Tariffs and industrialization in late nineteenth century America: the role of scale economies
Yeo Joon Yoon
Pages 137–159
https://doi.org/10.1093/erehj/heaa001
I construct a general equilibrium model with economies of scale and learning-by-doing in manufacturing to quantify the effects of tariff that the US imposed on its manufacturing imports from 1870 to 1913. I find that the tariff positively contributes to US manufacturing growth, but the magnitudes are small. I also show that the cumulative welfare effect of the tariff is positive if there exists enough degree of learning-by-doing, a result contrary to the conventional wisdom that tariffs have welfare-deteriorating effects. The welfare-enhancing effect of the tariff disappears when I use a similarly constructed model, but with constant returns to scale in manufacturing. The result suggests that the assumption about technology is important for the welfare implication of the tariff.
Optimism or pessimism? A composite view on English living standards during the Industrial Revolution
Daniel Gallardo-Albarrán and Herman de Jong
Pages 1–19
https://doi.org/10.1093/ereh/heaa002
This article examines the evolution of English living standards during the early phase of industrialization (1760–1850). We take a multi-dimensional perspective and apply an indicator that combines four key dimensions of well-being: material living standards, health, working time, and inequality. Contrary to other composite measures of well-being, our welfare metric draws on standard economic theory to aggregate its underlying components. We find decreasing welfare during the late eighteenth century due to rising working time and income inequality, despite improving health. After 1800, workers’ conditions improved when real wages started to rise, although the cumulative effect was not substantial by 1850.
The gold standard, fiscal dominance and financial supervision in Greece and South-East Europe, 1841–1939
Matthias Morys
Pages 106–136
https://doi.org/10.1093/ereh/heaa006
We add a historical and regional dimension to the debate on the Greek debt crisis by analysing repeated cycles of entry and exit from the gold standard, government default, and financial supervision for four South-East European countries from political independence to World War II. The prevailing pattern of fiscal dominance was broken only under financial supervision, when conditionality scaled back the treasury’s influence; only then were central banks able to stabilize their exchange rates. A political economy analysis for Greece finds that financial supervision was politically acceptable as it made successfully adhering to gold more likely in the view of contemporaries.
Letting the masses pay for the welfare state: tax regressivity in postwar Sweden
Gunnar Lantz
Pages 160–179
https://doi.org/10.1093/ereh/heaa007
The mixed economy of the twentieth century shows conflicting developments in tax collection. Progressive taxes to limit top incomes are not the whole story. An examination of Sweden 1958–2012 shows that the progressivity of direct taxes was offset by consumption taxes and social security contributions. Previous studies conclude that tax progressivity peaked in the 1980s. This study shows instead how Swedish taxation became regressive in that period. The literature on welfare regimes and redistributive universalism relies empirically on conditions in the 1980s. Sweden did exhibit universalism in social spending but also a corresponding universalism in revenue collection.
Without coal in the age of steam and dams in the age of electricity: an explanation for the failure of Portugal to industrialize before the Second World War
Sofia Teives Henriques and Paul Sharp
Pages 85–105
https://doi.org/10.1093/ereh/heaa003
We provide a natural resource explanation for the divergence of the Portuguese economy relative to other European countries before the Second World War. First, we demonstrate that a lack of domestic resources meant that Portugal experienced limited and unbalanced growth during the age of steam. Imports of coal were prohibitively expensive for inland areas. Coastal areas industrialized through steam but were constrained by limited demand from the interior. Second, we show that after the First World War, when other coal-poor countries turned to hydro-power, Portugal relied on coal-based thermal-power, creating a vicious circle of high-energy prices and labor-intensive industrialization.
Spanish subsistence wages and the Little Divergence in Europe, 1500–1800
Ernesto López Losa and Santiago Piquero Zarauz
Pages 59–84
https://doi.org/10.1093/ereh/heaa005
This paper suggests an alternative view of Europe’s Little Divergence in real wages. It presents a new dataset of prices and wages for Spain and proposes a new way of measuring the cost of bare-bones subsistence. The substitution of brown-bread prices for grain prices in the baskets transforms the scale and chronology of the divergence between North-western Europe and Spain. The results show that it began later and that unskilled subsistence wages in London and Amsterdam were significantly lower than those calculated by the canonical model, which would nuance the “high-wage” hypothesis.
Dirty float or clean intervention? The Bank of England in the foreign exchange market
Alain Naef
Pages 180–201
https://doi.org/10.1093/ereh/heaa011
The effectiveness of central bank intervention is debated and despite literature showing mixed results, central banks regularly intervene in the foreign exchange market, both in developing and developed economies. Does foreign exchange intervention work? Using over 60,000 new daily observations on intervention and exchange rates, this paper is the first to study the Bank of England's foreign exchange intervention between 1952 and 1972. The main finding is that the Bank was unsuccessful in managing a credible exchange rate over that period. Running an event study, I demonstrate that betting systematically against the Bank of England would have been a profitable trading strategy. Pressures increased in the 1960s and the Bank eventually manipulated the publication of its reserve figures to avoid a run on sterling.
The effects of market integration during the first globalization: a multi-market approach
David Chilosi and Giovanni Federico
Pages 20–58
https://doi.org/10.1093/ereh/heaa009
This paper is a first attempt to measure the effects of international market integration on world trade and welfare in the ``long nineteenth century”. We run a multi-market partial equilibrium model, which takes into account the interactions between route-specific changes in trade costs, for the two most traded commodities, cotton and wheat. The collapse in trade costs accounted for 60 percent of the growth of trade for cotton and for 40 percent for wheat. As expected, welfare gains were larger for small open economies, but they were substantial also for large countries, with big differences determined by trade policies.
