national institutions and subnational development in africa we investigate the role of national institutions on subnational african development in a novel framework that accounts both for local geography and cultural genetic traits we exploit the fact that the political boundaries in the eve of african independence partitioned more than two hundred ethnic groups across adjacent countries subjecting similar cultures residing in homogeneous geographic areas to different formal institutions using both a matching type and a spatial regression discontinuity approach we show that differences in countrywide institutional structures across the national border do not explain within ethnicity differences in economic performance as captured by satellite images of light density the average non effect of national institutions on ethnic development masks considerable heterogeneity partially driven by the diminishing role of national institutions in areas further from the capital cities

the impact of the timing of patents on innovation performance abstract in the context of industry standard setting firms face the strategic decision of whether to move faster than competitors or wait for more information that reduces uncertainty these decisions are even more challenging if there are multiple standards and if there are benefits to belonging to more than one standard this paper examines the effect of the timing of patents on a firm s innovation performance the strategic logic of real options posits that patent timing is determined by the tension between the value of preemption and the value of waiting we analyze 680 dvd disc patents in dvd patent pools to test the effect of the timing of patents on innovation performance consistent with real options logic under high uncertainty the later the timing of the patent the higher the innovation performance while under low uncertainty there is an early mover advantage

patent pools litigation and innovation this article analyzes patent pools and their effects on litigation incentives overall royalty rates and social welfare when patent rights are probabilistic and can be invalidated in court with probabilistic patents the license fees reflect the strength of the patents we show that patent pools of complementary patents can be used to discourage infringement by depriving potential licensees of the ability to selectively challenge patents and making them committed to a proposition of all or nothing in patent litigation if patents are sufficiently weak patent pools with complementary patents reduce social welfare as they charge higher licensing fees and chill subsequent innovation incentives

patenting in the shadow of competitors this article empirically examines the patenting behavior of new biotechnology firms that have different litigation costs i show that firms with high litigation costs are less likely to patent in subclasses with many other awards particularly those of firms with low litigation costs this pattern is consistent with the literature on costly litigation which suggests that firms that have high litigation costs will take greater precautions to avoid litigation these results are robust to a variety of control variables and modifications that seek to test alternative explanations

social class and the spirit of capitalism one of the key social transformations that accompanied the british industrial revolution was the economic decline of the aristocracy standard theories of wealth inequality cannot explain why the aristocrats in spite of their superior wealth and education failed to be the main protagonists and beneficiaries of industrialization we discuss recent research based on a model of endogenous preferences that is consistent with the demise of aristocracy jel 010 040

a model of firm valuation with exchange exposure this paper examines how the firm s exposure to exchange rate uncertainty influences its valuation it identifies the variables affecting the firm s economic and accounting exchange exposure as well as the cost of capital in a formal unified model

printing and protestants an empirical test of the role of printing in the reformation the causes of the protestant reformation have long been debated this paper seeks to revive and econometrically test the theory that the spread of the reformation is linked to the spread of the printing press i test this theory by analyzing data on the spread of the press and the reformation at the city level an econometric analysis that instruments for omitted variable bias with a city s distance from mainz the birthplace of printing suggests that cities with at least one printing press by 1500 were at minimum 29 percentage points more likely to be protestant by 1600

efficient patent pools the paper builds a tractable model of patent pools agreements among patent owners to license sets of their patents it provides a necessary and sufficient condition for patent pools to enhance welfare and shows that requiring pool members to be able to independently license patents matters if and only if the pool is otherwise welfare reducing the paper allows patents to differ in importance asymmetric blocking patterns and licensors to also be licensees we undertake some initial exploration of the impact of pools on innovation the analysis has broader applicability than pools being relevant to a number of co marketing arrangements

adopting a new religion the case of protestantism in 16th century germany using a dataset of territories and cities of the holy roman empire in the sixteenth century this article investigates the determinants of adoption and diffusion of protestantism as a state religion a territory s distance to wittenberg the city where martin luther taught is a major determinant of adoption this finding is consistent with a theory of strategic neighbourhood interactions introducing the reformation was a risky enterprise for territorial lords and had higher prospects of success if powerful neighbouring states committed to the new faith the actual spatial and temporal patterns of expansion of protestantism are analysed in a panel dataset

the rise of europe atlantic trade institutional change and economic growth the rise of western europe after 1500 is due largely to growth in countries with access to the atlantic ocean and with substantial trade with the new world africa and asia via the atlantic this trade and the associatedcolonialism affected europe not only directly but also indirectly by inducing institutional change where initial political institutions those established before 1500 placed significant checks on the monarchy the growth of atlantic trade strengthened merchant groups by constraining the power of the monarchy and helped merchants obtain changes in institutions to protect property rights these changes were central to subsequent economic growth

occupational choice and the spirit of capitalism the british industrial revolution triggered a socioeconomic transformation whereby the landowning aristocracy was replaced by industrial capitalists rising from the middle classes as the economically dominant group we propose a theory of preference formation under financial market imperfections that can account for this pattern parents shape their children s preferences in response to economic incentives middle class families in occupations requiring effort skill and experience develop patience and a work ethic whereas upper class families relying on rental income cultivate a refined taste for leisure these class specific attitudes which are rooted in the nature of preindustrial professions become key determinants of success once industrialization transforms the economic landscape i introduction the industrial revolution was more than capital accumulation and growth it also set off a social and political transformation that redefined hierarchies in society and reshaped the distribution of income and wealth before the onset of industrialization in eighteenth century britain wealth and political power were associated with the possession of land over the course of the nineteenth century a new class of entrepreneurs and businessmen emerged as the economic elite for the most part the members of this class rose from humble beginnings and had their social origins in the urban middle classes the landed elite was left behind and eventually lost its political and economic predominance many observers of the time linked this reversal in economic fortunes to differences in values attitudes and ultimately preferences across social classes there are countless examples both in scholarly and in fictional writing of portrayals of members of the landowning class as averse to work unwilling to save ill disposed tocommercialactivity andunabletoconsidermoneyassomething

an economic analysis of the protestant reformation this paper seeks to explain the initial successes and failures of protestantism on economic grounds it argues that the medieval roman catholic church through doctrinal manipulation the exclusion of rivals and various forms of price discrimination ultimately placed members seeking the z good spiritual services on the margin of defection these monopolistic practices encouraged entry by rival firms some of which were aligned with civil governments the paper hypothesizes that protestant entry was facilitated in emergent entrepreneurial societies characterized by the decline of feudalism and relatively unstable distribution of wealth and repressed in more homogeneous rent seeking societies that were mostly dissipating rather than creating wealth in these societies the roman church was more able to continue the practice of price discrimination informal tests of this proposition are conducted by considering primogeniture and urban growth as proxies for wealth stability

princes and merchants european city growth before the industrial revolution as measured by the pace of city growth in western europe from 1000 to 1800 absolutist monarchs stunted the growth of commerce and industry a region ruled by an absolutist prince saw its total urban population shrink by one hundred thousand people per century relative to a region without absolutist government this might be explained by higher rates of taxation under revenue maximizing absolutist governments than under nonabsolutist governments which care more about general economic prosperity and less about state revenue

people s opium religion and economic attitudes since max weber there has been an active debate on the impact of religion on people s economic attitudes much of the existing evidence however is based on cross country studies in which this impact is confounded by differences in other institutional factors we use the worldvalues surveys to id entify the relationship between intensity of religious beliefs and economic attitudes controlling for country fixed effects we study several economic attitudes towardcooperation the government working women legal rules thriftiness andthe market economy we also distinguish across religious denominations differentiating on whether a religion is dominant in a country we find that on average religious beliefs are associated with good economic attitudes where good is defined as conducive to higher per capita income andgrowth yet religious people tendto be more racist andless favorable with respect to working women these effects differ across religious denominations overall we find that christian religions are more positively associatedwith attitudes conducive to economic growth r 2003 elsevier science b v all rights reserved jel classification a1 e0 n4 z1

entry and patenting in the software industry to what extent are firms kept out of a market by patents covering related technologies do patents held by potential entrants make it easier to enter markets we estimate the empirical relationship between market entry and patents for 27 narrowly defined categories of software products during the period 1990 2004 controlling for demand market structure average patent quality and other factors we find that a 10 increase in the number of patents relevant to market reduces the rate of entry by 3 8 and this relationship intensified following expansions in the patentability of software in the mid 1990s however potential entrants with patent applications relevant to a market are more likely to enter it finally patents appear to substitute for complementary assets in the entry process because patents have both greater entry deterring and entry promoting effects for firms without prior experience in other markets this paper was accepted by bruno cassiman business strategy

international asset pricing with time varying risk premia abstract recent empirical evidence that forward exchange rates are biased predictors of future spot rates can also be interpreted as evidence against the hypothesis of a constant risk premium consequently reconciliation of this evidence with efficient international capital markets requires the existence of time varying risk premia this paper modifies kouri s 1977 asset pricing model to allow time varying exected returns on assets eliminates the assumption of a risk free real asset and derives the characteristics of the risk premia in the forward market as well as the equilibrium yield relationships among the equities and riskless nominal bonds of all countries

the economic effects of the protestant reformation testing the weber hypothesis in the german lands following max weber many theories have hypothesized that protestantism should have favored economic development with its religious heterogeneity the holy roman empire presents an ideal testing ground for this hypothesis using population figures of 272 cities in the years 1300 1900 i find no effects of protestantism on economic growth the finding is precisely estimated robust to the inclusion of various controls and does not depend on data selection or small sample size denominational differences in fertility behavior and literacy are unlikely to be major confounding factors protestantism has no effect when interacted with other likely determinants of economic development instrumental variables estimates considering the potential endogeneity of religious choice are similar to the ols results

trust in large organizations several authors suggest that trust is an important determinant of cooperation between strangers in a society and therefore of performance of social institutions we argue that trust should be particularly important for the performance of large organizations in a cross section of countries evidence on government performance participation in civic and professional societies importance of large firms and the performance of social institutions more generally supports this hypothesis moreover trust is lower in countries with dominant hierarchical religions which may have deterred networks of cooperation trust hold up remarkably well on a cross section of countries this abstract was borrowed from another version of this item

the exchange rate exposure of a global competitor this paper analyzes the exposure of operating cash flows to an exogenous exchange rate change for a firm operating internationally as a multimarket oligopolist i e a global competitor and facing demand that depends in a general way on the exchange rate it is shown that exposure is the sum of a base case exposure identified in other studies and two other components terms associated with exchange rate induced demand shifts and terms associated with competitors s reoptimization following the exchange rate shock in general the magnitudes of these additional terms are significant especially in the presence of asymmetries across markets and firms numerical examples are provided that incorporate asymmetries corresponding to stylized facts about some u s markets and u s manufacturers

the share price reaction of u k exporters to exchange rate movements an empirical study contrary to prior research this u k based study finds a contemporaneous relation between the foreign exchange rate and the market value of large exporters we also find a weak lagged relationship which suggests that the stock market takes time to incorporate all of the implications of foreign currency movements into share prices evidence that the nature of this relationship changed when sterling was in the erm is also provided

tax effect on the debt denomination decision of multinational projects in this paper we examine the effect of differential corporate taxes on the debt denomination decision of u s multinational firms facing stochastic project cash flows and exchange rates assuming to international interest arbitrage opportunity we show that u s based multinational firms can maximize projects expected npvs by borrowing in the foreign currency as long as the excess foreign tax credit can be fully utilized by the parent firm otherwise multinational firms should borrow the weaker currency when a lower exchange rate is expected the effect of differential tax rates on the risk of multinational projects with different debt denomination alternatives also is examined

culture in development an anti capitalist cultural bias through directed within family human capital transmission adversely affects the supply of entrepreneurial talent and risk taking this limits economic progress if aggregate productivity is low when productivity is high economic incentives can overcome cultural inertia though the income level depends on culture the growth rate in this case does not

luther and suleyman this paper emphasizes that the evolution of religious institutions in europe was influenced by the expansionary threat posed by the ottoman empire between the mid 15th century and the early 17th century various historical accounts have suggested that the ottomans rise helped the protestant reform movement as well as its various offshoots such as zwinglianism anabaptism and calvinism survive their infancy and mature utilizing a comprehensive dataset on violent conflicts for the period between 1451 and 1650 i find strong empirical support for the idea that ottoman military engagements in continental europe lowered the number and extent of violent conflicts among and within the european states ottomans influence in europe extended to the feud between the protestant reformers and the catholic establishment during the time between the birth of lutheranism and the end of the thirty years war the likelihood and timing of military engagements between the protestant reformers and the counter reformation forces depended negatively and statistically significantly on ottomans military activities in europe

innovation without patents evidence from world s fairs abstractthis paper introduces a unique historical data set of more than 8 000 british and american innovations at world s fairs between 1851 and 1915 to explore the relationship between patents and innovations the data indicate that the majority of innovations 89 percent of british exhibits in 1851 were not patented comparisons across british and u s data also show that patenting decisions were unresponsive to differences in patent laws cross sectional evidence suggests that high quality and urban exhibits were more likely to be patented the most significant differences however occurred across industries inventors were most likely to use patents in industries in which innovations are easy to reverse engineer and secrecy is ineffective relative to patents in the late nineteenth century scientific breakthroughs including the publication of the periodic table reduced the effectiveness of secrecy in the chemical industry difference in differences regressions suggest that this change resulted in a

incentives predestination and free will i introduction max weber s 1930 the protestant ethic and the spirit of capitalism argues that the protestant reformation set the stage for post medieval economic growth using an occupational study of germans from 1895 weber shows that protestants dominate the mercantile or capitalist occupations in that country at that time period weber also argues that between 1600 and 1900 protestant countries advanced faster than their catholic neighbors and that this was the result of calvin s urging acceptance of material success and the dogma of predestination 1 an ocean of work beginning with rachfahl 1909 and sombart 1913 has since attacked weber s theological generalizations see giddens 1992 for a review tawney 1926 and robertson 1933 argue weber s causal interpretation is wrong and that economic growth laid the framework for protestantism not protestantism for economic growth samuelsson 1961 disputes the very correlation between protestantism and economic success which is the basis of the weberian hypothesis the correlation between protestantism and economic success is certainly weaker than weber suggests even in the german data that weber himself uses furthermore more modem data tends to find only a modest link between protestantism and economic success as in winter 1974 and tomes 1994 2 however for centuries there were gaps in economic success between protestant and catholic nations and new findings on early modem data tend to confirm differences between protestants and catholics at least within the u s as weber s arch critic samuelsson himself writes there is some truth in the contention that the protestant countries and especially those adhering to the reformed church were particularly vigorous economically given that there was some correlation between protestantism and economic success before the mid to late 20th century the question then becomes why this correlation existed some elements of protestant theology clearly encourage capitalism usury doctrines became less rigid under calvinism nelson 1972 avarice was de emphasized as a sin weber claims that luther s concept of a calling includes worldly success and that this is a prominent difference with catholic doctrine although this theological claim has been subject to much debate e g sombart 1915 there still appears to be some basic truth to this point one of the largest theological gaps between the denominations is that calvinism accepts the dogma of predestination while catholicism argues for a dogma of free will 3 for the purposes of this paper we will follow weber and accept broad brush definitions of doctrine rather than getting mired in the more subtle features of the two doctrines under predestination a spiritual elite is preordained before the beginning of time and will receive eternal life 4 under free will it is only through a lifetime of good actions that individuals are accepted into heaven 5 weber argues that predestination creates a more lasting basis for economic growth than the dogma of free will in this paper we present a model that formally treats weber s claim under particular circumstances and show how predestination could create the correlation between protestantism and growth that existed in the pre modern era our model also suggests conditions under which a more successful society would favor the doctrine of predestination which can be seen as a formalization of tawney s and robertson s view that economic growth created the reformation in this essay both free will and predestination create incentives which spur good behavior 6 under the doctrine of free will good behavior is motivated by an increased probability of getting into heaven under the doctrine of predestination this incentive is irrelevant because individual actions do not determine spiritual outcomes instead an individual s actions are motivated by a desire to receive positive behavior from others by convincing them that he is part of the spiritual elite

how the west invented fertility restriction europeans restricted their fertility long before other parts of the world did so by raising the marriage age of women and ensuring that a substantial proportion remained celibate the european marriage pattern emp reduced childbirths by up to 40 we analyze the rise of this first socio economic institution in history that limited fertility through delayed marriage our model emphasizes changes in agricultural production following the black death the production of meat wool and dairy pastoral products increased while grain production declined women had a comparative advantage producing pastoral goods they often worked as servants in husbandry where they remained unmarried long after they had left the parental household in a malthusian world this translated into lower population pressure raising average wages by up to a quarter the black death thus set into motion a virtuous circle of higher wages and fertility decline that underpinned europe s high per capita incomes we demonstrate the importance of this effect in a calibration of our model

was weber wrong a human capital theory of protestant economic history max weber attributed the higher economic prosperity of protestant regions to a protestant work ethic we provide an alternative theory protestant economies prospered because instruction in reading the bible generated the human capital crucial to economic prosperity we test the theory using county level data from late nineteenth century prussia exploiting the initial concentric dispersion of the reformation to use distance to wittenberg as an instrument for protestantism we find that protestantism indeed led to higher economic prosperity but also to better education our results are consistent with protestants higher literacy accounting for most of the gap in economic prosperity

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

patents and innovation evidence from economic history abstract what is the optimal system of intellectual property rights to encourage innovation empirical evidence from economic history can help to inform important policy questions that have been di

patent pools and innovation in substitute technologies evidence from the 19th century sewing machine industry patent pools which combine complementary patents of competing firms are expected to increase overall welfare but potentially discourage innovation in substitutes for the pool technology this article exploits a new historical data set on changes in patenting and firm entry for a clearly defined pool technology and substitutes in the 19th century sewing machine industry this analysis reveals a substantial increase in innovation for an albeit technologically inferior substitute technology historical evidence suggests that the creation of a pool diverted innovation toward an inferior substitute technology by creating differential license fees and litigation risks

the three horsemen of riches plague war and urbanization in early modern europe how did europe escape the iron law of wages we construct a simple malthusian model with two sectors and multiple steady states and use it to explain why european per capita incomes and urbanization rates increased during the period 1350 1700 productivity growth can only explain a small fraction of the rise in output per capita population dynamics changes of the birth and death schedules were far more important determinants of steady states we show how a major shock to population can trigger a transition to a new steady state with higher per capita income the black death was such a shock raising wages substantially because of engel s law demand for urban products increased and urban centers grew in size european cities were unhealthy and rising urbanization pushed up aggregate death rates this effect was reinforced by diseases spread through war financed by higher tax revenues in addition rising trade also spread diseases in this way higher wages themselves reduced population pressure we show in a calibration exercise that our model can account for the sustained rise in european urbanization as well as permanently higher per capita incomes in 1700 without technological change wars contributed importantly to the rise of europe even if they had negative short run effects we thus trace europe s precocious rise to economic riches to interactions of the plague shock with the belligerent political environment and the nature of cities

the culture of entrepreneurship abstract we study the cultural process through which a society inculcates an entrepreneurial spirit people work for a guaranteed wage or operate a firm whose risky return depends on business expertise the latter is culturally acquired within the family or outside and people may choose an occupation different from the one they were socialized into a cultural bias towards safer occupations from colonial and post colonial policies leads to stagnation where entrepreneurs do not upgrade technology because of their proficiency with existing methods an aggregate productivity shock can tip this economy towards growth led by established businesses a human capital shock where existing business expertise is less useful is more disruptive growth occurs through the emergence of a new class of entrepreneurs we conclude that culture is not destiny it adapts even when some cultural traits do not

the role of patents in information and communication technologies a survey of the literature during the last few decades the number of patents in information and communication technologies has increased considerably an increasing number of patents and the associated fragmentation of ip rights have generated a series of potentially problematic consequences patent thickets royalty stacking the emergence of patent assertion entities increased patent litigation particularly around standard essential patents and the difficulties with defining fair reasonable and nondiscriminatory licensing terms are some of the most debated issues in the literature that we review in this paper we devote a specific section of our survey to patent quality currently one of the most debated issues surrounding the patent system in our analysis we mix theoretical and empirical arguments with a more policy oriented reasoning this allows us to better position the different issues in the relevant political and economic context

the sensitivity of bank stock returns to market interest and exchange rate risks abstract this paper presents and estimates a multifactor model of bank stock returns that incorporates market return interest rate and exchange rate risk factors a model of the optimizing behavior of an international banking firm is used to derive the sensitivity coefficients of the alternative factors regression equations are estimated that are based on either actual or unexpected values of the underlying factors with a post october 1979 time dummy variable and with a money center bank dummy variable standard results are obtained for the market and interest rate variables while new results are derived for the exchange rate variable the specific effects of the latter variable are found to be dependent on the time period of observation and the money center status of banks

do patents work thickets trolls and antibiotic resistance this paper connects ideas from recent literature on the economics of intellectual property ip to address the question did the strengthening and broadening of ip rights from important patent policy changes in the us promote greater innovation the analysis rests on the theory of cumulative innovation which shows that if ip rights on a pioneer invention extend to follow on research and impediments to contracting exist then strengthening patents can actually reduce overall innovation recent empirical studies are consistent with the theory patents can significantly deter follow on research in complex technology areas where contracting is difficult computers electronics telecommunications but not in drugs chemicals and human genes i outline remedies from court decisions and antitrust policy for addressing inefficiencies from patent trolling patent thickets and the anti commons of fragmented ownership i then apply the analysis to the antibiotics market drawing on recent research to examine how patent and competition policies can be used to improve incentives for drug development in the battle against antibiotic resistance the literature provides persuasive evidence that the policy changes overreached in broadening and strengthening ip rights and reveals important patent reforms for improving the effectiveness of patent systems in the us and canada