nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2017‒08‒20
five papers chosen by
Bernardo Bátiz-Lazo
Bangor University

  1. Income and Wealth Inequality in America, 1949-2013 By Kuhn, Moritz; Schularick, Moritz; Steins, Ulrike
  2. An exorbitant privilege in the first age of international financial integration By Eduardo van Hombeeck, Carlos
  3. Surplus Value Production and Realization in Marxian Theory - Applications to the U.S., 1987-2015 By Jonathan Cogliano
  4. Impact of Psychological Needs on Luxury Consumption By Mao, N.; McAleer, M.J.; Bai, S.
  5. Educational inequality and intergenerational mobility in Latin America: A new database By Neidhöfer, Guido; Serrano, Joaquín; Gasparini, Leonardo

  1. By: Kuhn, Moritz; Schularick, Moritz; Steins, Ulrike
    Abstract: This paper studies the distribution of U.S. household income and wealth over the past seven decades. We introduce a newly compiled household-level dataset based on archival data from historical waves of the Survey of Consumer Finances (SCF). Complementing recent work on top income and wealth shares, the long-run survey data give a granular picture of trends in the bottom 90% of the population. The new data confirm a substantial widening of income and wealth disparities since the 1970s. We show that the main loser of rising income and wealth concentration at the top was the American middle class -- households between the 25th and 75th percentile of the distribution. The household data also reveal that the paths of income and wealth inequality deviated substantially. Differences in the composition of household portfolios along the wealth distribution explain this divergence. While incomes stagnated, the middle class enjoyed substantial gains in housing wealth from highly concentrated and leveraged portfolios, mitigating wealth concentration at the top. The housing bust of 2007 put an end to this counterbalancing effect and triggered the largest spike in wealth inequality in postwar history. Our findings highlight the importance of portfolio composition, leverage and asset prices for wealth dynamics in postwar America.
    Keywords: historical micro data; Household portfolios; Income and wealth inequality
    JEL: D31 E21 E44 N3
    Date: 2017–08
  2. By: Eduardo van Hombeeck, Carlos (Bank of England)
    Abstract: The exorbitant privilege literature analyses the positive returns differential on net foreign assets enjoyed by the United States in the last quarter of the twentieth century as the issuer of the global reserve currency. In the first age of international financial integration (1871–1914), the global reserve currency was the British pound sterling. Whether the United Kingdom enjoyed a similar privilege is analysed with a new dataset, encompassing microdata on railroad and government financial securities. The use of microdata avoids the flaws that have plagued the US studies, particularly the use of incompatible aggregate variables. A monthly proxy for the British international investment position is constructed and estimates for capital gains and dividend yields obtained. The estimation points to an average privilege of 8.3% of GDP, with high variation. The finding supports the claim that in part exorbitant privilege is a general characteristic of the issuer of the global reserve currency and not unique to the late twentieth century US. Nonetheless, a decomposition of returns shows that there were fundamental differences between pre-war Britain and the late twentieth century US investment patterns and their response to the advantage presented by exorbitant privilege.
    Keywords: Exorbitant privilege; return differential; global reserve currency; international investment
    JEL: F36 N23
    Date: 2017–08–04
  3. By: Jonathan Cogliano (Department of Economics, Dickinson College)
    Abstract: This paper highlights the separation between surplus value production and realization in Marx's work. A new method of estimating surplus value production at the industry level is proposed and implemented. Marx's procedure of transforming labor values into prices of production shows that capitalist competition to equalize the profit rate entails transfers of surplus value across industries, thus differentials between surplus value created and surplus value realized as profit can exist at the industry level. These types of transfers can also exist between productive and unproductive activities in the circuit of capital. First, to trace out these transfers, a framework linking money value added to surplus value production by industry is established. Second, data on value added by industry for the U.S. are used to estimate surplus value production at the industry level. The analysis allows comparison of surplus value production and realization in each industry. The pattern of differentials between surplus value creation and realization across industries points to a potential source of instability for capitalist economies.
    Keywords: Circuit of Capital, Labor Theory of Value, Productive and Unproductive Labor, Surplus Value, Transfers of Surplus Value
    JEL: B5 B51 E11
    Date: 2017–08
  4. By: Mao, N.; McAleer, M.J.; Bai, S.
    Abstract: This paper examines the impact of psychological needs on luxury consumption. Veblen’s Theory of the Leisure Class (1899) invented the term “conspicuous consumption” to describe luxury goods and services, in which Veblen indicated the purpose of luxury consumption was to display wealth and social status. This paper integrates the following two papers: __(1)__ Han and Zhou (2002), who proposed an integrative model, and argued that three variables, namely Country-of-Origin, Brand Name, and Price, were major predictors for overall product evaluation and purchase intentions; and __(2)__ Han, Nunes and Dreze (2010), who proposed a taxonomy called The Luxury 4Ps, to explain the inductive and deductive psychological needs of luxury consumption.
    Keywords: Psychological needs, Luxury consumption, Consumer behavior
    JEL: N35 Z12 Z13
    Date: 2017–07–01
  5. By: Neidhöfer, Guido; Serrano, Joaquín; Gasparini, Leonardo
    Abstract: The causes and consequences of the intergenerational persistence of inequality are a topic of great interest among various fields in economics. However, until now, issues of data availability have restricted a broader and cross-national perspective on the topic. Based on rich sets of harmonized household survey data, we contribute to filling this gap computing time series for several indexes of relative and absolute intergenerational education mobility for 18 Latin American countries over 50 years, and making them publicly available. We find that intergenerational mobility has been rising in Latin America, on average. This pattern seems to be driven by the high upward mobility of children from low-educated families; at the same time, there is substantial immobility at the top of the distribution. Significant cross-country differences are observed and are associated with income inequality, poverty, economic growth, public educational expenditures and assortative mating.
    Keywords: inequality,intergenerational mobility,equality of opportunity,transition probabilities,assortative mating,education,human capital,Latin America
    JEL: D63 I24 J62 O15
    Date: 2017

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