Empire Effect 291 Older research on financial investment in the age of high imperialism looked only at raw yield data,thus leaving open the possibility that lower colonial spreads were a function of better economic "fundamentals" rather than the explicit or implicit guarantees to investors stemming from empire membership.The only way to say for sure that there was an em- pire effect is therefore to regress yield spreads against an appropriate range of additional control variables.The obvious question is which vari- ables to include.In our view,there are powerful methodological objec- tions to the inclusion of anachronistic indicators such as debt to GDP ra- tios.32 Self-evidently,people usually do not base their actions upon concepts that have not yet been invented or upon figures nobody yet cal- culates.33 Rather,if we want to determine how nineteenth-century inves- tors made their decisions,we need to model their behavior deductively on the basis of the data that were available to them at that time.34 The economic data were collected from primary and secondary sources.5 As anyone familiar with the financial press of the period knows, there was a plethora of publications available to investors.Standard refer- ence publications such as Fenn's Compendium,the Investor's Monthly Manual (henceforth IMM),the Stock Exchange Weekly Intelligence and the Corporation of Foreign Bondholders Annual Reports collected and ana- lyzed statistical data on government borrowers in a manner not unlike that of the handbooks on equity investments pioneered by Moody's in the United States.In addition to this dedicated financial press,there was a rap- idly growing number of more general statistical publications.3 31 See Davis and Huttenback,Mammon;and Edelstein,Overseas Investment and"Imperialism." 32 Bordo and Rockoff,"Gold Standard";and Obstfeld and Taylor,"Sovereign Risk." 3This point was advanced in Ferguson and Batley,"Event Risk"and in Ferguson,Cash Nexus,pp.285f.For a more recent development of this theme,see Flandreau and Zumer,Mak- ing ofGlobal Finance,pp.30-35. This is a practical as well as methodological issue.A lot of financial investment went to countries for which no modern GDP reconstructions exist.A more practical problem discussed in greater detail in Schularick,"Two Globalizations,"is the limited comparability of the GDP reconstructions. 35 Special gratitude is due to Trish Kelly,Peabody College,Vanderbilt University,for sharing unpublished data collected from the Corporation of Foreign Bondholders'Annual Reports.Addi- tional data were gathered from historical collections,mainly from the three volumes by Mitchell, Historical Statistics,if the figures were also available to historical investors.For some indicators, we made use of Arthur Banks's Cross-National Time Series Database.Professor Banks confirmed to us in mail correspondence that all pre-1913 indicators we used for our study were originally collected from The Statesman's Yearbook.For some countries,we were happy to rely on material collected by Michael Bordo,Chris Meissner,Maurice Obstfeld,Hugh Rockoff,Nathan Sussman, and Alan Taylor.Despite this collective effort,some gaps in the dataset remained. 36 Having spent considerable time on the collection of late-nineteenth and early-twentieth- century economic data,we found the quantity of indicators available to contemporary investors to be less of a problem than their mixed quality.Indeed,for most countries we found more than one series for the same indicator.Although it was rare that two series turned out to be com- pletely incompatible,differences of the order of 10 percent were not uncommon.The story theEmpire Effect 291 Older research on financial investment in the age of high imperialism looked only at raw yield data, thus leaving open the possibility that lower colonial spreads were a function of better economic “fundamentals” rather than the explicit or implicit guarantees to investors stemming from empire membership.31 The only way to say for sure that there was an em￾pire effect is therefore to regress yield spreads against an appropriate range of additional control variables. The obvious question is which vari￾ables to include. In our view, there are powerful methodological objec￾tions to the inclusion of anachronistic indicators such as debt to GDP ra￾tios.32 Self-evidently, people usually do not base their actions upon concepts that have not yet been invented or upon figures nobody yet cal￾culates.33 Rather, if we want to determine how nineteenth-century inves￾tors made their decisions, we need to model their behavior deductively on the basis of the data that were available to them at that time.34 The economic data were collected from primary and secondary sources.35 As anyone familiar with the financial press of the period knows, there was a plethora of publications available to investors. Standard refer￾ence publications such as Fenn’s Compendium, the Investor’s Monthly Manual (henceforth IMM), the Stock Exchange Weekly Intelligence and the Corporation of Foreign Bondholders Annual Reports collected and ana￾lyzed statistical data on government borrowers in a manner not unlike that of the handbooks on equity investments pioneered by Moody’s in the United States. In addition to this dedicated financial press, there was a rap￾idly growing number of more general statistical publications.36 31 See Davis and Huttenback, Mammon; and Edelstein, Overseas Investment and “Imperialism.” 32 Bordo and Rockoff, “Gold Standard”; and Obstfeld and Taylor, “Sovereign Risk.” 33 This point was advanced in Ferguson and Batley, “Event Risk”; and in Ferguson, Cash Nexus, pp. 285f. For a more recent development of this theme, see Flandreau and Zumer, Mak￾ing of Global Finance, pp. 30–35. 34 This is a practical as well as methodological issue. A lot of financial investment went to countries for which no modern GDP reconstructions exist. A more practical problem discussed in greater detail in Schularick, “Two Globalizations,” is the limited comparability of the GDP reconstructions. 35 Special gratitude is due to Trish Kelly, Peabody College, Vanderbilt University, for sharing unpublished data collected from the Corporation of Foreign Bondholders’ Annual Reports. Addi￾tional data were gathered from historical collections, mainly from the three volumes by Mitchell, Historical Statistics, if the figures were also available to historical investors. For some indicators, we made use of Arthur Banks’s Cross-National Time Series Database. Professor Banks confirmed to us in mail correspondence that all pre-1913 indicators we used for our study were originally collected from The Statesman’s Yearbook. For some countries, we were happy to rely on material collected by Michael Bordo, Chris Meissner, Maurice Obstfeld, Hugh Rockoff, Nathan Sussman, and Alan Taylor. Despite this collective effort, some gaps in the dataset remained. 36 Having spent considerable time on the collection of late-nineteenth and early-twentieth￾century economic data, we found the quantity of indicators available to contemporary investors to be less of a problem than their mixed quality. Indeed, for most countries we found more than one series for the same indicator. Although it was rare that two series turned out to be com￾pletely incompatible, differences of the order of 10 percent were not uncommon. The story the