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on Business, Economic and Financial History |
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Issue of 2020‒10‒26
fifty-four papers chosen by |
| By: | Leandro Prados de la Escosura (Universidad Carlos III and CEPR) |
| Abstract: | The rising trend in the capital-output ratio and the productivity slowdown have put capital back in the economist’s agenda. This paper contributes to the debate by providing new estimates of net capital stock and services for Spain over the last 170 years. The net capital (wealth) stock-GDP ratio rose over time and doubled in the last half-a-century. Capital services grew fast over the long-run accelerating in the 1920s and from the mid-1950s to 2007. Until 1975 its acceleration was helped by an increase in the ‘quality’ of capital. Capital deepening proceeded steadily, accelerating during 1955-1985, and slowing down thereafter for expanding sectors attracted less investment-specific technological progress. Although capital consumption rose over time, the rate of depreciation fell from 1970 to 2007 as new capital goods’ relative prices declined due to embodied technological change. |
| Keywords: | Capital Stock and Services, Capital Deepening, Capital- output ratio, Spain |
| JEL: | D24 E01 E22 N33 N34 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0197&r=all |
| By: | Roy, Tirthankar |
| Abstract: | The paper re-examines the role of the state in economic change in colonial India (1757–1947), by paying attention to fiscal capacity. This capacity was larger than that of the precolonial states, and based on different foundations, such as centralisation of finance and securitisation of public debt. Nevertheless, the effort to raise finance hit a barrier, which had owed to the separation of debt from revenue operations. Did the barrier matter? By keeping markets open, the colonial state served private enterprise, but its failure to sustain growth in fiscal capacity compromised public investment in infrastructure and social development. |
| Keywords: | British empire; colonialism; economic development; state capacity |
| JEL: | F54 N15 O10 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:100723&r=all |
| By: | Olivier Accominotti (LSE); Stefano Ugolini (LEREPS) |
| Abstract: | This chapter presents a history of international trade finance - the oldest domain of international finance - from its emergence in the Middle Ages up to today. We describe how the structure and governance of the global trade finance market changed over time and how trade credit instruments evolved. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing of international trade then became increasingly centralized and credit instruments were standardized through the diffusion of the local standards of consecutive leading trading centres (Antwerp, Amsterdam, London). This process of market centralization/product standardization culminated in the nineteenth century when London became the global centre for international trade finance and the sterling bill of exchange emerged as the most widely used trade finance instrument. The structure of the trade finance market then evolved considerably following the First World War and disintegrated during the interwar de-globalization and Bretton Woods period. The reconstruction of global trade finance in the post-1970 period gave way to the decentralized market structure that prevails nowadays. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.08668&r=all |
| By: | Joerg Bibow |
| Abstract: | This paper revisits Keynes's writings from Indian Currency and Finance (1913) to The General Theory (1936) with a focus on financial instability. The analysis reveals Keynes's astute concerns about the stability/fragility of the banking system, especially under deflationary conditions. Keynes's writings during the Great Depression uncover insights into how the Great Depression may have informed his General Theory . Exploring the connection between the experience of the Great Depression and the theoretical framework Keynes presents in The General Theory , the assumption of a constant money stock featuring in that work is central. The analysis underscores the case that The General Theory is not a special case of the (neo-)classical theory that is relevant only to "depression economics"--refuting the interpretation offered by J. R. Hicks (1937) in his seminal paper "Mr. Keynes and the Classics: A Suggested Interpretation." As a scholar of the Great Depression and Federal Reserve chairman at the time of the modern crisis, Ben Bernanke provides an important intellectual bridge between the historical crisis of the 1930s and the modern crisis of 2007-9. The paper concludes that, while policy practice has changed, the "classical" theory Keynes attacked in 1936 remains hegemonic today. The common (mis-)interpretation of The General Theory as depression economics continues to describe the mainstream's failure to engage in relevant monetary economics. |
| Keywords: | John Maynard Keynes; Great Depression; Financial Crises; Central Banks; Interest Rates; Monetary Theory |
| JEL: | B2 B3 E44 E58 E65 G01 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_974&r=all |
| By: | Committee, Nobel Prize (Nobel Prize Committee) |
| Abstract: | The practice of selling valuable items to the highest bidder, or procuring valuable services fromthe lowest bidder, goes as far back in history as we have written records. The Greek historianHerodotus documented auctions in ancient Babylon already 2500 years ago.1In the RomanEmpire, creditors regularly used auctions to sell off assets confiscated from delinquent debtors.In more modern times, Stockholms Auktionsverk, the oldest surviving auction house in the worldwas founded by the Swedish Baron Claes Rålamb in 1674. In addition to confiscated assets,Stockholms Auktionsverk auctioned a wide range of goods on behalf of willing sellers—forexample, Sweden’s late 17thcentury king, Karl XI, offered a batch of hunting weapons for sale.Similar auction houses existed all around Europe. In 1744, Samuel Baker and George Leigh solda set of valuable books for a grand total of £826 at their newly established auction company. ThatLondon-based company was to become Sotheby’s, presently the world’s largest fine-arts auctionhouse. |
| Keywords: | Austions |
| JEL: | D44 |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_002&r=all |
| By: | Rei, Claudia (University of Warwick) |
| Abstract: | The rise of the modern state in Western Europe, saw the emergence of national identities in the nineteenth century. This paper evaluates the association between historical religious and state capacity in Portugal proxied by priests and postmen in 1875, and current measures of national identity proxied by voter turnout in democratic elections from 1975 to 2017. I find that places with a stronger historical presence of postmen vote more in any election, but they vote less in local elections relative to national elections. This result suggests a persistent association of historical state presence with national identity. Historical religious presence is also positively associated with voter turnout but in smaller magnitude. There is however no negative association with local elections: in contrast with historical state capacity, historical religious capacity is connected with the local rather than the national unit. |
| Keywords: | JEL Classification: |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:496&r=all |
| By: | Wible, James R.; Assistant, JHET |
| Abstract: | More than a century ago one of the most famous essays ever written in American economics appeared in the Quarterly Journal of Economics, “Why is Economics Not an Evolutionary Science?” There Thorstein Veblen claimed that economics was too dominated by a mechanistic view to address the problems of economic life. Since the world and the economy had come to be viewed from an evolutionary perspective after Darwin, it was rather straight forward to argue that the increasingly abstract mathematical character of economics was non-evolutionary. However, Veblen had studied with a first-rate intellect, Charles Sanders Peirce, attending his elementary logic class. If Peirce had written about the future of economics in 1898, it would have been very different than Veblen’s essay. Peirce could have written that economics should become an evolutionary mathematical science and that much of classical and neoclassical economics could be interpreted from an evolutionary perspective. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:5nwsa&r=all |
| By: | Crafts, Nicholas (University of Sussex); Mills, Terence C. (Loughborough University) |
| Abstract: | We investigate a structural model of demographic-economic interactions for England during 1570 to 1850. We estimate that the annual rate of population growth consistent with constant real wages was 0.4 per cent before 1760 but 1.5 per cent thereafter. We find that exogenous shocks increased population growth dramatically in the early decades of the Industrial Revolution. Simulations of our model show that if these demographic shocks had occurred before the Industrial Revolution the impact on real wages would have been catastrophic and that these shocks were largely responsible for very slow growth of real wages during the Industrial Revolution. |
| Keywords: | epidemic disease; Industrial Revolution; Malthusian checks; nuptiality; population growth; real wages; technological progress. JEL Classification: N13; N33 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:502&r=all |
| By: | Roy, Tirthankar |
| Abstract: | Twentieth-century Afghanistan offers a lesson for the historian of comparative economic development. Two conditions help to understand Afghan history better, resource poverty and the absence of European colonial rule. In a resource-poor region, the possibility of rapid economic change depends to a great extent on the capability and stability of the states; at the same time, attempts to create strong centres of power with a weak tax base can generate debilitating conflicts. European colonialists in some cases managed to overcome the dilemma. In the absence of colonialism, old elites and old rivalries survived and intensified the conflict. These two features appeared in the histories of many of the world’s poor regions. They shaped the process of economic and political change in Afghanistan with great force. |
| JEL: | N45 N55 O10 O53 P16 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:106957&r=all |
| By: | Saileshsingh Gunessee (University of Nottingham, Ningbo China); Tom Lane (University of Nottingham, Ningbo China) |
| Abstract: | Traditionally, students of economics have often been told that it is a non-experimental science. Using a quantitative and qualitative analysis of introductory economics textbooks, we track the historical evolution of this rhetoric from 1970 to the present day. We find that anti-experimental rhetoric was dominant and largely unchanged prior to the turn of the 21st century. Since then, there has been a growing trend towards textbooks making positive statements about the role of experimentation in economics. Remarks that experiments are impossible in economics have been (almost) eliminated only this decade, evidencing a sluggish change in rhetoric. We outline the evolution of statements over revised editions of influential textbooks and show that, while most have become considerably more supportive of experimental economics, there is substantial variation over when this happened. Interviews with key textbook authors confirm the historical trend of increased enthusiasm towards experiments, and suggest they are now accepted within the economic mainstream. Our results hold important implications for the research methodology of our science and how it is understood by current and former students. |
| Keywords: | Economic Methodology; Experimental Science; Economics Principles Textbooks; History of Economic Thought |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2020-16&r=all |
| By: | Scott A. Carson |
| Abstract: | When other measures for material conditions are scarce or unreliable, the use of height is now common to evaluate economic conditions during economic development. However, throughout US economic development, height data by gender have been slow to emerge. Throughout the late 19th and early 20th centuries, female and male statures remained constant. Agricultural workers had taller statures than workers in other occupations, and the female agricultural height premium was over twice that of males. For both females and males, individuals with fairer complexions were taller than their darker complexioned counterparts. Gender collectively had the greatest explanatory effect associated with stature, followed by age and nativity. Socioeconomic status and birth period had the smallest collective effects with stature. |
| Keywords: | gender studies, stature by gender, economic transitions |
| JEL: | C10 C40 D10 I10 N30 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8616&r=all |
| By: | Sylvie Rivot (BETA) |
| Abstract: | The paper shows how Friedman gradually came to incorporate the expectations formation process in his account of macroeconomic disequilibria. It is shown that Friedman's early Monetarism relies on slowly adjusting prices and wages, mainly because of long-term contracts. When he first addressed the expectations issue in his work macroeconomic dynamics Friedman actually considered static expectations. In the mid-1960s his anticipationist critique of the Phillips curve led Friedman to place at the centre of the analysis the idea that private agents progressively adjust their forecasts to a new informational environment. Nevertheless, adaptive expectations involve backward-looking behaviour regarding the price structure, without taking account of the probable effect of discretionary policy on the economy in the future; hence economic agents make systematic forecasting errors. Friedman eventually considered forward-looking behaviour in the 1970s but stopped short of fully embracing the rational expectations approach to economic policy. In Friedman's later Monetarism there is an echo of Friedman's early joint work with Savage regarding attitudes towards risk based on the subjective probability approach. But this is the residual outcome of a very lengthy process. |
| Keywords: | Friedman, adaptive expectations, rational expectations, static expectations, dynamics, monetary economy |
| JEL: | B22 B31 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2020-39&r=all |
| By: | Daniel P. Gross; Bhaven N. Sampat |
| Abstract: | World War II was one of the most acute emergencies in U.S. history, and the first where the mobilization of science and technology was a major part of the government response. The U.S. Office of Scientific Research and Development (OSRD) led a major research effort to develop technologies and medical treatments that not only helped win the war, but also transformed civilian life, while laying the foundation for postwar science policy. Scholars and policymakers often make broad appeals to the World War II innovation model in other crises. In this essay we describe exactly how it worked. We do so first through a general overview of how OSRD approached several questions that may confront any crisis innovation effort: priority setting, selecting and engaging researchers, a funding mechanism, coordinating research efforts, and translation to practice. Next we present case studies of the radar, atomic fission, penicillin, and malaria research programs, illustrating how the principles applied in specific contexts, but also heterogeneity. We conclude by discussing lessons from OSRD, such as what makes crisis innovation policy different, how crisis innovation policy approaches may vary, and the limits to generalizing from World War II for contemporary crises. |
| JEL: | H12 H56 N42 N72 O31 O32 O38 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27909&r=all |
| By: | Horrell, Sara; Humphries, Jane; Weisdorf, Jacob |
| Abstract: | We provide a framework for considering the living standards among intact and disrupted working-class families of various sizes in historical England. We estimate family incomes without resort to the usual male day wages and ahistorical assumptions about men’s labour inputs, instead using approximations of their annual earnings. We incorporate women and children’s wages and labour inputs and use a family life-cycle approach which accommodates consumption smoothing through saving. The analysis extends to families with often overlooked but historically common structures: widows with their children, deserted wives, and families which include husbands/fathers but ones unable or unwilling to work. Our framework suggests living standards varied considerably over time and by family structure and dependency ratio. Small and intact families enjoyed high and rising living standards after 1700. Large, broken, and disrupted families depended on child labour and poor relief up until 1830. |
| Keywords: | child labour; consumption soothing; costs-of-living; dependency ratio; life cycle; living standards; poor relief; prices; wages |
| JEL: | J22 N13 O10 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:106986&r=all |
| By: | David S. Jacks; Kevin Hjortshøj O'Rourke; Alan M. Taylor |
| Abstract: | We introduce a new dataset on British exports at the bilateral, commodity-level from 1700 to 1899. We then pit two primary determinants of bilateral trade against one another: the trade-diminishing effects of distance versus the trade-enhancing effects of the British Empire. We find that gravity exerted its pull as early as 1700, but the distance effect then attenuated and had almost vanished by 1800. Meanwhile the empire effect peaked sometime in the late 18th century before significantly declining in magnitude. It was only after 1950 that distance would once again exert the same influence that it has today. |
| JEL: | F1 N7 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27904&r=all |
| By: | Giorgio Canarella (University of Nevada, Las Vegas, NV, U.S); Luis A. Gil-Alana (University of Navarra, Faculty of Economics, Pamplona, Spain); Rangan Gupta (University of Pretoria, Pretoria, South Africa); Stephen M. Miller (University of Nevada, Las Vegas, NV, U.S) |
| Abstract: | We examine the temporal dynamics of the historical series of real interest rates for a sample of six European countries (Italy, France, Germany, Holland (the Netherlands), Spain pre-1730 and post-1800, and the United Kingdom), the United States and Japan stretching back to the 14th century using fractional integration techniques. We estimate the fractional integration parameter d using the Whittle function in the frequency domain as proposed in Dahlhaus (1989) and implemented by Robinson (1994) for the linear case and Cuestas and Gil-Alana (2016) for the non-linear case in terms of Chebyshev time polynomials. We find evidence of short memory, persistence, and anti-persistence. In the linear case, we find evidence of persistence for France and the United Kingdom and evidence of anti-persistence for Spain pre-1730, Germany, and Italy, while for Holland (the Netherlands), Japan, Spain post-1800, and the United States the evidence favors the short memory hypothesis. Non-linear trend stationarity, however, is found for Spain pre-1739, Germany, Holland (the Netherlands), Japan, Spain, the United Kingdom, and the United States. Among these countries, evidence of anti-persistence is detected for Spain pre-1730, Germany, Holland (the Netherlands), Japan, and the United Kingdom, while Spain post-1800 and the United States exhibit short-memory behavior. Thus, the vast majority of the findings, in sharp contrast with most of the extant literature, support the hypothesis that the behavior of real interest rates is non-linear trend stationary driven by a prolonged damped oscillatory dynamics and not by a high degree of persistence. |
| Keywords: | Anti-persistence, long memory, short memory, Chebyshev polynomials, fractional integration, non-linearity |
| JEL: | C22 C58 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202093&r=all |
| By: | Mark Carlson; Matthew S. Jaremski |
| Abstract: | Maintaining sufficient liquidity in the financial system is vital for its stability. However, since returns on liquid assets are typically low, individual financial institutions may seek to hold fewer such assets, especially if they believe they can rely on other institutions for liquidity support. We examine whether state banks in the early 1900s took advantage of relatively high cash balances maintained by national banks, due to reserve requirements, to hold less cash themselves. We find that state banks did hold less cash in places where both state legal requirements were lower and national banks were more prevalent. |
| JEL: | D40 G38 N21 N41 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27912&r=all |
| By: | van 't Klooster, Jens; Assistant, JHET |
| Abstract: | Recent interpretations of the early Methodenstreit (1871 – 1883) between Gustav Schmoller and Carl Menger no longer identify a substantial point of controversy. I reconstruct the debate to show that the pivotal topic was the scope of economics. Menger claims that his Principles of Economics more or less capture the full scope of the discipline, which Schmoller denies. I also discuss recent Menger scholarship, which follows Friedrich Hayek in situating Menger at the edges or even outside the marginalist mainstream. I argue that this interpretation wrongly denies Menger his pioneer status as, possibly the first, marginalist. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:aq2bz&r=all |
| By: | Stephens, Holly; Assistant, JHET |
| Abstract: | This article examines a hitherto neglected aspect of the expansion of international trade in nineteenth-century East Asia—that of how ordinary people understood changing trade patterns. Rather than the political debates and imperial competition that have been the focus of existing research, I use the diary of Sim Wŏn’gwŏn (1850-1933), a farmer from Ulsan, southeastern Korea, to assess how knowledge shaped Sim’s perception of, and response to, the international grain trade. Sim used his diary to develop an economic worldview based on his observation of cyclical, seasonal changes in the weather, harvests, and prices. While this enabled Sim to anticipate some fluctuations, the international rice trade posed a challenge as local market prices began to reflect events beyond Sim’s sphere of information. I argue that uneven access to knowledge influenced Sim’s participation in international trade, which in turn cannot be understood without reference to Sim’s existing understanding of the economy. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:6hfqa&r=all |
| By: | Sony, Michael; Aithal, Sreeramana |
| Abstract: | Industry 4.0 is the current buzzword in the modern organization. It promises to revolutionize the Industry with automation and computing technologies. Indian Engineering Industry is the largest segment among the Indian Industries having a huge export potential. Industry 4.0 is making inroads into this high potential Industry in a gradual manner. There are very few studies as to how should engineers adapt with the skills and ability requirements of knowledge society created due to the application of Industry 4.0. The main aim of this paper is to critically analyze the previous studies so that engineers can adapt to Industry 4.0. This study finds six dimensions engineers must adapt while working in Industry 4.0 environment. Though there have been numerous literature reviews on Industry 4.0, however this is the first study carried out on engineer adaptability for Industry 4.0 in the contextual domain of Indian Engineering Industries. |
| Keywords: | Industry 4.0, Cyber-Physical-Systems, Knowledge Society, Engineer Adaptability, Literature review |
| JEL: | N7 O1 O14 |
| Date: | 2020–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102874&r=all |
| By: | Rafiq, Shuddhasattwa |
| Abstract: | This paper projects house and equity prices following different types of macroeconomic shocks since the 1870s in 17 western economies. In doing so, we classify macroeconomic downturns into three distinct groups: normal recessions, financial recessions, and disasters. By combining three newly available historical data sets spanning 143 years and by employing local projection technique, this study finds that financial recessions have the most detrimental effect and cause substantial decreases in house prices, stock prices and construction costs. Post-crisis stock price declines are observed through the whole sample period, but both house prices and construction costs were the most vulnerable to crises after WWII. The study also finds that stock prices drop substantially immediately after financial crises and rebound within four to six years, while shocks to house prices are more persistent. This asymmetry of persistence and magnitude of shocks among housing and equity prices might have had a substantial impact on post-recession wealth re-distribution since WWII as lower and middle class families are more likely to have their wealth invested in a home rather than in other financial investments like stocks. |
| Keywords: | Financial crisis, Normal recessions, House prices, Stock prices, Local projection. |
| JEL: | E5 E52 E58 G12 R31 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103164&r=all |
| By: | Cette Gilbert; Devillard Aurélien; Spiezia Vincenzo |
| Abstract: | Using a new and original database, our paper contributes to the growth accounting literature with three original aspects: first, it covers a long period from the early 60’s to 2019, just before the COVID-19 crisis; second, it analyses at the country level a large set of economies (30); finally, it singles out the growth contribution of ICTs but also of robots. The original database used in our analysis covers 30 developed countries and the Euro Area over a long period allowing to develop a growth accounting approach from 1960 to 2019. This database is built at the country level. Our growth accounting approach shows that the main drivers of labor productivity growth over the whole 1960-2019 period appear to be TFP, non-ICT and non-robot capital deepening, and education. The overall contribution of ICT capital is found to be small, although we do not estimate its effect on TFP. The contribution of robots to productivity growth through the two channels (capital deepening and TFP) appears to be significant in Germany and Japan in the sub-period 1975-1995, in France and Italy in 1995-2005, and in several Eastern European countries in 2005-2019. Our findings confirm also the slowdown in TFP in most countries from at least 1995 onwards. This slowdown is mainly explained by a decrease of the contributions of the components ‘others’ in the capital deepening and the TFP productivity channels. |
| Keywords: | Growth, Productivity, ICTs, Robots. |
| JEL: | O31 O33 O47 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:783&r=all |
| By: | Gay, Victor |
| Abstract: | This article describes a comprehensive geographic information system of Third-Republic France: the TRF-GIS. It provides annual nomenclatures and shapefiles of administrative constituencies of metropolitan France from 1870 to 1940, encompassing general administrative constituencies (départements, arrondissements, cantons) as well as the most significant special administrative constituencies: military, judicial and penitentiary, electoral, academic, labor inspection, and ecclesiastical constituencies. It further proposes annual nomenclatures at the contemporaneous commune level that map each municipality into its corresponding administrative framework along with its population count. The 901 nomenclatures, 830 shapefiles, and complete reproduction material along with primary sources of the TRF-GIS database are available at https://dataverse.harvard.edu/dataverse/ TRF-GIS. |
| Keywords: | GIS, HGIS, Administrative boundaries, Nomenclature, Toponymy, France, Third Republic |
| JEL: | N0 N00 N01 N43 N44 |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103304&r=all |
| By: | Douglas A. Irwin |
| Abstract: | In the 1950s, many economists believed that import substitution – policies to restrict imports of manufactured goods – was the best trade strategy to promote industrialization and economic growth in developing countries. By the mid-1960s, there was widespread disenchantment with the results of such policies, even among its proponents. This paper traces the rise and fall of import substitution as a development idea. Perhaps surprisingly, early advocates of import substitution were quite cautious in their support for the policy and were also among the first to question it based on evidence derived from country experiences. |
| JEL: | B31 F13 F14 O14 O19 O24 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27919&r=all |
| By: | Boberg-Fazlic, Nina (University of Southern Denmark); Sharp, Paul (University of Southern Denmark, CAGE, CEPR) |
| Abstract: | The “refugee gap” in the economic status of refugees relative to other migrants might be due to the experience of being a refugee, or to government policy, which often denies the right to work during lengthy application processes. In Denmark before the Second World War, however, refugees were not treated differently from other migrants, motivating our use of a database of the universe of Danish naturalizations between 1851 and 1960. We consider labor market performance and find that immigrants leaving conflicts fared no worse than other migrants, conditional on other characteristics, within this relatively homogenous sample of those who attained citizenship. Refugees must be provided with the same rights as other migrants if policy aims to ensure their economic success. |
| Keywords: | Asylum policy, Denmark, immigration, naturalizations, refugee gap JEL Classification: F22, J61, N33, N34 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:506&r=all |
| By: | Alexander Adamou; Yonatan Berman; Ole Peters |
| Abstract: | Economic growth is measured as the rate of relative change in gross domestic product (GDP) per capita. Yet, when incomes follow random multiplicative growth, the ensemble-average (GDP per capita) growth rate is higher than the time-average growth rate achieved by each individual in the long run. This mathematical fact is the starting point of ergodicity economics. Using the atypically high ensemble-average growth rate as the principal growth measure creates an incomplete picture. Policymaking would be better informed by reporting both ensemble-average and time-average growth rates. We analyse rigorously these growth rates and describe their evolution in the United States and France over the last fifty years. The difference between the two growth rates gives rise to a natural measure of income inequality, equal to the mean logarithmic deviation. Despite being estimated as the average of individual income growth rates, the time-average growth rate is independent of income mobility. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.10451&r=all |
| By: | Keiser, David A.; Shapiro, Joseph S. |
| Abstract: | In the half century since the founding of the U.S. Environmental Protection Agency, the U.S. has spent nearly $5 trillion ($2017) to provide cleaner rivers, lakes, and drinking water, or annual spending of 0.8 percent of U.S. GDP in most years. Yet over half of rivers and substantial shares of drinking water systems violate standards, and polls for decades have listed water pollution as Americans’ number one environmental concern. We assess the history, effectiveness, and efficiency of the Clean Water Act and Safe Drinking Water Act, and obtain four main conclusions. First, water pollution has fallen since these laws, in part due to their interventions. Second, investments made under these laws could be more costeffective. Third, most recent studies estimate benefits of cleaning up pollution in rivers and lakes which are much less than their costs. Either these analyses systematically understate the value of these investments or these investments are inefficient. Analysis finds more positive net benefits of drinking water quality investments. Fourth, economic research and teaching on water pollution is surprisingly uncommon, as measured by samples of publications, conference presentations, or textbooks. |
| Date: | 2018–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:201812010800001061&r=all |
| By: | Jean-Bernard, Chatelain; Kirsten, Ralf |
| Abstract: | This paper is a study of the history of the transplant of mathematical tools using negative feedback for macroeconomic stabilization policy from 1948 to 1975 and the subsequent break of the use of control for stabilization policy which occurred from 1975 to 1993. New-classical macroeconomists selected a subset of the tools of control that favored their support of rules against discretionary stabilization policy. The Lucas critique and Kydland and Prescott's time-inconsistency were over-statements that led to the "dark ages" of the prevalence of the stabilization-policy-ineffectiveness idea. These over-statements were later revised following the success of the Taylor rule. |
| Keywords: | Control, Stabilization Policy Ineffectiveness, Negative feedback, Dynamic Games |
| JEL: | B22 B41 C36 C61 C62 C73 E32 E52 E61 E62 |
| Date: | 2020–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103244&r=all |
| By: | Alessandro Belmonte |
| Abstract: | This paper studies heterogeneous electoral responses following terrorist attacks. I examine a rich panel data set containing detailed information on the geography of terrorism in South Tyrol, a Northernmost and predominantly German-speaking region of Italy, for a period spanning along 35 years. Exploiting the diverse nature of 337 attacks, I find that the Italian-speaking minority reacted to an increase in exposure to terrorist attacks by punishing the government party at the ballot box and supporting an extreme right-wing party. However, when terror prompted casualties, I find that more exposure was conducive of rally-round-the-flag momenta. I interpret these results in light of recent findings in social psychology on heterogeneous emotional reactions induced by terrorist attacks. My results inform the literature as well as the public debate on the diverse implications of terrorism. |
| Keywords: | Terrorism, voting, punishment effect, rally-effect, South Tyrol JEL Classification: D72, D74 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:511&r=all |
| By: | Jonathan F. Cogliano (University of Massachusetts Boston); Roberto Veneziani (Queen Mary University of London); Naoki Yoshihara (Kochi University of Technology) |
| Abstract: | his article surveys computational approaches to classical-Marxian economics. These approaches include a range of techniques { such as numerical simulations, agent-based models, and Monte Carlo methods { and cover many areas within the classical-Marxian tradition. We focus on three major themes in classical-Marxian economics, namely price and value theory; inequality, exploitation, and classes; and technical change, profitability, growth and cycles. We show that computational methods are particularly well-suited to capture certain key elements of the vision of the classical-Marxian approach and can be fruitfully used to make significant progress in the study of classical-Marxian topics. |
| Keywords: | Computational Methods; Agent-Based Models; Classical Economists; Marx. |
| JEL: | C63 B51 B41 |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:913&r=all |
| By: | Thaler, Richard (University of Chicago) |
| Abstract: | I was born in East Orange, New Jersey, on September 12, 1945. My father, Alan, was an actuary for Prudential Life Insurance, where he would spend most of his career. He had graduated from the University of Toronto, majoring in math and physics. Alas, I did not inherit his mathematical prowess. My mother Roslyn attended the now defunct Upsala College in East Orange. She was an elementary school teacher before having children: myself and my younger brothers, Donald and Maurice. Aside from a two-year stint in Los Angeles, where my father was temporarily transferred, I spent my youth in New Jersey. We lived in Chatham after returning from California. |
| Keywords: | Behavioraleconomics |
| JEL: | D03 D90 G02 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2017_004&r=all |
| By: | Paganelli, Maria Pia; Simon, Fabrizio; Assistant, JHET |
| Abstract: | For Adam Smith a crime is not the result of a rational calculation of loss and gain, but the consequence of envy and a vain desire to parade wealth to attract the approbation of others, combined with a natural systematic bias in overestimating the probability of success. Similarly, Smith does not conceive of legal sanctions as a rational deterrent, but as deriving from the feeling of resentment. While the prevailing approach of the eighteenth century is a rational explanation of crime and a utilitarian use of punishment, Adam Smith instead builds his theory of criminal behavior and legal prosecution consistently on the sentiments. A well-functioning legal system is thus an unintended consequence of our desire to bring justice to the individual person, not the result of a rational calculation to promote the public good, just like a well-functioning economic system is the unintended consequence of our desire to better our own condition, not the result of a rational calculation to promote public good. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:x82yh&r=all |
| By: | Emmanuel Saez; Gabriel Zucman |
| Abstract: | Recent studies argue that US inequality has increased less than previously thought, in particular due to a more modest rise of wealth and capital income at the top (Smith et al., 2019; Smith, Zidar and Zwick, 2020; Auten and Splinter, 2019). We examine the claims made in these papers point by point, separating genuine improvements from arguments that do not appear to us well grounded empirically or conceptually. Taking stock of this body of work, and factoring in other improvements, we provide a comprehensive update of our estimates of US income and wealth inequality. Although some of the points raised by the revisionists are valuable, the core quantitative findings of this literature do not appear to be supported by the data. The low capital share of private business income estimated in Smith et al. (2019) is not consistent with the large capital stock of these businesses. In Smith, Zidar and Zwick (2020), the interest rate assigned to the wealthy is higher than in the datasets where both income and wealth can be observed, leading to downward biased top wealth shares; capitalizing equities using almost only dividends dramatically underestimates the wealth of billionaires relative to the Forbes 400. In Auten and Splinter (2019), business profits earned by the top 1% but not taxable (due in particular to generous depreciation rules) are classified as tax evasion; tax evasion is then allocated to the bottom 99% based on an erroneous reading of random audit data. Our revised series show a rise of inequality similar to Saez and Zucman (2016) and Piketty, Saez, and Zucman (2018) while allowing for a more granular depiction of the composition of wealth and income at the top. |
| JEL: | D31 E25 H26 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27921&r=all |
| By: | Hanke, Steve (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise) |
| Abstract: | The Studies in Applied Economics series is under the general direction of Prof. Steve H. Hanke, Co‐Director of the Institute for Applied Economics, Global Health and Study of Business Enterprise (hanke@jhu.edu). This working paper is one in a series on currency boards. The currency board working papers will fill gaps in the history, statistics, and scholarship of the subject. |
| Date: | 2020–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:ris:jhisae:0002&r=all |
| By: | Morales Meoqui, Jorge |
| Abstract: | The paper features a new interpretation of David Ricardo’s famous numerical example in chapter 7 of the Principles. It claims that the only purpose of the four numbers was to illustrate the proposition that the relative value of commodities produced in different countries is not determined by the respective quantities of labour devoted to the production of each. This exception would apply until capital begins to move between countries as easily as it does within the same country. Moreover, the paper debunks some entrenched myths about the numerical example. It shows that Ricardo did not leave the terms of trade unspecified; that the purpose of the four numbers was not about measuring the gains from trade; and lastly, that Portugal had no productivity advantage over England. All of this marks a radical departure from the way scholars have interpreted Ricardo’s numerical example since the mid-nineteenth century. |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:dyt83&r=all |
| By: | Andrés Forero; Francisco A. Gallego; Felipe González; Matías Tapia |
| Abstract: | We explore how railroads affected population growth during the First Globalization (1865-1920) in Chile. We look at areas with strong comparative advantage in agriculture using novel data documenting sixty years of railroad construction. Using instrumental variables, we present four main findings. First, railroads increased both urban and rural population growth. Second, the impact was stronger in areas with more potential for agricultural expansion. Third, railroads increased specialization in agriculture when combined with a high level of the real exchange rate. And fourth, railroads had little effects on human capital and fertility. These results suggest that the effects of transportation technologies depend on existing macroeconomic conditions. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:887&r=all |
| By: | Niklas Potrafke; Fabian Ruthardt; Kaspar W\"uthrich |
| Abstract: | We investigate how protectionist policies influence economic growth. Our empirical strategy exploits an extraordinary tax scandal that gave rise to an unexpected change of government in Sweden. A free-trade majority in parliament was overturned by a comfortable protectionist majority in the fall of 1887. We employ the synthetic control method to select control countries against which economic growth in Sweden can be compared. We do not find evidence suggesting that protectionist policies influenced economic growth and examine channels why. Tariffs increased government revenue. However, the results do not suggest that the protectionist government stimulated the economy in the short-run by increasing government expenditure. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.02378&r=all |
| By: | Sara Lowes |
| Abstract: | This chapter will cover recent research in historical economics that uses ethnographic data and data from surveys and lab experiments. The study of historical economics, particularly outside of non-Western countries, has been constrained by availability of historical data. However, recent work incorporates data and tools from other fields and sub-fields to fill this gap. For example, economists are increasingly taking advantage of ethnographic data sets compiled by anthropologists. There is also growing interest in the use of original survey data collection both within and across countries and lab-in-the-field experiments to answer questions on culture and institutions. Often, these tools are used together to provide complementary evidence on the question of interest. These sources of data have been particularly important for research on areas where there is limited historical data, and they have increased the scope of questions that can be examined. This chapter will overview these recent developments and highlight the benefits of these diverse methodologies and data sources. |
| JEL: | C9 N01 N10 Z1 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27918&r=all |
| By: | Emmanuel Saez; Gabriel Zucman |
| Abstract: | This paper studies inequality in America through the lens of distributional macroeconomic accounts—comprehensive distributions of the aggregate amount of income and wealth recorded in the official macroeconomic accounts of the United States. We use these distributional macroeconomic accounts to quantify the rise of income and wealth concentration since the late 1970s, the change in tax progressivity, and the direct redistributive effects of government intervention in the economy. Between 1978 and 2018, the share of pre-tax income earned by the top 1% rose from 10% to about 19% and the share of wealth owned by the top 0.1% rose from 7% to about 18%. In 2018, the tax system was regressive at the top end; the top 400 wealthiest Americans paid a lower average tax rate than the macroeconomic tax rate of 29%. We confront our methods and findings with those of other studies, pinpoint the areas where more research is needed, and describe how additional data collection could improve inequality measurement. |
| JEL: | D31 H20 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27922&r=all |
| By: | Barbara Boelmann (University College London); Anna Raute (Queen Mary University of London); Uta Schönberg (University College London) |
| Abstract: | Does the culture in which a woman grows up influence her labor market decisions once she has had a child? To what extent might the culture of her present social environment shape maternal labor supply? To address these questions, we exploit the setting of German reunification. A state socialist country, East Germany strongly encouraged mothers to participate in the labor market full-time, whereas West Germany propagated a more traditional male breadwinner-model. After reunification, these two cultures were suddenly thrown together, with consequent increased social interactions between East and West Germans through migration and commuting. A comparison of East and West German mothers on both sides of the former Inner German border within the same commuting zone shows that culture matters. Indeed, East German mothers return to work more quickly and for longer hours than West German mothers even two decades after reunification. Second, in exploiting migration across this old border, we document a strong asymmetry in the persistence of the culture in which women were raised. Whereas East German female migrants return to work earlier and work longer hours than their West German colleagues even after long exposure to the more traditional West German culture, West German migrants adjust their post-birth labour supply behaviour nearly entirely to that of their East German colleagues. Finally, taking advantage of differential inflows of East German migrants across West German firms in the aftermath of reunification, we show that even a partial exposure to East German colleagues induces “native” West German mothers to accelerate their return to work after childbirth, suggesting that migration might be a catalyst for cultural change. |
| Keywords: | cultural transmission, social norms, maternal labor force participation, German |
| JEL: | J1 J2 Z1 |
| Date: | 2020–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:914&r=all |
| By: | Neklyudov, Sergey (Неклюдов, Сергей) (The Russian Presidential Academy of National Economy and Public Administration) |
| Abstract: | Among the texts of ancient Egyptian literature that have come down to us, there are several narrative works, which in publications, translations and research are usually called tales, stories, Märchen, Sagen, tales, stories, romans, contes, etc. Due to their poor preservation and the presence of numerous lacunae before the researcher is faced with problems of a reconstructive nature, it is necessary to fill in meaningful gaps, without which many damaged fragments cannot be adequately understood at all. Additional opportunities for reading them can be provided by the toolkit of comparative folklore, since without the inclusion of the subject in question in the corresponding typological series, it is impossible to understand its true meaning in the cultural tradition. Comparison of oral versions of the same plots with these ancient monuments clarifies some of their dark places in the narrative. The situation is similar with the fairy tale "The Doomed Tsarevich" (XIII century BC), which is discussed in detail in the article. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:wpaper:052033&r=all |
| By: | Ferrara, Andreas (University of Pittsburgh); Testa, Patrick A. (Tulane University) |
| Abstract: | Religious communities are important providers of social insurance. We document the development of religious communities in the face of economic volatility associated with natural resource abundance, using variation in major oilfield discoveries in the U.S. South between 1890 and 1990. We find that oil discoveries predict large and persistent increases in church membership. Effects are increasing with oil price volatility and larger for “oil-dependent” counties with small pre-oil populations and manufacturing sectors. Consistent with social insurance, larger religious communities limit spillovers from oil shocks across sectors, smoothing unemployment, while access to credit, private insurance, and public social insurance attenuate effects. |
| Keywords: | Social insurance; resource abundance; religion; church membership; oil; risk JEL Classification: N31, N32, H41, G52 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:513&r=all |
| By: | Dasgupta, Utteeyo; Jha, Chandan Kumar; Sarangi, Sudipta |
| Abstract: | Outbreaks of infectious diseases bring behavior and policy responses into sharp focus since societies face acute constraints and uncertainties. This paper compares two infectious disease outbreaks: the Covid-19 pandemic and the 1665 London plague outbreak described by Daniel Defoe in A Journal of the Year of the Plague published in 1722. We compare three aspects: individual behavior, social behavior and governance and find striking similarities in behavior in spite of these events being separated by 350 years. We contend that the same models of behavior can be used to explain human responses during such outbreaks regardless of when they occur. |
| Keywords: | pandemics, infectious diseases, economic behavior, comparative analysis |
| JEL: | A10 B52 Z11 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102956&r=all |
| By: | Aburto, Jose Manuel (University of Oxford, University of Southern Denmark); Kristensen, Frederikke Frehr (University of Southern Denmark); Sharp, Paul (University of Southern Denmark, CAGE, CEPR) |
| Abstract: | Covid-19 has demonstrated again that epidemics can affect minorities more than the population in general. We consider one of the last major epidemics in the United States: HIV/AIDS from ca. 1980-2000. We calculate life expectancy and lifespan disparity (a measure of variance in age at death) for thirty US states, finding noticeable differences both between states and between the black and white communities. Lifespan disparity allows us to examine distributional effects, and, using decomposition methods, we find that for six states lifespan disparity for blacks increased between 1980 and 1990, while life expectancy increased less than for whites. We find that we can attribute most of this to the impact of HIV/AIDS. |
| Keywords: | AIDS, HIV, life expectancy, lifespan disparity JEL Classification: I14, J15, N32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:512&r=all |
| By: | Committee, Nobel Prize (Nobel Prize Committee) |
| Abstract: | Every day, auctions distribute astronomical values between buyers and sellers. This year’s Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting sellers, buyers and taxpayers around the world |
| Keywords: | Auctions |
| JEL: | D44 |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_001&r=all |
| By: | Assaf Razin |
| Abstract: | International trade increased rapidly after 1990, fueled by the growth of a complex network of global value chains. Financial globalization gathered force. Trade globalization, however, reversed course since the Global Financial Crisis. The new trend is expected to endure after the Global Pandemic Crisis. There is no indication so far of significant reversal of financial globalization. |
| JEL: | F0 F3 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27929&r=all |
| By: | Nauro F. Campos; Vera Z. Eichenauer; Jan-Egbert Sturm |
| Abstract: | This paper addresses two main questions: (a) Has European integration hindered the implementation of labour, financial and product market structural reforms? (b) Do the effects of these reforms vary more across sectors than across countries? Using more granular reform measures, longer time windows and a larger sample of countries than previous studies, we confirm that the euro triggered product but neither labour nor financial market reforms. Differently from previous studies, we find that: (a) the Single Market has similar effects to the euro, and (b) sectoral heterogeneity appears less important in explaining the economic impacts of reforms than country heterogeneity. |
| Keywords: | European integration, structural reforms, single market, euro, sectoral heterogeneity |
| JEL: | F40 N10 N40 O40 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8582&r=all |
| By: | Miroslav Fil |
| Abstract: | Pairs trading is a strategy based on exploiting mean reversion in prices of securities. It has been shown to generate significant excess returns, but its profitability has dropped significantly in recent periods. We employ the most common distance and cointegration methods on US equities from 1990 to 2020 including the Covid-19 crisis. The strategy overall fails to outperform the market benchmark even with hyperparameter tuning, but it performs very strongly during bear markets. Furthermore, we demonstrate that market factors have a strong relationship with the optimal parametrization for the strategy, and adjustments are appropriate for modern market conditions. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.01157&r=all |
| By: | Andrew Clark (Department of Economics, University of Reading) |
| Abstract: | A longitudinal (1844-1965) study of the Pound Krona exchange rate is conducted utilizing London Times article news sentiment, gold price, GDP, and other relevant metrics to create a dynamic systems state-based model to predict the Pound Krona yearly exchange rate. The created model slightly outperforms a naive random walk forecasting model. |
| Keywords: | Econometrics, Machine Learning, Dynamic Systems, Complex Systems |
| JEL: | C32 C53 C63 E17 F31 |
| Date: | 2020–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2020-22&r=all |
| By: | Christian RIETSCH |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:leo:wpaper:2814&r=all |
| By: | Johannes C. Buggle; Stephanos Vlachos |
| Abstract: | This paper examines the effect of campaign visits in the context of the unique onesided nationwide speaking tour by a US Presidential candidate. During the 1896 election, the Democratic candidate went on a whistle stop train tour, while the Republican followed a frontporch campaign. To identify the causal effect of campaign speeches, we exploit several estimation strategies, including a within-county difference-in-differences design and a neighbor-pair fixed effect estimator. We find that one speech given by the Democratic candidate increased his vote share by about one percentage point on average. This increase stems from the persuasion of previously non-aligned industrial workers. |
| Keywords: | Elections, campaign strategies, persuasive communication |
| JEL: | D72 N41 N71 P48 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:20.05&r=all |
| By: | Mathieu Pedemonte |
| Abstract: | This paper shows how policy announcements can be used to manage expectations and have a role as a policy tool. Using regional variation in radio exposure, I evaluate the impact of President Franklin D. Roosevelt’s 1935 Fireside Chat, in which he showcased the introduction of important social policies, establishing a new cycle of the New Deal. I document that cities with higher exposure to the announcement exhibited a significant increase in spending on durable goods. I provide evidence that this result is not driven by wealth or other potentially confounding variables. The estimated effect is consistent with changes in expectations toward the policies announced. This paper shows the power of communication as a policy tool in affecting economic activity. |
| JEL: | E21 D84 N32 |
| Date: | 2020–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:88844&r=all |
| By: | Laure de Batz (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; Centre d’Economie de la Sorbonne, Université Paris); Evzen Kocenda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; Institute of Information Theory and Automation, Czech Academy of Sciences, Prague, Czech Republic; CESifo, Munich, IOS, Regensburg) |
| Abstract: | We examine how the publication of intentional financial crimes committed by listed firms is interpreted by financial markets, using a systematic and quantitative review of existing empirical studies. Specifically, we conduct a meta-regression analysis and investigate the extent and nature of the impact that the publication of financial misconducts exerts on stock returns. We survey 111 studies, published between 1978 and 2020, with a total of 439 estimates from event studies. Our key finding is that the average abnormal returns calculated from this empirical literature are affected by a negative publication selection bias. Still, after controlling for this bias, our meta-analysis indicates that publications of financial crimes are followed by statistically significant negative abnormal returns, which suggests the existence of an informational effect. Finally, the MRA results demonstrate that crimes committed in common law countries, alleged crimes, and accounting crimes carry particularly weighty information for market participants. The results call for more transparency on side of enforcers along enforcement procedures, to foster timely and proportionate market reactions and support efficient markets. |
| Keywords: | Meta-Analysis; Event study; Financial Misconduct; Fraud; Financial Markets, Information and Market Efficiency; Returns; Listed Companies |
| JEL: | C83 G14 G18 K42 N24 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2020_40&r=all |
| By: | Palma, J. G. |
| Abstract: | The analysis will focus on how the traditional Kindlebergian financial-crisis cycle of “manias, panics and crashes” has been twisted so that now policymakers make sure that any panic is immediately followed by a renewed mania. Due to a “secular-stagnationists”-style thinking, central bankers, treasury officials and politicians - the ‘new alchemists’ - now believe that only a perpetual-mania can deliver some resemblance of growth. So, they persist in pumping liquidity and relaxing monetary conditions, no matter how much this violates every possible principle of markets economics, and regardless of the fact that the current policies to reactivate mature economies (rocketing the net-worth of a few individuals) have already been tried and failed post-2008. One by-product of this new perpetual-mania is that emerging markets have become what I have labelled “the financial markets of last resort”, and commodities “the financial asset of last resort”. That is, most emerging markets now don’t have to put up anymore with international finance being a “sellers” market (where they had to knock and beg); now, it is the international speculator who has been pushed into a yield-chasing frenzy in emerging markets. This new “buyers” market has proved to be a mixed blessing for emerging markets, as many of them have joined the ‘everything rally’ - in which you have nothing to lose but your real economy. |
| Keywords: | manias, panics, financialisation, QE, excess liquidity, ‘disconnect’ between the financial and the real worlds, emerging markets, Latin America, Asia, Keynes, Kindleberger, Minsky, Buchanan |
| JEL: | E22 D70 D81 E24 E51 F02 F21 F32 F40 F44 F63 G15 G20 G28 G30 G38 L51 N20 O16 |
| Date: | 2020–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2094&r=all |