ASSIGNMENT

1. [Reading] Read ‘Primary Products and Economic Growth: An Empirical Measurement' (hereafter called C&G). When C&G was published, it started a controversy lasting decades. This question gives you a chance to see what all the fuss was about - and what Canadian economic historians have found worthy of long discussion.

a. Write a 3-2-1 report for the paper. Remember that you CAN'T just copy-and-paste text from the paper. You need to either cite quotes properly, and explain why you chose them, or use your own words. (12 marks)

i. What are the 3 most important concepts, ideas or issues in the reading?

Briefly explain why you chose them.

ii. What are the 2 concepts, ideas or issues in the article that you are having the most difficulty understanding, or that are missing but should have been included?

Briefly explain what you did to correct the situation (e.g. looked up an unfamiliar word or a missing fact), and the result.

iii. If you could ask the author1 question, what would it be?

Why is this question important?

b. C&G assumes that in the gadgets sector, demand for labour is perfectly elastic. Suppose instead that once a certain number of workers have been hired, demand for gadgetlabour becomes elastic, so that more workers will be hired only if the wage falls. (This is the standard downward-sloping demand relationship.) Would this increase or decrease the positive impact of a wheat boom, according to the model? Explain briefly. [Hint: If you're stuck, you may wish to skim through Frank Lewis's paper in the references. He deals with this issue.]

c. A later paper pointed out that C&G had missed a spot when it came to their empirical calculations. A lot of rent in the early prairies was paid via share-cropping agreements. Under sharecropping, a farmer would pay a share of the harvest (say, 20% of the wheat) as rent to the landowner. This type of rent did not show up in the census data used by C&G . Would failing to count sharecropping ‘rent' increase or decrease the positive impact of a wheat boom, compared to its ‘true' value? Explain briefly. [Hint: If you're stuck, you may wish to skim through Gordon Bertram's paper in the references. He deals with this issue.]

2. [‘Raphing] This question asks you to investigate the convergence (coming together) of British and North American wheat prices between the late 1800s and early 1900s. In an influential paper, C. Knick Harley attributed this mostly to falling transportation costs due to technological change.

If graphing by hand, use only the first eleven years of data (1845 - 1855). Otherwise, use the full data set (1845 - 1934).

a. Use the data series provided to plot nominal (not adjusted for inflation) prices for 1 bushel of wheat in Great Britain and Chicago . Note that there are 20 shillings in a pound (£) and 8 bushels in a quarter . Your graph should have:

i. Years on the Horizontal Axis, and Dollars Per Bushel on the Vertical Axis.

ii. Two line graphs: one for the price of wheat in Great Britain, and one for the price of wheat in Chicago. You will have to convert both price series! British prices are in shillings/quarter, and Chicago prices are in cents/bushel. You want both in dollars/bushel.

b. Suppose the only thing affecting grain prices over the period are transportation costs and minor random shocks. Assume the British price is the price paid by consumers, and the Chicago price is the price obtained by suppliers. Transportation can be thought of as a tax driving a wedge between consumers and producers, as in the tax incidence models you should have covered in Micro .

A major result of this model is that the burden of the tax is highest on the party with the lowest elasticity. If price elasticity of demand is lower than price elasticity of supply, consumers will pay most of the tax via higher after-tax prices. If the reverse is true, producers will pay most of the tax via lower take-home prices.

Consider your graph from part a. Given what you have plotted, and our simplifying assumptions, until 1900 (or 1855 if doing it by hand), which was higher: Britain's price elasticity of demand, or North America's (Chicago's) price elasticity of supply? Briefly explain your reasoning. [Hint: For any given change in transportation costs, which changed more: the after-transportation price paid by British consumers, or the take-home price obtained by Chicago wheat sellers?]

c. Although I've provided (approximate) consumer price indices for both countries, using them to deflate wheat prices is problematic. During this time period, wheat was an extremely important item of consumption, forming a sizable chunk of the basket of goods tracked by a consumer price index. Moreover, there is reason to believe that the relative importance of wheat in the average diet was different in Britain than in North America.

One of the main problems can be summarized as follows. If the price index used to correct for inflation has wheat as a major component of its basket, then it will be difficult to tell whether a change in the price of wheat represents a change in relative prices, or is merely part of a change in general prices. We would expect farmers to react to the former by increasing supply, but not necessarily to the latter. For a deeper discussion of the issues, see Peterson&Tomek.

i. What would you expect to change in the appearance of your graphfor part a. if you deflated wheat prices using a price index that was strongly correlated with the price of wheat? (That is, that is high when the price of wheat is high, and low when the price of wheat is low, regardless of what's happening to other prices.) Explain briefly.

ii. Plot British wheat prices against the British price index until 1900 (or until 1855, if doing it by hand). This should be a scatter plot with shillings/quarter on the horizontal axis, and the British price index on the vertical axis. Calculate the R2 value for this series (in Excel, create a trendline and ask that the R2 be printed on the graph). I've done the same thing for the Chicago prices and the American price index, so that you may compare the two. Which of the two regions shows higher correlation between wheat prices and the price index - Britain or Chicago?Explain briefly.

3. [Research] In this question, you are asked to perform a (forward) citation search using Google Scholar. A forward citation search finds articles that include the article you are looking up in their lists of references. This can be very useful to find what the latest research is on a controversial topic, or if you are confident that any paper about the topic you are researching will be certain to cite a certain ‘classic' paper.

Pick ONE of the following two articles to use as the basis of the search:

• Edward J. Chambers and Donald F. Gordon, "Primary Products and Economic Growth: An Empirical Measurement," Journal of Political Economy, Vol. 74, 1966, pp. 315 - 332.

o If you pick this one, you'll be investigating later research on the importance of the wheat boom to Canada's economy.

• C. Knick Harley, "Transportation, the world wheat trade, and the Kuznets Cycle, 1850 - 1913," Explorations in Economic History, Vol. 17, 1980, pp. 218 - 250.

o If you pick this one, you'll be investigating later research on the convergence of wheat prices in the 19th and early 20th century.

a. For this section, you will find an article published since 1981 that advances the topic under study (impact of the wheat boom or price convergence). Start by going to http://scholar.google.ca . It's best to do this with a university connection, or at home while connected to the university via VPN. (It will make more articles available to you for free.)

i. Type your article's name into the search bar, and hit enter or click on the magnifying glass.

ii. You should see your article show up. At the bottom of its summary, you'll see ‘Cited by [Number]'. Click on that. It will take you to a list of articles that have referenced the one you looked up.

iii. Under ‘Any Time', click on ‘Custom Range' and set the date range to 1981 - 2017, then hit ‘Search'.

iv. To narrow things down, let's find articles that reference wheat. Click the square next to ‘Search within citing articles' at the top of the list. Enter ‘wheat' in the main search bar at the top of the page and hit enter or click on the magnifying glass.

v. Look through the summaries until you find an article that is available at UVic (these will usually have a [PDF] link next to them, or a Get This @UVic) and relevant to the topic you are looking up. For the first article, this will be the impact of the wheat boom on the Canadian economy. For the second, this will be the convergence of wheat prices around the turn of the 20th century. (Hint: Feel free to refine your search using additional terms such as ‘convergence', ‘boom' or ‘Canada' if you are still feeling overwhelmed.)

vi. Cite the article you have found (the TA has to be able to look it up easily), and briefly explain why you chose it.

b. Briefly explain the contribution that the article makes to the topic under discussion.

You're not expected to read the whole article - it's probably enough to get the information from the abstract, or to skim the introduction and conclusion.

For example, if you chose the second article, your answer might be along the lines of, "The article I chose says that reduced transaction costs in the form of less grain-related British government regulations and paperwork were just as important as technological advances in advancing price convergence of wheat between 1846 and 1857. Both reduced the cost of transporting wheat from Winnipeg to Liverpool, as shown in a recently discovered data set."

Useful References (UVic connection or VPN needed for free access)

Question 1

Edward J. Chambers and Donald F. Gordon, "Primary Products and Economic Growth: An Empirical Measurement," Journal of Political Economy, Vol. 74, 1966, pp. 315 - 332.

Available at http://www.jstor.org/stable/1829150

Frank Lewis, "The Canadian Wheat Boom and Per Capita Income: New Estimates," Journal of Political Economy, Vol. 83, 1975, pp. 1249 - 1257.

Available at http://www.jstor.org/stable/1830860

Gordon W. Bertram, "The Relevance of the Wheat Boom in Canadian Economic Growth," The Canadian Journal of Economics, Vol. 6, 1973, pp. 545 - 566.

Available at http://www.jstor.org/stable/134090

Geoff McIntyre, "When is Farming Not Farming?", MPN, October 27, 2011. http://www.mnp.ca/en/posts/when-is-farming-not-farming

John Phair, "Panel members favour renting over share-cropping," todaysfarmer.ca, December 30, 2010. http://www.todaysfarmer.ca/2010/12/30/panel-members-favour-renting-over-share-cropping

Grant Diamond, "Share cropping: is it farm or rental income?", The Western Producer, February 4th, 2016. http://www.producer.com/2016/02/share-cropping-is-it-farm-or-rental-income/

Question 2

C. Knick Harley, "Transportation, the world wheat trade, and the Kuznets Cycle, 1850 - 1913," Explorations in Economic History, Vol. 17, 1980, pp. 218 - 250.

Available at http://www.sciencedirect.com/science/article/pii/001449838090011X

Anonymous, "Tax Incidence: How the Tax Burden is Shared between Buyers and Sellers," thismatter.com, http://thismatter.com/economics/tax-incidence.htm

E. T. Collins, "Dietary Change and Cereal Consumption in Britain in the Nineteenth Century," The Agricultural History Review, Vol. 23, 1975, pp. 97 - 115.

Available at http://www.jstor.org/stable/40273664

Jennifer K. Bond and Olga Liefert, "Wheat's Role in the U.S. Diet," USDA Economic Research Service, October 26, 2016.

Available at https://www.ers.usda.gov/topics/crops/wheat/wheats-role-in-the-us-diet/

George Fisher, The Instructor, or, Young Man's Best Companion, T. Martin & Co., London, 1810.

1811 edition archived at https://archive.org/details/instructororyou00accgoog

HikaruHanawa Peterson and William G. Tomek, "Implications of Deflating Commodity Prices for Time-Series Analysis," Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management, 2000, No. 18944.

Archived at http://purl.umn.edu/18944

Question 3

Edward J. Chambers and Donald F. Gordon, "Primary Products and Economic Growth: An Empirical Measurement," Journal of Political Economy, Vol. 74, 1966, pp. 315 - 332.

Available at http://www.jstor.org/stable/1829150

C. Knick Harley, "Transportation, the world wheat trade, and the Kuznets Cycle, 1850 - 1913," Explorations in Economic History, Vol. 17, 1980, pp. 218 - 250.

Available at http://www.sciencedirect.com/science/article/pii/001449838090011X

DATA APPENDIX (BY HAND FIGURES ONLY, SEE EXCEL SHEET FOR FULL SERIES)

Article: THE JOURNAL OF POLITICAL ECONOMY: PRIMARY PRODUCTS AND ECONOMIC GROWTH AN EMPIRICAL MEASUREMENT* by EDWARD J. CHAMBERS AND DONALD F. GORDON.

Attachment:- Attachments.rar