Report from the Economic History Society in Columbus, Ohio, September 12-14, 2014.

This year’s Economic History Association meeting took place in Columbus, Ohio. It followed the usual format of short presentations, and designated discussants on each paper, as well as poster displays from graduate students.

There were many excellent presentations, including some from European scholars or on European topics. Of particular interest to EHES members might be the session on Political Economy in Europe, with papers presented by Noel Johnsson at George Mason University, Rui Esteves at Oxford, and Mark Dincecco at  Michigan, and one on trade with Michael Huberman from Montréal, Alan de Bromhead from Queen’s Belfast, and Jules Hugot from CEPII. I particularly enjoyed Alan’s talk on the effect of the granting of female suffrage in the UK on the movement towards protectionism, which generated a lively debate.

In one of the sessions, Ahmed Rahman, USNA, talked about naval economic history

After an entertaining introduction, the Presidential Address was by Philip Hoffman, who argued against the traditional definition of the national state as laid down years ago by Max Weber. He demonstrated that many entities which we would certainly consider states did not enjoy a ‘monopoly of violence’.

The Gerschenkron Prize for the best PhD dissertation on topics other than American economic history was won by Tyler Beck Goodspeed on ‘Essays in British Financial History’. He received his PhD from Harvard, so no luck for the Europeans this year. He is however currently at Oxford, so we can be optimistic that European universities continue to attract many of the best economic historians – even from the United States.

The dissertation session

Otherwise, the Friday night reception at the Ohio Statehouse was a great chance to visit this impressive building. The Saturday night dinner was, on the other hand, in the view of your correspondant, something of a let down!

This blog post was written by Paul Sharp, professor in Economic History at University of Southern Denmark

Catching up or falling behind? Institutions, Geography and Economic Development of Eastern Europe in the Long Run

We look back on a summer school, hosted by the EHES, Humboldt-Universität and the London School of Economics and Political Science.  Centered on the theme “Catching up or falling behind? Institutions, Geography and Economic Development of Eastern Europe in the Long Run”, the Summer School brought together experienced and young researchers working on Eastern European economic history in an engaging and informal atmosphere. The event, which took place from September 1st to 5th, put the factors that have shaped development of the eastern half of the continent in the context of the recent debates in our discipline, such as the Little Divergence, institutional persistence and the role of geography.

Lecturers Max-Stephan Schulze (LSE, London) and Nikolaus Wolf (Humboldt,
Berlin)  focused on the role of market access and agglomeration effects in explaining the lag between western and eastern European regions.

Steven Nafziger (Williams College, MA) and Sevket Pamuk (Boğaziçi, Istanbul) provided valuable insights into the interaction between state formation, institutional reform and economic outcomes. Sibylle Lehmann-Hasemeyer (Hohenheim) took the chance to offer an encompassing account of the political economy of growth and protectionism in the late 19th century.

Additionally, the Summer School featured daily seminars aimed at bridging the gap between theoretical insights and hands-on empirical analysis. Speakers Tamas Vonyo (LSE, London), Alexander Klein (Kent) and Matthias Morys (York) allowed the  participants an in-depth view of the nuts-and-bolts aspects of empirical research. Particular emphasis was placed on the methodological issues surrounding growth accounting, the treatment of endogeneity, and exchange rate dynamics.

Finally, afternoon workshops gave doctoral students a chance to present their newest research related to Eastern Europe. This included talks by Bálint Menyhért, Hana Nielsen, Ilya Voskoboynikov, Jelena Raifalovic and Leo Kukic on the long run drivers of development, Flóra Macher, Thilo Albers, Marvin Suesse and Stefan Nikolic on financial crises and geography, Elena Korchmina, Alexander Opitz, Ekaterina Khautsova and Valentyna Shevchenko on institutions and economic development in Imperial Russia, Mikolaj Malinowski, Pinar Ceylan, Piotr Łozowski, and David Dolejší on early modern markets and cities, as well as Rita Pető, Máté Rigó, Ruth Schueler and Paweł Bukowski on the economic role of culture, education and social status.

We are very proud of having hosted such an event that provided stimulating intellectual inspiration for so many promising young talents. Many students took the chance to build networks and present their ideas to academic peers stemming from different disciplinary and cultural backgrounds. The impressive variety of innovative ideas presented during the week gives us a very positive outlook on the future of the field.

This blog post was written by:

Thilo R. Huning, PhD student at Humboldt-Universität in Berlin.

The British Economy in Global Perspective, 1000-2000

The Department of Business and Economics at the University of Southern Denmark marked the start of the new academic year with a PhD course given by their Guest Professor Stephen Broadberry. The course, titled The British Economy in Global Perspective, 1000-2000, efficiently covered a millennium of British economic history in just three days.

Professor Broadberry opens the lecture 

Drawing upon his work with various co-authors, Professor Broadberry began day 1 with a discussion of the course of British economic growth between 1270 and 1870, before placing the numbers in an international context in the afternoon’s session. Days 2 and 3 were less about Britain’s golden years and more about her relative decline from around 1870.

The course was well attended by staff and students from across Scandinavia. It was the latest in a series of exciting courses offered by the university, with Nick Crafts having offered a three-day course in October 2013.

This blog post was written by Jason Lennard, PhD student at Lund University

Mismeasuring Long Run Growth. The Bias from Spliced National Accounts

Leandro Prados de la Escosura
is Professor in Economic History at
Universidad Carlos III de Madrid

Last April it was made public that Nigeria’s GDP figures for 2013 had been revised upwards by 89 per cent, as the base year for its calculation was brought forward from 1990 to 2010 (Financial Times April 7, 2014). As a result, Nigeria became the largest economy in Sub Saharan Africa. Though spectacular, this is not an exceptional case. Ghana (2010), Argentina’s (1993) or Italy’s (1987) also experienced dramatic upward revisions of their GDP. 

How should this revision affect GDP time series and, consequently, the country’s relative position? Should the existing historical series be re-scaled in the same proportion? 

Official national accounts are usually available from mid-twentieth century onwards, but often only for the latest decades. Furthermore, official national accounts are only constructed in a homogeneous way for short periods. Hence, the output of national accounts needs to be spliced with historical national accounts. Thus, when a homogeneous long-run GDP series is required, various sets of national accounts using different benchmark years and often constructed with dissimilar methodologies need to be spliced. The alternative choice of splicing procedures to derive a single GDP series may result in substantial differences in levels and growth rates and, hence, in significant biases in the assessment of economic performance over time.

National accounts rely on complete information on quantities and prices in order to compute GDP for a single benchmark year, which is, then, extrapolated forward on the basis of limited information for a sample of goods and services. To allow for changes in relative prices and, thus, to avoid that forward projections of the current benchmark become non representative, national accountants periodically replace the current benchmark with a new and closer GDP benchmark. The new benchmark is constructed, in part, with different sources and computation methods. Often far from negligible differences in the new benchmark year between ‘new’ and ‘old’ national accounts stem from statistical (sources and estimation procedures) and conceptual (definitions and classifications) bases. Once a new benchmark has been introduced, newly available statistical evidence would not be taken on board to avoid a discontinuity in the existing series. Thus, the coverage of new economic activities partly explains the discrepancy between the new and old series. As a result, a problem of consistency between the new and old national account series emerges.

Is there a solution to this inconsistency problem? The obvious option would be computing GDP for the years covered by the old benchmark with the same sources and procedures employed in the construction of the new benchmark. However, this option is beyond the resources of an independent researcher. The challenge is, then, establishing the extent to which conceptual and technical innovations in the new benchmark series hint at a measurement error in the old benchmark series. In particular, whether the discrepancy in the overlapping year between the new benchmark (in which GDP is estimated with ‘complete’ information) and the old benchmark series (in which reduced information on quantities and prices is used to project forward the ‘complete’ information estimate from its initial year) results from a measurement error in the old benchmark’s initial year estimate.

A simple solution, widely used by national accountants (and implicitly accepted in international comparisons), is the backward projection, or retropolation, approach, that accepts the reference level provided by the most recent benchmark estimate (YT) and re-scales the earlier benchmark series (Xt) with the ratio between the new and the old series for the year (T) at which the two series overlap (YT/XT).
Underlying this procedure is the implicit assumption of an error level in the old benchmark’s series whose relative size is constant over time. In other words, no error is assumed to exist in the old series’ rates of variation that are, hence, retained in the spliced series YRt . Official national accountants have favoured this procedure of linking national accounts series on the grounds that it preserves the earlier benchmark’s rates of variation.

Usually the most recent benchmark provides a higher GDP level for the overlapping year, as its coverage of economic activities is wider. Thus, the backwards projection of the new benchmark GDP level with the available growth rates -computed at the previous benchmark’s relative prices- implies a systematic upwards revision of GDP levels for earlier years. This one-sided upward revision effect on the levels of spliced GDP series is hardly noticeable when discrepancies between the new and old benchmarks are small for the overlapping year and the considered time span is short. However, as the time horizon expands and earlier series are re-scaled once and again to match newer ones, the gap tends to deepen significantly.

An alternative to the backward projection linkage is provided by the interpolation procedure that accepts the levels computed directly for each benchmark-year as the best possible estimates, on the grounds that they have been obtained with ‘complete’ information on quantities and prices, and distributes the gap or difference between the ‘new ‘and ‘old’ benchmark series in the overlapping year T at a growing rate.
Contrary to the retropolation approach, the interpolation procedure assumes that the error is generated between the years 0 and T. Consequently, it modifies the annual rate of variation between benchmarks (usually upwards) while keeps unaltered the initial level –that of the old benchmark-. As a result, the initial level will be probably lower than the one derived from the retropolation approach.

The choice of linkage procedure makes a significant difference for GDP levels and growth rates. When the levels for earlier years are re-scaled upwards with the retropolation procedure, the country in question becomes retrospectively richer. Alternatively, interpolating each original benchmark tends to raise the economy’s rate of growth and, hence, casts a lower initial GDP level. Which method is preferable? A practical answer may be derived from the analysis of Spain’s experience, a country that went through a process of deep structural change during the second half of the twentieth century.

The figure below presents the GDP levels resulting from splicing national accounts through non-linear interpolation relative to the levels derived through extrapolation. It can be noticed how the over-exaggeration of GDP levels cumulates over time when the extrapolation method is used.

Ratio of spliced interpolated series to retropolated series, 1954-2013 (GDP at current prices). 

Differences between the results of the interpolation and retropolation procedures appear much more dramatic when placed in a long run perspective, that is, when the spliced national accounts are projected backwards into the nineteenth century with volume indices taken from historical accounts series. This is due to the fact that most countries grew at a slower pace before 1950, so its per capita GDP level by mid-twentieth century determines its earlier relative position in country rankings.

Thus, the choice of splicing procedure can result in far from negligible differences in the relative position of a country in terms of per capita income over the long run. As an illustration I present Spain’s relative position to France derived with retropolation and interpolation splicing methods below.

Spain’s Real Per Capita GDP (France = 1). Alternative Splicing Results (2011 EKS $)

According to the retropolation splicing procedure, by mid-nineteenth century, real per capita GDP in Spain would have been similar, if not superior, to that of France. If, alternatively, the relative position that results for Spain from the interpolation splicing procedure represents about 80 percent of the French. When the period 1850-1913 is considered, Spain would match France’s real income per head, according to the retropolated series, and reach only four-fifths if the interpolated series are employed. These proportions hardly alter if the period under comparison is extended to 1935. It can be conclude that whatever the measurement error embodied in the interpolation procedure may be, its results appear far more plausible than those resulting from the conventional retropolation approach.

The bottom line is that splicing national accounts must be handled with extreme care, especially when countries have experienced intense growth and deep structural change, as there is a risk to bias their income levels upwards and, consequently, their growth rates downwards. A systematic revision of national accounts splicing in fast growing countries over the last half a century using the interpolation approach would most probably reduce their initial per capita GDP levels while rise their growth with the result of a more intense and widespread catching up to the Core countries.

This blog post was written by Leandro Prados de la Escosura (Universidad Carlos III and CEPR)

References

de la Fuente Moreno, A. (2014), “A Mixed Splicing Procedure for Economic Time Series”, Estadística Española 56 (183): 107-121.

Maddison, A. (1991b), “A Revised Estimate of Italian Economic Growth 1861-1989”, Banca Nazionale del Lavoro Quarterly Review 177: 225-241.

Prados de la Escosura, L. (2014), Mismeasuring Long Run Growth. The Bias from Spliced National Accounts, EHES Working Paper 60.

The Drivers of Long-run CO2 Emissions: A Global Perspective since 1800

New EHES working paper

Climate change is regarded by many as the greatest environmental challenge faced by present and future generations. While public awareness and climate policy are recent developments, mankind’s activity has been contributing to the rise in CO2 emissions for more than two centuries. New research by Sofia Teives Henriques and Karol J. Borowiecki investigates the drivers of changes in fossil-fuel CO2 emissions in a long-term and global perspective.

The unprecedented prosperity brought about by industrialization is strongly linked with wide-range changes in global patterns of energy consumption. These shifts have led to a significant rise in the level of carbon dioxide in the Earth’s atmosphere, which is currently 40% above its long-term pre-industrial average.

Coal-burning in an English town during the late 19th century

This article explores the drivers behind long-run CO2 emissions across twelve presently developed economies, by decomposing changes in carbon emissions into population, income, technological and energy mix changes. By building on nine European countries, the United States, Canada and Japan, which were responsible for more than three quarters of worldwide CO2 emissions until 1950 and more than half until the 1980s, the authors are able to shed light on the drivers of historical carbon emissions in a global context.

Total CO2 emissions, Gt

The results indicate that at low levels of income per capita, fuel switching from biomass to fossil fuels is the main contributing factor to CO2 emission growth. Population and especially income effects become the most important emission drivers at higher levels of income and also dominate the overall long-run change. Technological change is the main offsetting factor. Particularly in the last decades, technological change and fuel switching have become important contributors to the decrease in emissions in Europe.

Cumulative time-series decomposition of the changes in CO2 emissions, 1800-2011, Gigatonnes

The results presented by Sofia and Karol indicate that the combined contribution of changes in energy intensity and fuel switching to the decline in CO2 emissions was weaker in the more recent period 1990-2011 than in 1973-1990. Nevertheless, Europe fared better in this regard than non-European countries, possibly thanks to stronger political commitment. This supports the view that in order to limit further emissions, a much more comprehensive global energy policy is needed.

The working paper can be downloaded here.

Sofia Teives Henriques is a Post Doc Researcher,
University of Southern Denmark

Karol J. Borowiecki is associate professor in
Economics at University of Southern Denmark

State dissolution, sovereign debt and default: Lessons from the UK and Ireland, 1920-1938

New EHES working paper

How do financial markets react to the dissolution of a sovereign state?  Do dissolutions lead to sovereign defaults? Events in Scotland, Spain and the Ukraine underscore the importance of these questions. In the absence of recent case studies, historical studies can provide insight. A new EHES working paper studies the breakup of the United Kingdom (UK) of Great Britain and Ireland in 1922.

Photo of an Irish land bond

Compiling daily historical data from the Dublin Stock Exchange, Nathan Foley-Fisher (Federal Reserve Board) and Eoin McLaughlin (Edinburgh) utilise a type of sovereign debt termed ‘Irish land bonds’. Before independence in 1922, all land bonds issued carried a UK government guarantee.  After independence, the Irish government guaranteed new land bond issuance. The authors exploit this institutional structure to analyse market participants’ perception of the strength of the UK’s guarantees.

Foley-Fisher and McLaughlin find persistent uncertainty about the value of the British government’s guarantee. This uncertainty lasted until 1932, when the Irish government refused to transfer payments on the land bonds to the British Treasury.  The default forced the British government to make good on its guarantees.  Demonstrating that the guarantees were sound removed the surrounding uncertainty. As a consequence, the yield spread on the pre-independence land bonds fell significantly.

'Weighted average (nominal amount outstanding) current yields on UK and Irish bonds

The main lesson is that uncertainty about fiscal responsibility can persist for a long time after independence has been declared.  Even with sovereign guarantees, market participants may expect compensation for the uncertainty in the form of higher yields. This compensation may, in turn, raise the cost of borrowing, as can be seen from the above graph.

The working paper can be downloaded here: http://www.ehes.org/EHES%2061.pdf

Nathan Foley-Fisher is an Economist at the Federal Reserve Board 

Eoin McLaughlin is an Early Career Fellow at University of Edinburgh

 .

New EHES working paper

Fertility and early-life mortality. Evidence from smallpox vaccination in Sweden

What is the causal effect of early-life mortality on fertility? Recent research by Philipp Ager, Casper W. Hansen and Peter S. Jensen sheds new light on this question by testing how the introduction of vaccination in Sweden at the end of 1801 affected early life mortality and fertility at the parish level.

Edward Jenner (1749-1823), father of vaccination uses cowpox vaccine to inoculate children against smallpox.

During the 18th century smallpox was a severe disease in Sweden that wiped out around 10 percent of the population; among them many infants. When vaccination reached Sweden, smallpox mortality dropped remarkably (see Figure 1), in particular, infants, who had the highest mortalities before vaccination, experienced the largest decline (see Table 1).

In line with the historical narrative, Ager, Hansen and Jensen first show that parishes in counties with higher levels of smallpox mortality prior to the introduction of vaccination indeed experienced a greater decline in infant mortality afterwards. Based on this finding, the authors argue that they can identify the causal effect of early-life mortality on fertility. They construct an instrumental variable for early-life mortality where they exploit cross-sectional differences in pre-vaccination smallpox mortality (before 1801) along with the time variation arising from the introduction of the smallpox vaccine. Their instrumental variable estimate reveals that the vaccination-induced decline in early-life mortality lowered the birth rate, while the number of surviving children and population growth remained largely unaffected. Ager, Hansen and Jensen’s conclusion is that the decline in early-life mortality cannot be considered as a major determinant of the onset of Sweden's fertility decline during the 19th century.

This working paper was written by Philipp Ager (University of Southern Denmark), Casper Worm Hansen (University of Copenhagen) and Peter Sandholt Jensen (University of Southern Denmark) and can be downloaded here: http://www.ehes.org/EHES%2058.pdf

New EHES Working Paper

The Danish Agricultural Revolution in an Energy Perspective: A Case of Development with Few Domestic Energy Sources

Is a lack of domestic energy resources necessarily a limiting factor to growth, as suggested for example by the work of Robert C. Allen? A new EHES Working Paper argues that this does not have to be the case using a case study of Denmark.

Danish energy consumption by source (%)

Denmark had historically next to no domestic energy resources, but the authors argue that Denmark’s take off at the end of the nineteenth century was in fact relatively energy dependent, which they document by presenting new historical energy accounts for the years 1800-1913.

They then relate this to Denmark’s well-known agricultural transformation and development through the dairy industry. The Danish cooperative creameries, which spread throughout the country over the last two decades of the nineteenth century, were dependent on coal – a point which has not been stressed before in the literature. Although Denmark had next to no domestic coal deposits, they demonstrate that her geography allowed cheap availability throughout the country through imports.

A Danish cooperative creamery

Thus, Denmark might be seen as the exception that proves the rule: although modern energy forms are important for growth, domestic energy resources are not necessary, as long as it is possible to import them cheaply from elsewhere.

Percentage of Energy Consumption from Coal for Selected Countries, 1800-1913

The working paper was written by Sofia Teives Henriques, University of Southern Denmark and Paul Sharp, University of Southern Denmark and can be downloaded here: http://www.ehes.org/EHES_No56.pdf

Understanding the Economic Development of Eastern Europe

The WEast Economic History Workshop titled "Understanding the Economic Development of Eastern Europe" took place in Belgrade on the 5th  and 6th  July. The Belgrade WEast Workshop was organised by Jacob Weisdorf, Mikolaj Malinowski, Matthias Morys, Stefan Nikolić and the Belgrade Banking Academy. The purpose of WEast Workshops is to foster knowledge transfer and collaboration between economic historians and economists, with shared interest in the region of CESEE, representing both western and eastern universities and research centres.

Over the duration of two days, fascinating lectures were given by Stephen Broadberry (LSE) and Branko Milanović (Graduate center, CUNY), 15 papers were presented in 5 sessions, with participants coming from 17 different institutions located in 11 different countries (both in the "West" and "East"). The Workshop was held just in the center of the Serbian capital, in an elegant ambience of a building erected in 1911, in the Secessionist style. Belgrade proved to be an excellent host, not least because it managed to nourish the participants with beautiful sunny weather so that they can explore its sights in their spare time.

Opening of the Workshop: workshop organisers, keynote lecturers and session chairs

The Workshop was opened by a keynote address by Stephen Broadberry. His lecture was titled "Accounting for the Great Divergence" and it set the tone for academic discourse in the sessions to follow. Given the nature of the workshop he put special emphasis on explaining Europe’s Little Divergence. He acknowledged recent contributions that incorporate Eastern Europe into the debate.

The first of the three academic sessions on the first day started with Ralph Hippe (LSE) and Joerg Baten (University of Tubingen) who found that for less industrialised countries in 19th century Europe there was a substantial negative effect of land inequality on human capital. Thereafter, Elena Korchmina and Ilya Voskoboynikov (both affiliated with National Research University Higher School of Economics) argued that noblemen-veterans of Napoleonic wars (1812-1814) influenced the quality of government in the Russian Ryazan province by changing the existing model of elections. Finally, Jelena Rafailović (Institute for Recent History of Serbia), analysed innovative activity in interwar Yugoslavia using an extensive data set on patent statistics.

After a lunch break with traditional Serbian food and sweets, the second session started with Matthias Morys (University of York) presenting his joint paper written with Martin Ivanov (Bulgarian Academy of Sciences). Using dynamic factor analysis the authors find a steadily increasing synchronisation of business cycles in five SEE counties with a pan-European business cycle before 1913 and the emergence of a regional business cycle in the interwar period. Next, Elena Korchmina presented her joint work with Andrei Markevich (New Economics School Moscow) in which they analyse the link between poll tax collection in XVIII century Russia (Ryazan province) and modern state formation. The session concluded with a topic quite connected to tax collection, albeit in the 20th century. Relying on income tax data, Filip Novokmet (Paris School of Economics) showed that for the interwar period concentration of income at the top of the income distribution was much more pronounced in Czechoslovakia than in Bulgaria.

The final session of the day focused on former Yugoslavia and its successor states. Milan Deskar-Škrbić (Erste & Steiermarkische Bank) presented a paper co-authored with Jurica Zrnc (Croatian National Bank) and Ivo Bićanić (Faculty of Business and Economics, Zagreb), in which they analyse points of convergence and discontinuity in the Yugoslav economy on a regional level for the period 1950-1990. Dora Tuđa (University of Tilburg) presented her joint work with Ivo Bićanić, on long term estimates of Croatian GDP data and a critique of them, to which Branko Milanović (as an author of one of the series) could provide substantial feedback. The session concluded with Leonard Kukić (LSE) presenting his research on the contribution of misallocation of resources between sectors to Yugoslav regional income disparities, in the post-WWII period. After an eventful first day of work, all the participants were invited for a relaxing and well deserved dinner.

Workshop participants enjoying a presentation

Branko Milanović started the second day of the Workshop with a lecture titled “Between Kuznets and Piketty: How to understand inequality changes in the last 200 years”. His main argument was that in the long term there are waves of upswings and downswings in inequality - which he proposed to be called the “Kuznets’ Waves” - and that we are now part of a second such wave driven by the current industrial revolution.

In contrast to the current “industrial revolution”, the first session of the day dealt with industrialisation in the East in the 19th and 20th century. Employing new time‐series of energy use and steam engines for the Czech Republic (1830-1873) and using tools of Economic Geography, Hana Nielsen (Lund University) studied the role of coal in Czech industrialisation and made a Gerschenkron-like argument, that despite the use of coal starting relatively late, eventually a fast transition towards its use was able to compensate for the delay. Stefan Nikolić (University of York) exploited regional variation in his analysis of the determinants of industrial location. Relying on a new panel data set, he argued that factor endowments were clearly more important than New Economic Geography factors in attracting industry in interwar Yugoslavia. Finally, Hrvoje Ratkajec (University of Primorska, Koper) combined Economic Geography with Business History, to analyse the industrial and trade connections between the area of Northeast Adriatic (with centre in Triest) and other Slovenian lands in the period 1900-1930, focusing on the impacts of the First World War on these connections.

The last but not least session examined the origins and consequences of Polish partitions. Mikolaj Malinowski (Utrecht University / Humboldt University) demonstrated that collapse of the central institutions in Poland in the 17th and 18th century brought about market disintegration and economic stagnation that set the stage for the disappearance of the country in 1795. Piotr Korys and Maciej Tyminski (both affiliated with University of Warsaw) presented a part of their ongoing project on the reconstruction of GDP of Polish lands during the partition period and documented the evolution and economy structure in the late 19th and early 20th century in different partition territories. The partition also played a role in the final paper of the workshop in which Pawel Bukowski (CEU) convincingly argued that the partition of Poland by the Russian, Prussian and Habsburg Empires, has had long lasting effects on the educational performance of Polish students, depending on the educational tradition and attitude towards the dominating empire.

The participants in all the sessions were very much inspired to comment and ask questions regarding the papers being presented. Furthermore, a fun thing to mention is that when Branko Milanović “tweeted” Pawel Bukowski’s aforementioned results, questions for the presenter were coming even from the "Twittersphere". Pawel gladly responded, so in a very modern way the workshop echoed far beyond Belgrade even before it was over.

For all the above stated, we can conclude that the Belgrade WEast Workshop was a great success. For this reason the WEast team is very optimistic about the forthcoming WEast Workshops.
You can find more information about the WEast initiative and its activities at http://weast-initiative.blogspot.de/ .

This blog post was written by: Stefan Nikolić, PhD student at University of York

New EHES Working paper

Breaking the Unbreakable Union: Nationalism, Trade Disintegration and the Soviet Economic Collapse 

Why did the Soviet economy collapse so quickly in the late 1980s and early 1990s? A new EHES Working Paper argues that the reason can partly be found in the reemergence of nationalism to the territorial fringes of the Union.

Leaders from Ukraine, Belarus and Russia sign the Belavezha Accords on 8. December 1991, declaring the dissolution of the Soviet Union and the creation of the Commonwealth of Independent States. Picture credit: RIA Novosti Archive.

For decades, planners had striven to construct the Soviet economy as a tightly integrated system, where supply chains spanned domestic boundaries. The Union’s constituent parts- called republics in Soviet parlance- exercised little influence over the allocation of production and trade flows. This changed when Gorbachev took power in 1985. His new political course, which emphasized liberalization over repression, opened up the possibility of republics seceding from the Union. This set in motion a chain of events that ultimately dealt a death blow to an already stumbling system.

A central feature of the planned economy had been the fact that monitoring and control of local elites by the center was incomplete, which left local bodies some degree of discretion. This discretion could be used to tweak the plan, for example by restricting the export of particularly valuable goods to other republics. In normal times this did not happen very frequently, as the prospect of continual interaction placed a limit on the degree to which local elites could exercise their discretion profitably. Once secession became an option, however, it became profitable for local elites to limit the flow of goods between republics. The result was that domestic Soviet trade plunged, supply chains were broken and production plummeted.

The story is supported by a game-theoretical model as well as by data on domestic Soviet trade from 1987 to 1991. Using an adapted version of an empirical gravity model, it is shown that the more likely a republic was to secede- measured by the timing of official declarations of autonomy- the more domestic trade fell. The economic disintegration of the Soviet Union thus predated its official demise in December 1991.

This quantitative effect is strengthened if an instrumental variable procedure is used to account for the possible endogeneity of secessions, for example because republics badly integrated into the Soviet trade system may be more willing to secede. The instrument used is the proportion of textbooks printed in the republican language as opposed to Russian. This reflects the extent of linguistic nationalism present in each locality. Republics who used Russian to a lesser degree were more nationalistic and more eager to secede. They consequently witnessed a stronger fall in trade.

Marvin Suesse is a PhD student at Humboldt-Universität zu Berlin

Finally, the fall in trade caused by a higher disposition to secede had a negative effect on output. On average, withheld trade can explain up to 30% of the variations in GDP growth between Soviet republics during the breakup period. In other words, nationalism in the Soviet and Post-Soviet world may have a strong role to play in explaining the mixed economic experiences of the region after the fall of Socialism.

The working paper can be downloaded here.