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on Business, Economic and Financial History |
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Issue of 2017‒01‒22
twenty papers chosen by |
| By: | Robert J. Shiller (Cowles Foundation, Yale University) |
| Abstract: | This address considers the epidemiology of narratives relevant to economic fluctuations. The human brain has always been highly tuned towards narratives, whether factual or not, to justify ongoing actions, even such basic actions as spending and investing. Stories motivate and connect activities to deeply felt values and needs. Narratives “go viral” and spread far, even worldwide, with economic impact. The 1920-21 Depression, the Great Depression of the 1930s, the so-called “Great Recession” of 2007-9 and the contentious political-economic situation of today, are considered as the results of the popular narratives of their respective times. Though these narratives are deeply human phenomena that are difficult to study in a scientific manner, quantitative analysis may help us gain a better understanding of these epidemics in the future. |
| Keywords: | Economic fluctuations, Business cycles, Story, Meme, Epidemic, SIR model, Kermack and McKendrick, Multipliers, Bubbles, Depression of 1920, Profiteer, Great Depression, Stock market crash, 2008 financial crisis, Post-truth |
| JEL: | E00 E03 E30 G02 N1 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2069&r=his |
| By: | V. Bignon; C. Jobst |
| Abstract: | This paper shows that a central bank can more efficiently mitigate economic crises when it broadens eligibility for its discount facility to any safe asset or solvent agent. We use difference-in-differences panel regressions and emulate crises by studying how defaults of banks and non-agricultural firms were affected by the arrival of an agricultural disease. We exploit the specificities of the implementation of the discount window to deal with the endogeneity of the access to the central bank to the arrival of the crisis and local default rates. We find that broad eligibility reduced significantly the increase in the default rate when the shock hit the local economy. A counterfactual exercise shows that defaults would have been 10% to 15% higher if the Bank of France would have implemented the strictest eligibility rule. This effect is identified independently of changes in policy interest rates and the fiscal deficit. |
| Keywords: | discount window, collateral, Bagehot rule, central bank, default rate |
| JEL: | E32 E44 E51 E58 N14 N54 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:618&r=his |
| By: | Pereira, Luiz C. Bresser; Moreira, Thiago de Moraes |
| Abstract: | What we should learn from foreign debt is, essentially, that developing countries should not get indebted in foreign money. Not only because foreign debt leads countries cyclically to balance of payment financial crises and are constrained to long and painful restructuring. Principally because, contrary to conventional wisdom, the current account deficits and its financing, even if made by foreign direct investments, in most cases do not promote but hinder economic growth, in so far that they incite consumption, not investment. Something often forgotten is that to a current account deficits corresponds an overvalued currency, which makes the business enterprises in the country utilizing technology in the world state of the art non competitive, and, so, discourages investment. In consequence, we observe in developing countries a high rate of substitution of foreign for domestic savings. Instead of recurring to foreign indebtedness, developing countries should develop domestic financial institutions to finance investment |
| Date: | 2016–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:427&r=his |
| By: | Takhtamanova, Yelena (Federal Reserve Bank of San Francisco); Sierminska, Eva (UNU-MERIT, and LISER, Luxembourg) |
| Abstract: | This paper studies the mechanisms driving the persistently high unemployment rate during the last recession and mild recovery. Previous studies have examined the demographic aspect of the recession. We focus on specific industries. Consequently, we propose a methodology to decompose changes in the unemployment rate into worker inflows and outflows across industry groups and outline the unique characteristics of the latest recession (including examining cyclical and structural forces). We use harmonized-reclassified industry data for 1976-2011 in the United States, which allows us to make comparisons previously not possible. |
| Keywords: | Unemployment, Worker Flows, Job Finding Rate, Separation Rate, Industry |
| JEL: | J11 J62 |
| Date: | 2017–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2017003&r=his |
| By: | Economou, Emmanouel/Marios/Lazaros; Nickos, Kyriazis; Papadamou, Stephanos |
| Abstract: | The current paper contributes to the recent discussion in the US which has to do with the level of efficiency of the QE practices being implemented since 2008 and afterwards until today. It also analyses the basic argumentation of the academics and social and political groups who are in favour of the restoration of the Gold Standard. Thus, the analysis offers a critical approach concerning the US monetary practices linked to the implementation of the gold standard regimes as against to the quantitative easing policies. We conclude that although there are both arguments in favour of or against the abandonment of the QE policies in the US, the implementation (through restoration) of the Gold standard doctrines is very difficult to materialize, especially when an economy faces or has already faced the negative and detrimental side-effects of recession. |
| Keywords: | US monetary policy, Gold Standard, Quantitative Easing |
| JEL: | E62 F33 G18 N2 |
| Date: | 2017–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76184&r=his |
| By: | Fischer, Thomas (Department of Economics, Lund University) |
| Abstract: | Using a standard model where the individual consumption path is computed solving an optimal control problem, we investigate central claims of Piketty (2014) Rather than r>g (confirmed in the data) r-s>g - with s being the rate of time preference - matters. If this condition holds and the elasticity of substitution in the production function is larger than one, the capital share converges to one in the long run. Nevertheless, this does not have major impact on the distribution of wealth. The latter, however, converges to maximum inequality for heterogeneous time preferences or rates of interest (either persistent or stochastic). |
| Keywords: | wealth inequality; optimal control path; dynamic efficiency |
| JEL: | C63 D31 E21 |
| Date: | 2017–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2017_001&r=his |
| By: | Brülhart, Marius; Dupertuis, Didier; Moreau, Elodie |
| Abstract: | We estimate the size of inheritance flows in Switzerland over a long span of data, in close analogy to the study for France by Piketty (2011). We find that inheritance flows had been growing more slowly than national income up until the 1970s, but have been outpacing income growth since. According to our central estimates, the annual flow of inheritance amounted to 13.2% of national income in 2011. The share of total wealth that is attributable to inheritance has remained relatively stable over time, fluctuating between 45% and 60%. |
| Keywords: | Inheritance; Switzerland; Wealth |
| JEL: | D31 H24 N34 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11768&r=his |
| By: | Iyigun, Murat; Nunn, Nathan; Qian, Nancy |
| Abstract: | This paper investigates the long-run effects of climate change on conflict by examining cooling from 1400-1900 CE, a period that includes most of the Little Ice Age. We construct a geo-referenced and digitized database of conflicts in Europe, North Africa, and the Near East from 1400-1900, which we merge with historical temperature data. We first show that during this time, cooling is associated with increased conflict. Then, turning to the dynamics of cooling, we allow the effects of cooling over a fifty-year period to depend on the extent of cooling during the preceding fifty-year period. We find that the effect of cooling on conflict is significantly larger if the same location experienced cooling during the preceding period. We interpret this as evidence that the adverse effect of climate change intensifies with its duration. |
| Keywords: | Development; economic history; Environment; political economy |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11760&r=his |
| By: | Beestermöller, Matthias |
| Abstract: | This paper investigates the effect of the largest rail strikes in German history in 2014-2015 on long-distance buses – a newly liberalized market. Using a novel dataset of detailed bus ticket sales and rail cancellations, I find that the primary channel that drives ticket sales during the strike is whether the absolute bus travel time was sufficiently short. In a difference-indifferences framework, I exploit this variation to identify any demand persistence. Although the common trend assumption does not seem to be completely tenable in the given context, my results point to a persistent effect on the ticket sales for inter-city buses on the affected routes. |
| Keywords: | Transportation; Long-Run Demand Effects; Intermodal Substitution; Strike |
| JEL: | L92 R41 C81 |
| Date: | 2017–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:31768&r=his |
| By: | Facundo Alvaredo (Paris School of Economics, INET at the Oxford Martin School and Conicet); Salvatore Morelli (CSEF – University of Naples “Federico II” and INET at the Oxford Martin School); Anthony B. Atkinson (Nuffield College, London School of Economics, and INET at the Oxford Martin School) |
| Abstract: | Recent research highlighted controversy about the evolution of concentration of personal wealth. In this paper we provide new evidence about the long-run evolution of top wealth shares for the United Kingdom. The new series covers a long period – from 1895 to the present – and has a different point of departure from the previous literature: the distribution of estates left at death. We find that the application to the estate data of mortality multipliers to yield estimates of wealth among the living does not substantially change the degree of concentration over much of the period both, in the UK and US, allowing inferences to be made for years when this method cannot be applied. The results show that wealth concentration in the UK remained relatively constant during the first wave of globalization, but then decreased dramatically in the period from 1914 to 1979. The UK went from being more unequal in terms of wealth than the US to being lessunequal. However, the decline in UK wealth concentration came to an end around 1980, and since then there is evidence of an increase in top shares, notably in the distribution of wealth excluding housing in recent years. We investigate the triangulating evidence provided by data on capital income concentration and on reported super fortunes. |
| Keywords: | Wealth inequality, estates, mortality multipliers, United Kingdom, United States |
| JEL: | D3 H2 N3 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2017:01&r=his |
| By: | Georg Graetz; Guy Michaels |
| Abstract: | Since the early 1990s, recoveries from recessions in the US have been plagued by weak employment growth. One possible explanation for these "jobless" recoveries is rooted in technological change: middle-skill jobs, often involving routine tasks, are lost during recessions, and the displaced workers take time to transition into other jobs (Jaimovich and Siu, 2014). But technological replacement of middle-skill workers is not unique to the US—it also takes place in other developed countries (Goos, Manning, and Salomons, 2014). So if jobless recoveries in the US are due to technology, we might expect to also see them elsewhere in the developed world. We test this possibility using data on recoveries from 71 recessions in 28 industries and 17 countries from 1970-2011. We find that though GDP recovered more slowly after recent recessions, employment did not. Industries that used more routine tasks, and those more exposed to robotization, did not recently experience slower employment recoveries. Finally, middle-skill employment did not recover more slowly after recent recessions, and this pattern was no different in routine-intensive industries. Taken together, this evidence suggests that technology is not causing jobless recoveries in developed countries outside the US. |
| Keywords: | job polarization, jobless recoveries, routine-biased technological change, robots |
| JEL: | E32 J23 O33 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1461&r=his |
| By: | Alvaredo, Facundo; Atkinson, Anthony B; Morelli, Salvatore |
| Abstract: | Recent research highlighted controversy about the evolution of concentration of personal wealth. In this paper we provide new evidence about the long-run evolution of top wealth shares for the United Kingdom. The new series covers a long period - from 1895 to the present - and has a different point of departure from the previous literature: the distribution of estates left at death. We find that the application to the estate data of mortality multipliers to yield estimates of wealth among the living does not substantially change the degree of concentration over much of the period both, in the UK and US, allowing inferences to be made for years when this method cannot be applied. The results show that wealth concentration in the UK remained relatively constant during the first wave of globalization, but then decreased dramatically in the period from 1914 to 1979. The UK went from being more unequal in terms of wealth than the US to being less unequal. However, the decline in UK wealth concentration came to an end around 1980, and since then there is evidence of an increase in top shares, notably in the distribution of wealth excluding housing in recent years. We investigate the triangulating evidence provided by data on capital income concentration and on reported super fortunes. |
| Keywords: | estates; mortality multipliers; United Kingdom; United States; Wealth Inequality |
| JEL: | D3 H2 N3 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11759&r=his |
| By: | Metin M. Cosgel (University of Connecticut); Jungbin Hwang (University of Connecticut); Chihwa Kao (University of Connecticut); Thomas J. Miceli (University of Connecticut) |
| Abstract: | One of the most controversial questions in the study of religion has been the effect of pluralism on religiosity. Whereas sociologists of religion have traditionally predicted a negative relationship between pluralism and religious vitality, advocates of a supply-side approach have recently challenged this view, arguing that religious pluralism has increased vitality. Despite a large number of empirical studies devoted to this question, the results have been mixed. We argue that the main reason for the inability of scholars to reach a consensus on this important question has been the failure to deal appropriately with the endogeneity problem arising from omitted variables affecting both pluralism and religiosity. To remedy this, we offer a systematic analysis of influences on religiosity, combining information from the World Values Survey (1981-2014) with controls on the geographic and historical characteristics of nations and annual data on macroeconomic variables, relationship between state and religion, and religious pluralism. To address endogeneity concerns regarding the relationship between pluralism and religiosity, we exploit the variation among nations in their geographic distance to religious “capitals” of the world as an instrument. The OLS results reveal a negative and highly significant effect of pluralism on religiosity, which persists as we variously control for other factors. However, the association largely disappears when we correct for the omitted variable bias through the 2SLS analysis. Specifically, the magnitude and statistical significance of the effect of pluralism both fall sharply. Our results cast doubt on the causal interpretations of the negative relationship between pluralism and religiosity found by some studies, while offering a way to reconcile the conflicting results found in the literature. |
| Keywords: | religiosity, pluralism, diversity, state, secularization, religious concentration, political economy, endogeneity, identification |
| JEL: | H10 N30 O5 P5 Z12 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2017-01&r=his |
| By: | Vitor Gaspar; Laura Jaramillo; Philippe Wingender |
| Abstract: | Is there a minimum tax to GDP ratio associated with a significant acceleration in the process of growth and development? We give an empirical answer to this question by investigating the existence of a tipping point in tax-to-GDP levels. We use two separate databases: a novel contemporary database covering 139 countries from 1965 to 2011 and a historical database for 30 advanced economies from 1800 to 1980. We find that the answer to the question is yes. Estimated tipping points are similar at about 12¾ percent of GDP. For the contemporary dataset we find that a country just above the threshold will have GDP per capita 7.5 percent larger, after 10 years. The effect is tightly estimated and economically large. |
| Keywords: | Taxation;Development;Tax revenues;Economic growth;Time series;Databases;income per capita, taxation, development, multiple equilibria |
| Date: | 2016–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:16/234&r=his |
| By: | Fontana, Nicola; Nannicini, Tommaso; Tabellini, Guido |
| Abstract: | The Italian civil war and the Nazi occupation of Italy occurred at a critical juncture, just before the birth of a new democracy and when, for the first time in a generation, Italians were choosing political affiliations and forming political identities. In this paper we study how these traumatic events shaped the new political system. We exploit geographic heterogeneity in the intensity and duration of the civil war, and the persistence of the battlefront along the "Gothic line" cutting through Northern-Central Italy. We find that the Communist Party gained votes in the post-war elections where the Nazi occupation and the civil war lasted longer, mainly at the expense of the centrist and catholic parties. This effect persists until the early 1990s. Evidence also suggests that this is due to an effect on political attitudes. Thus, the foreign occupation and the civil war left a lasting legacy of political extremism and polarization on the newborn Italian democracy. |
| Keywords: | Civil War; political extremism; World War II |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11758&r=his |
| By: | Economou, Emmanouel/Marios/Lazaros; Kyriazis, Nicholas; Zachilas, Loukas |
| Abstract: | In the present paper we introduce the concept of optimal rate of political and social change as a benchmark to explain the successful or unsuccessful development of societies facing both internal change and external shocks. Societies face two extremes: volatility, e.g. rapid changes that lead to instability and possibly to collapse, or rigidity, which does not permit necessary adaptation and change and thus may again lead to collapse. Optimal is thus a rate of change between the two extremes. We develop a model to illustrate this and then analyse two cases from ancient Greece: Sparta, as a society and state with too many institutional and balances, that led to rigidity and collapse, and Athens that in the 5th century BCE had an institutional setting with almost no checks and balances (the citizens’ body, the Assembly, which was all powerful and dominant), which again led to near collapse, but then, during the 4th century BCE, introduced new institutions that enabled the state to survive in a world of changing circumstances and balances of power. |
| Keywords: | political and social change, Athens, Sparta |
| JEL: | N0 N40 N43 Z1 Z13 Z18 |
| Date: | 2016–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76117&r=his |
| By: | Joseph S. Shapiro (Cowles Foundation, Yale University); David A. Keiser (Iowa State University & NBER) |
| Abstract: | Since the 1972 U.S. Clean Water Act, government and industry have invested over $1 trillion to abate water pollution, or $100 per person-year. Over half of U.S. stream and river miles, however, still violate pollution standards. We use the most comprehensive set of files ever compiled on water pollution and its determinants, including 50 million pollution readings from 170,000 monitoring sites, to study water pollution’s trends, causes, and welfare consequences. We have three main findings. First, water pollution concentrations have fallen substantially since 1972, though were declining at faster rates before then. Second, the Clean Water Act’s grants to municipal wastewater treatment plants caused some of these declines. Third, the grants’ estimated effects on housing values are generally smaller than the grants’ costs. |
| Keywords: | Clean Water Act, Pollution regulation, Water quality, Cost benefit analysis, Cost effectiveness analysis, Hedonic models, Fiscal federalism, Infrastructure |
| JEL: | H23 H54 H70 Q50 R31 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2070&r=his |
| By: | Malikane, Christopher |
| Abstract: | Based on new quarterly estimates of the general rate of profit over 1960-2016, this paper shows that the South African economy experienced two phase changes in the pace and rhythm of capital accumulation. The rate of profit exhibits a cyclical tendency to fall, mainly driven by the tendency of capital intensity to rise. The economy experienced a crisis of absolute overproduction of capital in the mid-1980s. This crisis was not only characterised by stagnation in the mass of profits, it was also characterised by a halt in capital accumulation. Thereafter, the rate of profit recovered primarily because of the fall in the capital-output ratio but it failed to reach the levels seen in the 1970's. We estimate that in 2012, the South African economy entered a new and on-going crisis of overproduction of capital characterised by stagnant profits and prolonged overaccumulation, which makes it impossible for economic growth to recover. |
| Keywords: | falling rate of profit, capital intensity, overproduction of capital, overaccumulation |
| JEL: | B5 E11 O5 |
| Date: | 2017–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76165&r=his |
| By: | Meier zu Selhausen, Felix; van Leeuwen, Marco; Weisdorf, Jacob |
| Abstract: | This article uses Anglican marriage registers from colonial and post-colonial Uganda to investigate long-term trends and determinants of intergenerational social mobility among Christian African men. We show that the colonial era opened up new labour opportunities for our African converts enabling them to take large steps up the social ladder regardless of their social origin. Contrary to the widespread belief that British indirect rule perpetuated the power of pre-colonial African elites, we show that a remarkably fluid colonial labour economy actually undermined their social advantages. Sons of traditional landed chiefs gradually lost their high social-status monopoly to a new commercially-orientated and well-educated class of Anglican Ugandans, who mostly came from non-elite and even lower-class backgrounds. We also document that the colonial administration and the Anglican mission functioned as key steps on the ladder to upward mobility, and that mission education helped provide the skills and social reference needed to climb it. These social mobility patterns persisted throughout the post-colonial era despite rising informal labour during Idi Amin's dictatorship. |
| Keywords: | Chiefs; Christian Missionaries; Indirect Colonial Rule; Labour History; Social mobility; Uganda |
| JEL: | J62 O15 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11767&r=his |
| By: | Iris Grant; Iris Kesternich; Carina Steckenleiter; Joachim Winter |
| Abstract: | We analyze the long-term effects of gender imbalances on female labor force participation, in particular in the politician market, exploiting variation in sex ratios across Germany induced by WWII. In the 1990 elections, women were more likely to run for office in constituencies that had relatively fewer men in 1946. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:565080&r=his |