality, and the exercise of fertility restraint through higher marriage age, with greater human capital accumulation. The first explanation is simply an association but the second proposes a causal link where higher age of motherhood reduced the cost of investment in children. Evidence is provided that the causal process was operative in later nineteenth century Europ

In search of the Iberian business cycle: endogenous fiscal policy and the changing nature of the state, 1945-2000.

Paper presented at: The Seventh Conference of the European Historical Economics Society (EHES), University of Lund (Sweden), 29 June- 1 July 2007Paper presented at: Third Iberian Economic History Workshop: Iberometrics III, Valencia, March 23-24, 2007Both fiscally responsible and irresponsible governments may have fiscal reaction functions which reduce or increase the amplitude and duration of business cycles. This, we suggest, is the key to the pattern of Iberian fluctuations in economic activity since 1945. Underlying these functions are political settlements or their absence; Traumatic political histories or shocks destroy the basis for stabilising fiscal policies. Stability, political ingenuity and luck can create this basis. Whereas in Spain, the ministers behind the 1959 Stabilisation Plan managed eventually to tame the excesses of a militarily directed economy, and the dictator ensured a transition that kept the army’s loyalty, the opposite path was followed in Portugal. Fiscal prudence allowed authoritarian Portugal to match Spain’s spectacular growth rates of the 1950s and 1960s without economic crises, but failure to secure the army prevented a smooth transition from dictatorship. In consequence Portugal experienced more extreme downturns and budgetary policies than Spain after 2000, and the Maastricht/EMU shocks. The two countries followed crossing paths. Macroeconomic instability prevailed in Spain under at least the early Franco, whereas smoothed adjustments (in spite of stronger external shocks) characterized the economy after the democratic transition. The reverse can be observed in Portugal, where macroeconomic stability under the Estado Novo gave way to dramatic fluctuations after the 1974 revolution