This article examines the historical record of the Austro-Hungarian monetary union, focusing on its bargaining dimension. As a result of the 1867 Compromise, Austria and Hungary shared a common currency, although they were fiscally sovereign and independent entities. By using repeated threats to quit, Hungary succeeded in obtaining more than proportional control and forcing the common central bank into a policy that was very favourable to it. Using insights from public economics, this article explains the reasons for this outcome. Because Hungary would have been able to secure quite good conditions for itself had it broken apart, Austria had to provide its counterpart with incentives to stay on board. I conclude that the eventual split of Hungary after World War I was therefore not ‘written on the wall’ in 1914, since the Austro-Hungarian monetary union was quite profitable to Hungarians.

The essays in this Special Issue were initially written for the first Past, Present and Policy meeting, a New Economic History Panel, that was held in Vienna, 30 September–1 October 2005. This panel was designed by Marc Flandreau and is currently sponsored by the Chaire de Finances Internationales at the Institut d'Etudes Politiques de Paris, and by the Centre for Economic Policy Research in London. The Vienna meeting, known as PPP1, was hosted and sponsored by the Austrian National Bank.

Citizenship was a key concept in European state formation from the Middle Ages onwards. This article presents an economic interpretation of citizenship. It argues that such a contract increases the efficiency of the exchange between the state and its inhabitants. Next, the concept of citizenship is applied to the political economy of the Dutch Republic, which was an ‘intermediate’ stage in the process of state formation between the medieval commune (with a restricted form of citizenship) and the nation-state of the nineteenth century, when the concept became more inclusive, covering all inhabitants. The article briefly sketches the genesis of the Dutch Republic and identifies some of the key problems of its political economy.

The term financial revolution has been abused in the literature. Revolution connotes a sharp and unique break from the past that should stand up to careful historical scrutiny, but in fact it does not. Evolution describes financial history better than revolutions. We compare the classic ‘financial revolutions’ with the financial innovations of Genoa, Venice and Florence in the Quattrocento and Cinquecento and the upshot is that these Italian city-states – the two maritime cities more than Florence – had developed many of the features that were to be found later on in the Netherlands, England and the United States. The importance of the early financial innovators has been eclipsed by the fact that these city-states did not survive politically. Instead, the innovations were absorbed in the long chain of financial evolution and, in the process, lost the identity of their creators.

This article examines important aspects of the interaction between the fiscal history and political events of tsarist Russia's final years in the light of macroeconomic theories of government budget constraints. Using econometric tests of intertemporal stability and techniques of intervention analysis, I find that tsarist Russia had achieved a sustainable peacetime balance in its fiscal relations by the eve of World War I, but that this balance was lost under the strain of wartime financial difficulty.

The growth of trade after 1860 has been attributed to declining tariffs, to falling transport costs, and, recently, to monetary arrangements. However, coincident with the rise of trade the second half of the nineteenth century saw the development of the first electric communication network: the telegraph. The first successful trans-oceanic cable was operating in 1865. The telegraph remained the only direct trans-oceanic communication link until into the twentieth century. Little research has been conducted explicitly linking the impact of telegraphs on international shipping and international trade. A panel is used to show that there is a correlation between the diffusion of the telegraph, co-ordination of shipping, and the growth of world trade even controlling for the impact of other well-studied effects. The telegraph reduced the time ships spent in port and allowed ships to travel farther among ports to collect more valuable cargo.

Having been separated into numerous autonomous states, nineteenth-century Germany was the very model of a regionally diversified process of industrialisation. How the nutritional status of Germans developed during early industrialisation is analysed in this article. With newly available data, average height for birth cohorts 1770–1849 is established for the two German states of Saxony and Wuerttemberg. The development of these heights is compared to the – so far – sole German height trend of this epoch, the average height of Bavarians. The results suggest that, starting with the birth cohorts of the Napoleonic era, the biological standard of living was on the decline across all the three German territories under consideration. An explorative interpretation of the height trend in Saxony reveals that during the beginning of industrialisation a mixture of relatively bad climatic conditions, rising prices of foodstuffs and a persistently falling real income can be held responsible for the rapid and substantial decline of the nutritional status in this pioneering state of German industrialisation. Finally, by the middle of the nineteenth century the Saxons found themselves trapped in a classical type of nutritional crisis.

This article examines the effect of total war on inequalities in pay in munitions industries in Britain during World War II. I present new data derived from Ministry of Labour monthly reports of changes in wage-rates, which allows for a systematic analysis of pay inequality by skill category and by gender and age. I also investigate changes in earnings equality using data derived from Earnings and Hours Enquiries and from records of the National Arbitration Tribunal. I conclude that pay differentials – defined by skill, gender or age – narrowed considerably during World War II. For men, the War represented an accentuation of a trend towards greater levelling that commenced in the later part of the 1930s and continued in the immediate postwar years. This was not the case for women workers. During the War years gender pay inequality in munitions industries was substantially reduced, but some of these gains were eroded with the coming of peace and demobilisation. Wartime labour policy was directed toward the deskilling of manufacturing work and this was coupled with both a significant expansion of unionisation (especially among unskilled workers) and institutional and legal changes that strengthened the bargaining position of trade unions. These factors suggest that institution factors worked in conjunction with labour demand effects to reduce pay inequality in those industries crucial for the war effort.

By 1914, the London Stock Exchange listed and traded one-third of the public capital available to investors anywhere in the world. No other exchange could match it in terms of scale and scope of securities on offer, or in terms of the number of stockbrokers available to potential customers. The reason, we argue, is that the microstructure of the London Stock Exchange was also unique. The owners of the exchange (Proprietors) left governance of the exchange to the users of the exchange (Members). Because the owners of the exchange could only increase revenue by increasing the number of users, newer members constantly sought new sources of revenue through financial innovations. The evolution of the London Stock Exchange's microstructure was path-dependent – the initial conditions for membership set the separate incentives for the owners and operators of the exchange, and these determined how they responded to successive shocks over time. Path dependency, unfortunately, eventually led to decreasing effectiveness and innovation by the members over time.

This article investigates the question of how openness affected the growth of income in the late nineteenth-century Atlantic economy. More specifically, is the tariff-growth correlation identified by O'Rourke (2000) driven by European offshoots? Is the correlation perhaps explained by the concurrent integration of intranational markets before 1914? And what can other measures of openness tell us about the growth process in the nineteenth century? This note offers some answers. The results can be summarised as follows: O'Rourke's primary finding is not altered by changes in the sample; incorporating measures of inter- and intranational market integration into the analysis again supports O'Rourke's findings, but apparently leaves no role for intranational market integration; and evidence from trade-flow data suggests that there may been a pro-growth role for tariffs in a non-reciprocal trade environment.

This study deals with the price building process of cross-listed stocks on the most important European stock exchanges in the 1870s. By applying a vector error correction approach we look for cointegration relationships. Obviously, there was already a high degree of cross-border integration. Furthermore, we observe the uncommon phenomenon that it was not the home market Vienna but the foreign market Berlin which was the dominant one in the price-building process. An explanation could be the intense speculation during the 1870s in Berlin. Therefore, cross-listed stocks worked as a vehicle for spreading the ongoing speculation from Berlin to other places.

This article presents new evidence on the determinants of short-time working in Britain during the interwar period. Using a selection of manufacturing industries we test the impact that output volatility, the benefit-wage ratio, and trade union density had on short-time working. We find that persistence effects (captured by lagged values of output fluctuation) and gender differences in trade union density were important for a number of industries. However, perhaps our most interesting finding is that the benefit-wage ratio also exercised a statistically significant impact on short-time working. This suggests that the Benjamin-Kochin thesis may be important after all. In other words, the army of short-time workers that existed in Britain between the Wars may, indeed, have been a ‘volunteer army’.

I review recent monographs on the history of monetary and international financial regimes, which have explored the origins of the gold standard and the extent and sources of capital market integration. The studies of the emergence of the gold standard have adopted variously long term and shorter term perspectives, and arrive at different conclusions concerning the relative contributions of technological and political factors. The histories of capital markets document the extent and sources of the openness of late nineteenth century capital markets, and reach conflicting conclusions on the role that the gold standard played in capital market integration.

Although the macroeconomics of Latin America during the first wave of globalisation has been largely documented, key microeconomic aspects remain insufficiently studied. This is the case for the process of the foreign bank penetration driven by British and German banks. The article analyses the historical experiences of Chile and Brazil with foreign banks between 1878 and 1913. Based on newly available bank balance sheet data for each country, we searched for evidence of differences in the financial behaviour between local and foreign (British and German) banks as well as possible competition effects induced by foreign entry. In line with the results of the vast literature on the present wave of foreign bank entry into developing countries, we find that, on the whole, foreign and domestic banks behaved differently and that the impacts of British and German bank penetration in Brazil and Chile tended to be positive.

Despite a stream of information from recent research, as well as analytical interpretations, we still lack a general picture of pre-1914 multinational banking based on a unifying empirical approach comparable to that recently developed by financial economists for the wave of banks' multinational expansion in the late twentieth century. The main purpose of this article, based on a unique dataset covering the foreign branches of British, French and German banks from 1880 to 1913, is to test in a similar theoretically-driven fashion the determinants of multinational banking during the first globalisation. The empirical strategy is based on an augmented gravity model in which geography and institutions interact with economic factors in determining the patterns of multinational banking. Contrary to what has emerged from recent studies on present multinational banking, I find that the ‘fundamentals’ of pre-1914 foreign branching cannot easily be fitted into a gravity-like model, and that no unifying pattern of foreign expansion can be inferred from the data.

Since the early 1997 paper by La Porta et al., a growing body of research has argued that ‘legal origins’ have a country-specific, time-invariant effect on property rights and economic development. Following the methodology of La Porta et al., an original database of 51 bankruptcy laws has been built: it ranges over 15 European countries and more than a hundred years (1808–1914), and summarises how the rights and incentives of the parties were defined as the procedures unfolded. The first conclusion is that, over the entire period, all legal traditions strongly protected creditors' rights; only English law comes out prima facie as less protective. Second, evidence suggests that the evolution of these laws was influenced less by their past than by continent-wide trends, arguably linked to capitalist development. An early nineteenth century model thus saw heavy repression of failed debtors and highly regulated judicial procedures. After a transition period from the late 1860s to the late 1880s, prison for debt was abandoned, rehabilitation became easier, and the parties were given much more room to recontract on property rights.

Recent cross-country investigations of the role of institutional fundamentals, such as the protection of property rights, in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this article we pursue this new direction by considering relationships between finance, growth, legal origin, and the political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a country's legal origin (such as English, French, German, or Scandinavian) and financial development are for the most part consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper fundamentals, however, a significant part of the growth-enhancing role of financial development remains unexplained by them.