economic history
work hard
Economics 613 �American Economic History
Prof. T.D. Logan, Spring Quarter 2012
Midterm Exam April 25, 2012
Answer all parts of all questions in your bluebook. Be precise and concise in your answers, and make sure that you read the entire exam before you begin. Relax, take a deep
breath, and do your best. Good Luck!!
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1 The Field of Economic History
1. (10) Give a de�nition of economic history. How does Fogel ("The Limits of Quantitative Methods in History") answer the question "Should quantitative/economic approaches be used in historical scholarship?" Describe one way in which he justi�es his answer.
2 Macroeconomic Measurement in Economic History
1. (25) Kuznets used two methods to estimate GNP, both a "components" and an "indicator" method where both gave very similar results. Balke & Gordon ("The Estimation of Prewar Gross National Product") and Romer ("The Prewar Business Cycle Reconsidered") each use one of the methods to correct the Kuznets series, and they reach very di¤erent conclusions. Which method does Romer use to correct the GNP series and how does she correct it (be speci�c)? Which method do Balke and Gordon use to correct the GNP series and how do they correct it (be speci�c)? Using a discussion of the methodological di¤erences between a "components" and "indicator" method, explain how Romer and Balke and Gordon could reach very di¤erent conclusions while Kuznets used both methods and obtained the same results (be as speci�c as you can). Is one method better than the other? Justify your answer.
2. (10) Describe two ways in which Davis�series for Industrial Production is di¤erent than the existing series (be as speci�c as you can). Using the index, does Davis �nd that business cycle volatility changed before and after the Civil War? [Hint: this is a di¤erent issue than the volatility question considered by Romer.] What measure of business cycle severity does Davis use to make his case? [Hint: it is not the standard deviation of deviations from trend.]
3. (20)Consider theestimationofCPIbiasusingEngel curvesbyCosta. Recall that theestimating equation is wi;j;t = �+'(lnPF;j;t � lnPN;j;t)+� (lnYi;j;t � lnPj;t)+X�+ui;j;t where w is the share of the budget devoted to food for household i in year t in place j, P is the true, unobserved price index for food (F), nonfood (N), and all goods, Y is household expenditure, X is a vector of household characteristics, and u is the error term. If prices are measured with error then ln(Pj;t) = ln(Pj;0) + ln(1+�j;t) + ln(1+Ej;t); ln(PF;j;t) = ln(PF;j;0) + ln(1+�F;j;t) + ln(1+EF;j;t); and ln(PN;j;t) = ln(PN;j;0) + ln(1+�N;j;t) + ln(1+EN;j;t) where P0 is the true price at time 0, � is the CPI, and E is the cumulative measurement error in the price index from year 0 to year t. Recall that the functional form of estimating CPI bias
wi;j;t =
�+' [ln(1+�F;j;t)� ln(1+�N;j;t)]+� [lnYi;j;t � ln(1+�j;t)]+X� + TX t=1
�tDt + X j=1
�jDj +ui;j;t
follows directly given this framework where Dj are regional e¤ects and time e¤ects from year 0 to year t are captured in Dt. Show that �t = ' [ln(1+EF;j;t)� ln(1+EN;j;t)] � � ln(1+Ej;t) [show your work, partial credit
will be awarded]. When �t < 0 or �t > 0, what does that imply for the measurement of real income (have we over- or underestimated real income)? Justify your answer using an Engel curve as illustration. Logan("Are Engel Curve Estimates of CPI Bias Biased?") corrects theCosta functional form to allow for household size changes. He argues that �t;Costa = �t;corrected+�(Dt � ln(n)). What is �t;corrected? Justify your answer.
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3 Labor and Education
1. (10) Rosenbloom ("One Market or Many") argues that real wages will be equalized in an integrated labor market. What regression does Rosenbloom estimate to describe di¤erences in real wages between cities [no equations needed, but you do need to de�ne the variables used]? Rosenbloom says that demand plays a primary role in explaining the real wage gaps he estimates. What evidence does he use to support that contention, and how is it consistent with a demand explanation?
2. (10) Goldin notes that the high school movement was unevenly distributed the United States. What years in American history describe the "high school movement"? What areas of the country led the high school movement and what speci�c reasons does Goldin note for their leadership? Were regional leaders in the high school movement also regional leaders in the coeducation movement? Why or why not?
3. (15) How have the returns to education and inequality evolved over the twentieth century, what has been the trend in each? If the returns to education re�ect supply and demand for skill, how has the trend in supply been related to the returns to skill over the twentieth century? How has the trend in demand been related to returns to skill over the twentieth century? Give speci�c examples from readings and lecture to justify your answer.
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