nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2016‒09‒04
24 papers chosen by

  1. History of the Federal Reserve Board Statistical Releases By Gisela Rua; Sian L. Seldin
  2. The business cycle in historical perspective: Reconstructing quarterly data on Swedish GDP 1913-2014 By Edvinsson, Rodney; Hegelund, Erik
  3. The Economic Consequences of the 1953 London Debt Agreement By Gregori Galofré-Vilà; Martin McKee; Christopher M. Meissner; David Stuckler
  4. Who Should Own and Control Urban Water Systems? Historical Evidence from England and Wales By Brian Beach; Werner Troesken; Nicola Tynan
  5. Decision-Making by Precedent and the Founding of American Honda (1948 - 1974) By Ramon Casadesus-Masanell; John Heilbron
  6. Historicizing Entrepreneurial Imprinting: Sensitive Periods, Cognitive Frames and Resistance By Giovanni Favero; Vladi Finotto; Anna Moretti
  7. A global corporate census: publicly traded and close companies in 1910 By Leslie Hannah
  8. The Economic Impact of Universities: Evidence from Across the Globe By Valero, Anna; Van Reenen, John
  9. The Global Demography of Aging: Facts, Explanations, Future By Bloom, David E.; Luca, Dara Lee
  10. Las políticas del Banco de la República durante un auge entre dos crisis, 1930-1951. By Juliana Jaramillo-Echeverri.; Adolfo Meisel-Roca.
  11. La Gran Depresión en Colombia: Un estímulo a la industrialización, 1930-1953. By Juliana Jaramillo-Echeverri.; Adolfo Meisel-Roca.; María Teresa Ramírez-Giraldo.
  12. Common law and the origin of shareholder protection By Acheson, Graeme G.; Campbell, Gareth; Turner, John D.
  13. Muy tarde pero rentables: Los ferrocarriles en Colombia durante el período1920-1950. By Adolfo Meisel Roca; María Teresa Ramírez G.; Juliana Jaramillo E.
  14. Housing prices, mortgage interest rates and the rising share of capital income in the United States By Gianni La Cava
  15. The Visible Hand: The Role of Government in China’s Long-Awaited Industrial Revolution By Fortier, George E.; Wen, Yi
  16. Rumors and Runs in Opaque Markets: Evidence from the Panic in 1907 By Caroline Fohlin; Thomas Gehrig; Marlene Haas
  17. Causal Change Detection in Possibly Integrated Systems: Revisiting the Money-Income Relationship By Shuping Shi; Stan Hurn; Peter C B Phillips
  18. Spatial and social distance in the fertility transition: Sweden 1880-1900 By Sebastian Klüsener; Martin Dribe; Francesco Scalone
  19. Beyond the personal-anonymous divide: Agency relations in powers of attorney in France, 18th–19th centuries By Fabien Eloire; Claire Lemercier; Veronica Aoki Santarosa
  20. Institutions Without Culture. A Critique of Acemoglu and Robinson's Theory of Economic Development By Joanna Dzionek-Kozlowska; Rafal Matera
  21. Trickle-Down Ethnic Politics: Drunk and Absent in the Kenya Police Force (1957-1970) By Oliver Vanden Eynde; Alexander Moradi; Patrick M. Kuhn
  22. The Long-Run Evolution of the Financial Sector By Laura Veldkamp; Maryam Farboodi
  23. The Rise and Fall of Unions in the United States By Emin Dinlersoz; Jeremy Greenwood
  24. What is the Contribution of Intra-household Inequality to Overall Income Inequality? Evidence from Global Data, 1973-2013 By Deepak Malghan; Hema Swaminathan

  1. By: Gisela Rua; Sian L. Seldin
    Abstract: Print{{p}}March 4, 2016{{p}}History of the Federal Reserve Board Statistical Releases{{p}}Gisela Rua and Sian L. Seldin1{{p}}Soon after the creation of the Federal Reserve System in 1913, the Board of Governors started publishing extensive statistical data on{{p}}the United States economy and its banking system. This early statistical work, which preceded the U.S. national accounts, has{{p}}continued through today. In this note, we describe the history of the Federal Reserve Board statistical publications presented in FEDS{{p}}Paper 2016-016.{{p}}While the Board of Governors has published extensive data on a continuous basis over the last century, this information has been made{{p}}available to the public in various formats. In the early years of the Federal Reserve, statistical data were published either as individual{{p}}releases or as part of the monthly Federal Reserve Bulletin. Some of these data were then compiled in the Board's annual reports. Later{{p}}on, the Board gathered its major series relating to banking, monetary, and financial developments--including revisions to previously{{p}}published data--in two volumes, Banking and Monetary Statistics 1914-1941and 1941-1970. These volumes made it easier for{{p}}researchers to find, in one convenient location, data that had previously been published in various places and formats. Between 1970{{p}}and 2000, the Board continued to assemble and update its most important series in a single volume, called the Annual Statistical Digest{{p}}from 1970 to 1995 and the Statistical Digest from 1996 to 2000. The Digest included even more series than the Banking and Monetary{{p}}Statistics. More recently, with widespread usage of the Internet, statistical releases have been published at the Board's public website.{{p}}Additionally, at the time of the Federal Reserve's centennial celebration, the Federal Reserve Archival System for Economic Research{{p}}(FRASER) made publicly available an extensive collection of the Board's statistical releases in digital format. The work presented in{{p}}FEDS Paper 2016-016 uses all these historical publications and other information to trace down the titles and release numbers of the{{p}}statistical data published by the Board of Governors since 1914.{{p}}The majority of the Board's statistical releases are numbered, using an alphanumeric reference, such as C.7.3 or G.17.2 While we are{{p}}not aware of any written record describing the reasons for choosing specific release numbers, some seem to follow a particular pattern.{{p}}For instance, the statistical releases with numbers that start with the letter "E" are generally published on a quarterly or semiannual{{p}}frequency, those that start with the letter "G" are generally monthly, and those starting with "H" are generally weekly. Before 1946, the{{p}}Board of Governors used a different nomenclature for numbering its releases: "B" or "FR," followed by a number.{{p}}In addition to the nomenclature change in 1946, most of the Board's statistical releases have experienced various other changes in their{{p}}titles and numbers over time. For example, as depicted in figure 1, today's G.17 statistical release (Industrial Production and Capacity{{p}}Utilization) resulted from the merger of two previous releases in 1990, G.12.3 (Industrial Production) and G.3 (Capacity Utilization,{{p}}Manufacturing, Mining, Utilities and Industrial Materials). Moreover, the G.12.3 release itself had resulted from the merger of G.12.2{{p}}(National Summary of Business Conditions) and G.12.3 (Business Indexes) in 1973. Furthermore, before 1976, the data in the G.3{{p}}release were published under the number E.5 and with a slightly different title.3 Such information about the G.17 release--and many{{p}}other releases--that is presented in FEDS Paper 2016-016 provides useful guidance for the researcher or librarian interested in finding{{p}}the official releases containing both the published data and accompanying text. Of course, not all statistical releases are as hard to{{p}}trace. For example, from 1946 to the present, the H.4.1 release has kept the same release number and seen only small changes to its{{p}}title.{{p}}Figure 1. G.17 Statistical Release{{p}} FRB: FEDS Notes: History of the Federal Reserve Board Statistical Releases{{p}}1 of 4 3/4/2016 11:50 AM{{p}}Accessible Version{{p}}The work presented in the FEDS paper also reveals an interesting pattern in the Board's publications over time. The solid line in figure 2{{p}}displays the volume of numbered statistical releases published by the Board of Governors since its creation. From 1914 to the 1960s,{{p}}the Board gradually added new statistical releases to its portfolio, and the general tendency seems to have been for the Board to{{p}}increase its statistical reporting services. However, from the 1960s to the present, the volume of statistical releases has gradually{{p}}decreased. While part of this decline reflects the discontinuance of several statistical releases, which resulted in data no longer being{{p}}made available to the public, there are other reasons for the observed decline. First, in this period, the Board transferred some of its{{p}}statistical reporting responsibilities to Federal Reserve Banks and other government agencies. For example, between 1964 and 1966,{{p}}the preparation of weekly, monthly, and annual statistical data on department store sales (C.7.3, G.7.2, G.7.3, and H.8b) was transferred{{p}}to the Census Bureau.4 Second, the Board discontinued statistical releases that included data already being provided by another{{p}}agency. For example, in June 1978, the Board explained that it was no longer publishing the G.8 release (Index Numbers of Wholesale{{p}}Prices) because most of the data was being provided and published by the Bureau of Labor Statistics and the Department of{{p}}Agriculture.5 Third, the Board merged many existing statistical releases into single publications, similar to the G.17 example given{{p}}above. We looked at a few of these mergers, and it seems that the resulting publications incorporated most of the data that were{{p}}previously included in the merged releases.6 As shown by the dashed line in figure 2, if we adjust the volume of numbered statistical{{p}}releases to account for these three situations, the reduction in the amount of data made available to the public by the Board of{{p}}Governors, though still present, was somewhat smaller.7{{p}}Figure 2. Numbered Statistical Releases, 1914-2015{{p}} FRB: FEDS Notes: History of the Federal Reserve Board Statistical Releases{{p}}2 of 4 3/4/2016 11:50 AM{{p}}Accessibility Contact Us Disclaimer Website Policies FOIA PDF Reader{{p}}Accessible Version{{p}}To conclude, in this note we have used the list of statistical publications presented in FEDS Paper 2016-016 to highlight some aspects of{{p}}the history of the Federal Reserve Board's statistical releases. We direct interested readers to the paper, especially those looking to{{p}}track down the Board's statistical publications through history.{{p}}1. We are grateful to Adrian Hamins-Puertolas for his assistance with this note. Return to text{{p}}2. In FEDS Paper 2016-016, these are listed in the section "Numbered Releases." Although the Board of Governors has also published unnumbered statistical{{p}}releases and surveys, the list provided in the FEDS paper section entitled "Unnumbered Releases" is not exhaustive. It focuses only on the unnumbered{{p}}statistical releases that are still being published by the Board of Governors; it therefore excludes all unnumbered statistical releases that have been{{p}}discontinued. Return to text{{p}}3. It would be very interesting to know why these changes occurred, but we have not found any written record of the decision process. Return to text{{p}}4. Board of Governors of the Federal Reserve System (U.S.). "August 10, 1965 announcement," C.7.3 Department Store Trade, United States (August 10,{{p}}1965). Other examples are the releases E.15 and E.16. Return to text{{p}}5. Board of Governors of the Federal Reserve System (U.S.). "June 23, 1978," G.8 Index Numbers of Wholesale Prices (June 23, 1978). Return to text{{p}}6. Sources: Board of Governors of the Federal Reserve System, "February 5, 1976," E.4 Automobile Credit (February 5, 1976); "April 17, 1990," G.17{{p}}Industrial Production and Capacity Utilization (April 17, 1990); "November 6, 1969: Changes in Bank Debits Release," G.6 Debits and Deposit Turnover at{{p}}Commercial Banks (November 6, 1969); and "November 12, 1970," G.20 Finance Companies (November 12, 1970). Return to text{{p}}7. The adjusted volume of statistical releases continues to count releases that are merged into a single release, were transferred to another agency, or were{{p}}discontinued because the data was already being provided by another agency. Return to text{{p}}Please cite this note as:{{p}}Rua, Gisela, and Sian L. Seldin (2016). "History of the Federal Reserve Board Statistical Releases," FEDS Notes. Washington: Board of{{p}}Governors of the Federal Reserve System, March 4, 2016,{{p}} Disclaimer: FEDS Notes are articles in which Board economists offer their own views and present analysis on a range of topics in{{p}}economics and finance. These articles are shorter and less technically oriented than FEDS Working Papers.{{p}}Last update: March 4, 2016{{p}}Home | Economic Research & Data{{p}} FRB: FEDS Notes: History of the Federal Reserve Board Statistical Releases{{p}}3 of 4 3/4/2016 11:50 AM{{p}} FRB: FEDS Notes: History of the Federal Reserve Board Statistical Releases{{p}}4 of 4 3/4/2016 11:50 AM
    Date: 2016–03–04
  2. By: Edvinsson, Rodney (Dept. of Economic History, Stockholm University); Hegelund, Erik (Dept. of Economic History, Stockholm University)
    Abstract: Although historical national accounts for Sweden belong to the most detailed in the world, hitherto no quarterly series of Sweden GDP has been published for the period before the 1960s. In this paper we present such a series back to 1913, using higher frequency series on manufacturing and private consumption as indicators, and standard methods for temporal disaggregation from annual GDP data. By applying the JDemetra+ software, we also estimate a deseasonalized volume time series. Based on this new quarterly data and the Bry-Boschan algorithm to identify peaks and troughs we present different chronologies of the classical business cycle in Sweden, indicating a somewhat new and more precise picture of the economic development for the last 100 years. We find that the new series provides new information on the business cycle, confirming its very irregular nature and detecting recessions that are not clearly indicated by annual data.
    Keywords: Quarterly GDP; Temporal disaggregation; Business cycles; Sweden
    JEL: N14
    Date: 2016–08–26
  3. By: Gregori Galofré-Vilà; Martin McKee; Christopher M. Meissner; David Stuckler
    Abstract: In 1953 the Western Allied powers implemented a radical debt-relief plan that would, in due course, eliminate half of West Germany’s external debt and create a series of favourable debt repayment conditions. The London Debt Agreement (LDA) correlated with West Germany experiencing the highest rate of economic growth recorded in Europe in the 1950s and 1960s. In this paper we examine the economic consequences of this historical episode. We use new data compiled from the monthly reports of the Deutsche Bundesbank from 1948 to the 1960s. These reports not only provide detailed statistics of the German finances, but also a narrative on the evolution of the German economy on a monthly basis. These sources also contain special issues on the LDA, highlighting contemporaries’ interest in the state of German public finances and public opinion on the debt negotiation. We find evidence that debt relief in the LDA spurred economic growth in three main ways: creating fiscal space for public investment; lowering costs of borrowing; and stabilising inflation. Using difference-in-differences regression models comparing pre- and post-LDA years, we find that the LDA was associated with a substantial rise in real per capita social expenditure, in health, education, housing, and economic development, this rise being significantly over and above changes in other types of spending that include military expenditure. We further observe that benchmark yields on long-term debt, an indication of default risk, dropped substantially in West Germany when LDA negotiations began in 1951 and then stabilised at historically low rates after the LDA was ratified. The LDA coincided with new foreign borrowing and investment, which in turn helped promote economic growth. Finally, the German currency, the deutschmark, introduced in 1948, had been highly volatile until 1953, after which time we find it largely stabilised.
    JEL: E62 E65 N44
    Date: 2016–08
  4. By: Brian Beach; Werner Troesken; Nicola Tynan
    Abstract: Nearly 40% of England’s privately built waterworks were municipalised in the late 19th century. We examine how this affected public health by pairing annual mortality data for over 600 registration districts, spanning 1869 to 1910, with detailed waterworks information. Identification is aided by both institutional hurdles and idiosyncratic delays in the municipalisation process. Municipalisation lowered deaths from typhoid fever, a waterborne disease, by nearly 20% but deaths from non-waterborne causes were unaffected. Results are also robust to the adoption of several strategies that control for the possibility of mean reversion and other potential confounds.
    JEL: H51 H54 I18 N13
    Date: 2016–08
  5. By: Ramon Casadesus-Masanell (Harvard Business School, Strategy Unit); John Heilbron (Harvard Business School)
    Abstract: American Honda was founded in 1959 as a wholly owned subsidiary of the Honda Motor Company to facilitate sales and distribution in the United States. The details of American Honda's early history have long served as evidence in debates among scholars and practitioners about the managerial determinants of the subsidiary's success. In particular, it is debated whether American Honda operated according to a deliberate or emergent strategy, i.e. whether or not strategic decisions made in the States conformed to the intentions of upper management. This paper presents evidence that Kihachiro Kawashima, President of American Honda from 1959 to 1965, made important decisions according to precedent set by his boss and mentor, Honda's chief strategist, Takeo Fujisawa. It presents further evidence that these decisions may have contributed to the recovery of American Honda from its sales crisis during the late 1960s and its continued success thereafter. Addressing ourselves to concepts in the management literature, we argue that strategy realized by the appeal of subordinates to the historical precedent of their superiors defies categorization as deliberate or emergent.
    Date: 2016–08
  6. By: Giovanni Favero (Dept. of Management, Università Ca' Foscari Venice); Vladi Finotto (Dept. of Management, Università Ca' Foscari Venice); Anna Moretti (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: Literature in strategy and entrepreneurship resorted to the concept of imprinting to explain the resilience of firmsÕ traits. Nonetheless, it assumed such a process is at work rather than aiming at its explanation. This article advances a conceptual framework based on three main building blocks - cognitive frame, resource mobilization, and resisting entrepreneurs - combined in a historical perspective, overcoming the existing generalized confusion about "what to study" and "how to study" in the investigation of entrepreneurial imprinting. We offer an original definition of the imprints and a dynamic view based on resistance investigating the replication, substitution, and re-negotiation of imprints in time. The contribution of the present work is twofold: on the one side, it contributes to the ongoing debate on entrepreneurial imprinting by closing some of the gaps that characterized previous literature on the subject, and offering an innovative bridging between imprinting and resistance; on the other side, it answers to the recent call for a deeper integration between historical approaches and entrepreneurship literature.
    Keywords: Entrepreneurial imprinting, Cognitive frames, Resistance, Historical approach, Interpretive process
    JEL: L26 N01 M14
    Date: 2016–08
  7. By: Leslie Hannah
    Abstract: In 1910 the world had almost half a million corporations, only one-hundredth of today's total. About one-fifth—with over half of corporate capital—were publicly tradable, higher portions than today. Most publicly quoted corporations traded in Europe and the British Empire, but most close (private) corporations operated in the US, which, until the 1940s, had more corporations per capita than anywhere else. The 83 countries surveyed here differed markedly in company numbers, corporate capital/GDP ratios, and average corporate size. Enclave economies—dominated by quoted (and often foreign-owned) companies—had the largest average sizes, while other nations had more varied mixes of large quoted corporations and close company small and medium enterprises.
    JEL: N0 L81
    Date: 2015–08–21
  8. By: Valero, Anna; Van Reenen, John
    Abstract: We develop a new dataset using UNESCO source materials on the location of nearly 15,000 universities in about 1,500 regions across 78 countries, some dating back to the 11th Century. We estimate fixed effects models at the sub-national level between 1950 and 2010 and find that increases in the number of universities are positively associated with future growth of GDP per capita (and this relationship is robust to controlling for a host of observables, as well as unobserved regional trends). Our estimates imply that doubling the number of universities per capita is associated with 4% higher future GDP per capita. Furthermore, there appear to be positive spillover effects from universities to geographically close neighboring regions. We show that the relationship between growth and universities is not simply driven by the direct expenditures of the university, its staff and students. Part of the effect of universities on growth is mediated through an increased supply of human capital and greater innovation (although the magnitudes are not large). We find that within countries, higher historical university presence is associated with stronger pro-democratic attitudes.
    Keywords: growth; Human Capital; innovation; Universities
    JEL: I23 I25 J24 O10 O31
    Date: 2016–08
  9. By: Bloom, David E. (Harvard University); Luca, Dara Lee (Mathematica Policy Research)
    Abstract: Population ageing is the 21st century's dominant demographic phenomenon. Declining fertility, increasing longevity, and the progression of large-sized cohorts to the older ages are causing elder shares to rise throughout the world. The phenomenon of population ageing, which is unprecedented in human history, brings with it sweeping changes in population needs and capacities, with potentially significant implications for employment, savings, consumption, economic growth, asset values, and fiscal balance. This chapter provides a broad overview of the global demography of aging. It reviews patterns, trends, and projections involving various indicators of population aging and their demographic antecedents and sequelae. The chapter also reviews theories economists use to explain the behavioral changes driving the most prominent demographic shifts. Finally, it discusses the changing nature of aging, the future of longevity, and associated policy implications, highlighting some key research issues that require further examination.
    Keywords: population aging, economic demography, longevity
    JEL: J11 J14 N30
    Date: 2016–08
  10. By: Juliana Jaramillo-Echeverri.; Adolfo Meisel-Roca.
    Abstract: Entre 1930 y 1951 Colombia enfrentó grandes cambios y diversos choques económicos internos y externos. Este artículo estudia la política monetaria del Banco de la República y las nuevas funciones que adquirió durante esa época, dentro de las que se cuentan la administración de las salinas y las minas de esmeraldas. Por el lado de la contribución cultural se destaca su aporte por medio de la apertura de la biblioteca del Banco y el Museo del Oro. Pese a las crisis que tuvo que afrontar, el balance de la economía colombiana de este periodo fue positivo, sobre todo en el contexto de una desaceleración de la economía mundial y regional. Ese resultado se basó, en gran parte, en el buen desempeño de las exportaciones y el cambio estructural que representó la industrialización por sustitución de importaciones. Classification JEL: E31, E42, E58.
    Keywords: Banco de la República, Colombia, política monetaria.
    Date: 2016–01
  11. By: Juliana Jaramillo-Echeverri.; Adolfo Meisel-Roca.; María Teresa Ramírez-Giraldo.
    Abstract: Este trabajo analiza el papel de los factores que determinaron la rápida industrialización del período 1934-1953. Se concluye que después de 1934 el mercado impulsó la industrialización a través de la reducción de costos, la generación de economías de escala, el desarrollo del aprendizaje por medio de la práctica, las economías de aglomeración y la transformación tecnológica. Se examina la estructura de la industria manufacturera colombiana en 1945, que fue el resultado de la profunda transformación económica que tuvo lugar en la década anterior. Las estimaciones de una función de producción para la industria en 1945 evidencian diferencias importantes en las elasticidades factoriales y la productividad entre sectores y regiones. Los resultados indican que la productividad de la mano de obra está positivamente relacionada con el nivel de capital humano y físico, mientras la antigüedad de las firmas se asocia con bajos niveles de la misma.
    Keywords: Industrialización, Gran Depresión, industria impulsada por el mercado, Colombia. Classification JEL:N1, N66, O14.
    Date: 2016–01
  12. By: Acheson, Graeme G.; Campbell, Gareth; Turner, John D.
    Abstract: This paper examines the origins of investor protection under the common law by analysing the development of shareholder protection in Victorian Britain, the home of the common law. In this era, very little was codified, with corporate law simply suggesting a default template of rules. Ultimately, the matter of protection was one for the corporation and its shareholders. Using c. 500 articles of association and ownership records of publicly-traded Victorian corporations, we find that corporations afforded investors with just as much protection as is present in modern corporate law and that firms with better shareholder protection had more diffuse ownership.
    Keywords: law and finance,ADRI,shareholder protection,corporate ownership,common law
    JEL: G32 G34 G38 K22 N23 N43 N83
    Date: 2016
  13. By: Adolfo Meisel Roca; María Teresa Ramírez G.; Juliana Jaramillo E.
    Abstract: Durante la década de los años veinte, la economía colombiana experimentó la mayor tasa de crecimiento de su historia. Las reformas económicas efectuadas en 1923 (el banco central, el patrón oro, la legislación bancaria, la reorganización fiscal), el auge del café, y la afluencia sin precedentes de capital extranjero fueron las fuerzas impulsoras detrás de este éxito. En esa década, el país recibió 25 millones de dólares de los Estados Unidos por concepto de indemnización por su papel en la separación de Panamá de Colombia. Además, las reformas y el crecimiento de las exportaciones de café permitieron un enorme aumento de los préstamos extranjeros. El valor de los préstamos obtenidos hasta 1929 ascendió a 257 millones de dólares. Tales fondos se utilizaron principalmente para la construcción de infraestructura pública, en particular los ferrocarriles. Aproximadamente el 45% de los préstamos extranjeros durante ese período fueron invertidos en la construcción de ferrocarriles. Dieciséis de los 25 millones de dólares recibidos por concepto de reparación por Panamá también se invirtieron en ferrocarriles. En el presente estudio, se estima la tasa global de retorno y las tasas internas de retorno para cada uno de los ferrocarriles existente en esa época. Para estos cálculos, se tiene en cuenta que Colombia en realidad pagó sólo el 85% de los préstamos que obtuvo en la década de los años veinte, debido a los efectos de la Gran Depresión y la suspensión de pagos de la deuda externa. Las tasas de rendimiento de los ferrocarriles construidos y ampliados en la década de los años veinte fueron comparables a las obtenidas por los países europeos en el siglo XIX. Classification JEL: N26, N76, O16, O1.
    Keywords: tasa de rentabilidad, inversión, ferrocarriles, deuda externa, Colombia.
    Date: 2014–10
  14. By: Gianni La Cava
    Abstract: Piketty (2014) documents how the share of aggregate income going to capital in the United States has risen in the post-war era. Rognlie (2015) has since shown that this is largely due to the housing sector. This paper explores the determinants of the secular rise in the share of housing capital income (or 'rental income') in the US economy. I first decompose the aggregate national accounts by geographic region and also by type of housing. I then exploit variation across US states in factors that could explain housing capital income, such as interest rates, housing prices and income growth. The analysis shows that the long-run increase in the aggregate share of housing capital income is mainly due to higher imputed rental income going to owner-occupiers. I also find evidence that the rise in the share of housing capital income over recent decades reflects a combination of: 1) lower real interest rates; 2) lower consumer price inflation; and 3) constraints on the supply of new housing in some large US cities. In effect, the paper documents that the fall in nominal interest rates over the 1980s and 1990s raised the demand for housing and pushed up housing prices and rents (relative to non-housing prices) in supply-constrained areas. I estimate that the long-term decline in interest rates can explain more than half the increase in the share of nominal income spent on housing since the early 1980s.
    Keywords: interest rates, housing prices, housing supply, imputed rent, inequality
    Date: 2016–07
  15. By: Fortier, George E. (Federal Reserve Bank of St. Louis); Wen, Yi (Federal Reserve Bank of St. Louis)
    Abstract: China is undergoing its long-awaited industrial revolution. There is no shortage of commentary and opinion on this dramatic period, but few have attempted to provide a coherent, in-depth, political economic framework that explains the fundamental mechanisms behind China’s rapid industrialization. This article reviews the New Stage Theory of economic development put forth by Wen (2016a). It illuminates the critical sequence of developmental stages since the reforms enacted by Deng Xiaoping in 1978: namely, small-scale commercialized agricultural production, proto-industrialization in the countryside, a formal industrial revolution based on mass production of labor-intensive light consumer goods, a sustainable “industrial trinity” boom in energy/motive power/infrastructure, and a second industrial revolution involving the mass production of heavy industrial goods. This developmental sequence follows essentially the same pattern as Great Britain’s Industrial Revolution, despite sharp differences in political and institutional conditions. One of the key conclusions exemplified by China’s economic rise is that the extent of industrialization is limited by the extent of the market. One of the key strategies behind the creation and nurturing of a continually growing market in China is based on this premise: The free market is a public good that is very costly for nations to create and support. Market creation requires a powerful “mercantilist” state and the correct sequence of developmental stages; China has been successfully accomplishing its industrialization through these stages, backed by measured, targeted reforms and direct participation from its central and local governments.
    Keywords: China; Income Traps; Institutions; Industrial Revolution; Economic Development; Industrial Policies; Washington Consensus; Shock Therapy; New Stage Theory
    Date: 2016–08–01
  16. By: Caroline Fohlin; Thomas Gehrig; Marlene Haas
    Abstract: Using a new daily dataset for all stocks traded on the New York Stock Exchange between 1905 and 1910, we study the impact of information asymmetry during the liquidity freeze and market run of October 1907 - one of the most severe financial crises of the twentieth century. We estimate that the market drove up spreads from 0.5 percent to 3 percent during the peak of the crisis and, using a spread decomposition, we identify information risk as the largest component of illiquidity. Information costs rose most in the mining sector - the origin of the stock corner and a sector with among the worst track records of corporate governance and accounting. We find other hallmarks of information-based illiquidity: trading volume dropped and price impact rose. Despite short-term cash infusions into the market, the market remained relatively illiquid for several months following the peak of the panic. Notably, market illiquidity risk is priced in the cross-section of stock returns. Thus, our findings demonstrate how opaque systems allow idiosyncratic rumors to spread and amplify into a long-lasting market-wide crisis.
    Date: 2016–08
  17. By: Shuping Shi (Macquarie University); Stan Hurn (QUT); Peter C B Phillips (Yale University)
    Abstract: This paper re-examines changes in the causal link between money and income in the United States for over the past half century (1959 - 2014). Three methods for the data-driven discovery of change points in causal relationships are proposed, all of which can be implemented without prior detrending of the data. These methods are a forward recursive algorithm, a recursive rolling algorithm and the rolling window algorithm all of which utilize subsample tests of Granger causality within a lag-augmented vector autoregressive framework. The limit distributions for these subsample Wald tests are provided. The results from a suite of simulation experiments suggest that the rolling window algorithm provides the most reliable results, followed by the recursive rolling method. The forward expanding window procedure is shown to have worst performance. All three approaches find evidence of money-income causality during the Volcker period in the 1980s. The rolling and recursive rolling algorithms detect two additional causality episodes: the turbulent period of late 1960s and the starting period of the subprime mortgage crisis in 2007.
    Keywords: Time-varying Granger causality, subsample Wald tests, Money-Income
    JEL: C12 C15 C32 E47
    Date: 2016–08–30
  18. By: Sebastian Klüsener (Max Planck Institute for Demographic Research, Rostock, Germany); Martin Dribe; Francesco Scalone
    Abstract: Most existing studies on the fertility transition focus either on macro-level trends or on micro-level patterns with limited geographic scope. Much less attention has been given to the interplay between individual characteristics and contextual conditions, including geographic location. This paper contributes to closing this research gap. We investigate the relevance of geography and socioeconomic status (SES) for understanding fertility variation in the initial phase of the fertility decline in Sweden. Spatially-sensitive multi-level analyses are applied to study fertility trends by SES and parish, using full-count individual-level census data for 1880, 1890, and 1900. Our results show that the elite not only constituted the vanguard group in the fertility decline, but that the shift in fertility behavior occurred quickly among this social class in virtually all parts of Sweden. Other social classes experienced the decline with some delay in both central and peripheral areas, and their patterns of decline were more clustered in and around the early centers of the decline compared to the pattern of the elite. Long-distance migrants, who were disproportionately represented among the elite and who initially had higher fertility, were among the pioneers in the process. This suggests that factors such as social connectedness through space and local social embeddedness were important in determining the early adoption of changes in fertility behavior. Our results confirm the view that social status and social class boundaries were of considerable relevance in structuring the fertility transition. The importance of space for understanding variation in the fertility decline seems to be negatively correlated with social status, with the pattern of decline among the elite showing the lowest degree of spatial variation.
    Keywords: Sweden, fertility decline, geography, social classes, spatial analysis
    JEL: J1 Z0
    Date: 2016–08
  19. By: Fabien Eloire (Centre lillois d'études et de recherches sociologiques et économiques); Claire Lemercier (Centre de sociologie des organisations); Veronica Aoki Santarosa (University of Michigan)
    Abstract: Powers of attorney are often interpreted as evidence of trust among the parties involved, and as such, of the existence of personal links between principals and their proxies. We build a novel dataset of notarized powers of attorney capturing a wide variety of agency relationships in four large French commercial cities in the eighteenth and nineteenth centuries to test hypotheses on the relational basis of economic relationships. We find little support for the idea of an evolution from personal to anonymous relationships during our period. Rather, our results point to the complementarity of embeddedness and formality, and suggest an increase over time in the importance of relationships based on repeated interactions, and a broad homophily driving merchants to choose fellow merchants as proxies.
    Keywords: procuration; mandat; proxy form; power of attorney; confiance; trust; agency relations
    Date: 2016–08
  20. By: Joanna Dzionek-Kozlowska (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz); Rafal Matera (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz)
    Abstract: Acemoglu and Robinson’s theory presented in their famous Why Nations Fail, and other papers, should be placed among the institutional theories of economic development. Yet the problem is they strongly differentiate their concept from the so-called culture hypothesis, which they reject. This stance is difficult to accept, not only because of the significance of culture-related factors of economic development, but it is also difficult to reconcile with their own model. The aim of this paper is to demonstrate that such a strong rejection of the culture hypothesis is inconsistent with their own analysis, triggers some principal problems with understanding the basic notion of institution, and suggests Acemoglu and Robinson are only focused on considering formal institutions. The article concludes with the statement that, paradoxically, Acemoglu and Robinson’s unconvincing rejection of the culture hypothesis may be regarded as a justification of the importance of culture-related factors.
    Keywords: Institutional Economics, Daron Acemoglu, James Robinson, Institutions vs Culture Controversy, Economic Development
    JEL: B52 O10 Z10
    Date: 2016–08
  21. By: Oliver Vanden Eynde; Alexander Moradi; Patrick M. Kuhn
    Abstract: Using a panel of 6,784 Kenyan police officers, we show how the rise of ethnic politics encroached on their daily behavior during Kenya's independence period (1957-1970). We find a significant deterioration in discipline after Kenya's first multiparty election in 1961 for those police officers of ethnic groups associated with the dominant KANU party. These effects are not driven by the selection of policemen, as individual officers change their behavior when their ethnic group gains political power. While we find no evidence of favoritism within the police, we show that shocks to political dominance can still change attitudes and job performance.
    Date: 2016
  22. By: Laura Veldkamp (New York University Stern School of Busi); Maryam Farboodi (Princeton University)
    Abstract: As the financial sector has swollen in size, the nature of its activities has shifted and investors have taken ever larger bets on its outcomes. The financial sector should add value by processing information, evaluating risks, disseminating that information through advising or road shows, and ultimately, using the information to allocate capital. Over time, the nature of the information processed and transmitted has changed. While financial analysis used to mean fundamental analysis of an asset's long-run value, perhaps combined with some statistical exploration of recent price trends, more recently, focus has shifted to mining order flow data to identify promising times at which to trade. We build a model that explores the reason for this analysis shift, offers testable predictions to help determine the extent of the shift, and clarifies the consequences for the real economy.
    Date: 2016
  23. By: Emin Dinlersoz (Center for Economic Studies, U.S. Census Bureau); Jeremy Greenwood (University of Pennsylvania)
    Date: 2016–08
  24. By: Deepak Malghan; Hema Swaminathan
    Abstract: Intra-household inequality continues to remain a neglected corner despite renewed focus on income and wealth inequality. Using the LIS micro data, we present evidence that this neglect is equivalent to ignoring up to a third of total inequality. For a wide range of countries and over four decades, we show that at least 30 per cent of total inequality is attributable to inequality within the household. Using a simple normative measure of inequality, we comment on the welfare implications of these trends.
    Date: 2016–08

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NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.