Category Archive: Sources

  1. Shack Stories

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    MUNICIPAL BUDGETS

    The pandemic imposed major stress on municipal budgets around the world, with many local governments facing a mix of decreasing revenues and increasing expenditures. In the United States, municipal budgets—which saw smaller revenue losses than expected—reflected a range of taxing authorities and revenue sources across cities. 

    In a 2018 paper for the Brookings Institute, MICHAEL PAGANO and CHRISTOPHER HOENE examine cities’ responses to fiscal crisis by studying municipal budgets after the Great Recession. 

    From the text:

    “The fiscal architecture of municipalities has changed over time. Cities have expanded their taxing authority. Some cities have raised substantial revenues from a telecommunications tax (e.g., Florida and Illinois cities), others have imposed a tax on real estate transactions, and most cities levy a business, building permit, and construction fee on builders. Municipalities attempt to design a fiscal architecture or create a revenue system that connects to the underlying economy of the city. At the same time, they attempt to design a fiscal architecture that is stable over the course of a business cycle. The property tax has the upside of being generally stable over time, rising incrementally during growth periods and declining relatively slowly during recessionary periods. Cities, with sufficient authority to adjust their revenue portfolios, do so with the understanding that the more balance between elastic and inelastic sources and the better aligned the fiscal architecture is to the city’s underlying economic base, the more predictable and resilient the city’s revenue system will be. The flexibility to redesign those systems is, in many cases, severely constrained by the state. 

    Kansas City, Mo. is a case in point. It has the authority to impose a property, sales, and income (earnings and profits) tax. At the start of the Great Recession, Kansas City’s earnings tax receipts dropped 10 percent between fiscal year 2008 and fiscal year 2010, while sales tax receipts plummeted 15 percent. Property tax receipts, however, actually increased by 10 percent, resulting in a decline in total tax revenue of 8.5 percent. Because Kansas City has such a diverse tax portfolio, its total tax receipts returned to fiscal year 2008 levels by fiscal year 2013.” 

    Link to the text.

    +  “The presence of binding local tax and expenditure limitation movements (TELS) and the presence of state-level TELS led to an increase in the share of user charges and fees for traditionally charge-financed services.” Changhoon Jung and Suho Bae examine county-level use of charges and fees from 1972 to 2002. Link. And a 2004 article by Hoene studies the trend of increased user charges and fees in Californian cities as a a response to Proposition 13. Link.  

    +  “Cities might, at times, embrace state involvement rather than lament its restrictions or rue its indifference.” Elizabeth M. Marcello’s case study of the Empire State Development Corporation looks at the use of state authority at the city level. Link. 

    +  The Reserve Bank of India’s 2021 report on state finances outlines decreased national spending and increased state spending. Link. And a report by the UN Economic Commission for Latin America and the Caribbean highlights differences municipal revenue sources and spending across the region. Link. 

    NEW RESEARCHERS

    Loan Officers & Algorithms

    In his job market paper, FAIZAAN KISAT, PhD candidate in economics at Princeton, compares how loan officers and machine learning algorithms approve loans for women and ethnic minorities for Pakistan.  

    From the paper:

    “I conducted a large-scale randomized control trial (RCT) involving 30 loan officers and 5,500 digitally submitted credit applications in Karachi, Pakistan. The intervention randomly assigned loans to either a traditional loan officer or a machine learning algorithm and provided applicant demographic data for a subset of loans to each agent. The experimental design also over-sampled marginalized sub-groups in Pakistan, including women and ethnic minorities, to enable a precise estimation of the levels of human and algorithmic discrimination. In response to the questions posed above, I find that: First, the loan officers exhibit a gender equity preference and approve more women once they observe an applicant’s gender. Second, the algorithm reports a 21% reduction in loan default relative to an officer when both decision-makers make approval decisions for an anonymized applicant pool. Third, revealing applicant identities has opposing effects on each agent’s level of gender-based discrimination. In particular, the loan officers’ level of discrimination declines once they observe gender. Conversely, algorithmic discrimination against women increases with the disclosure of identities.” 

    Link to the paper, link to Kizat’s website.

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   “In its current form, Eskom is unquestionably an impediment to decarbonization. But as the global market-led transition away from fossil energy continues to flounder, it remains in many ways the only entity plausibly capable of delivering a transition.” New on PW, Bruce Baigrie writes on South Africa’s state-owned electricity utility and a path towards decarbonization. Link. 

    +   “The EU taxonomy was meant to fulfill a role that so far had never really been attempted before: a detailed, granular resource mapping climate science to financial assets.” Kate Mackenzie in Bloomberg on the failings of the EU green assets taxonomy. Link. (See also: Mackenzie’s piece in PW on finance and international climate action. Link.)

    +   “Preprints on the coronavirus have been impressively reliable.” In the Economist, a look at scientific journals and the use of restrictive publishing during the pandemic. Link.

    +   A genealogy of food banks in the UK, by Andrew Williams and Jon May. Link. 

    +   “At the bottom of the income distribution, 35% of individuals have access to higher education compared to 90% at the top of the distribution. This overall level of inequality is surprisingly close to that observed in the United States.” Cécile Bonneau and Sébastien Grobon on the powerful role of parental income in unequal access to education in France. Link. 

    +   “China’s insurance giants are increasingly eyeing Latin American markets in support of the BRI or to provide life, health, and property insurance products to Latin American consumers.” A report by Margaret Myers on Chinese insurers. Link. 

    +   “For the Pakistani military, a decentralised system has never been an acceptable constitutional arrangement.” Salman Rafi Sheikh takes a critical look at Pakistan’s ruling party, the PTI, and its move to push 33 bills through Parliament. Link. 

    +   “Black-owned restaurants are 25% less likely to receive PPP loans.” Sergey Chernenko & David Scharfstein examine a sample of PPP loans in Florida. Link. 

    +   “This article follows Bulgarian officials engaged in cotton and textile exchange with African states in the early Cold War. These officials founded enterprises for carrying out transactions, collected information on prices at international cotton exchanges and attended meetings of the Council for Mutual Economic Assistance (COMECON) to coordinate trade activities in capitalist markets. Exploring how Bulgarian foreign trade organizations positioned themselves on the scene of international trade, this article argues that cotton traders, instead of upholding the supposed bloc bipolarity of the Cold War, followed the logic of the markets they worked in. A focus on trade infrastructures in particular shows that early Cold War East–South trade was not as strictly bilateral as official agreements and statistics suggest and reveals the systematic embeddedness of the socialist traders’ practices in global capitalist structures.” By Jan Zofka. Link. 

  2. Twenty-Two Constructions

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    FISCAL MULTIPLIERS

    The pandemic induced wave of government spending has prompted renewed debates on the magnitude and likelihood of significant fiscal multipliers—the effect of fiscal spending on output—in the coming years.

    In a 2020 paper, JOONKYU CHOI, VERONIKA PENCIAKOVA, and FELIPE SAFFIE examine the political underpinnings of spending allocation, and their impact on its longterm effects.

    From the text: 

    “One-third of the funds from the 2009 American Recovery and Reinvestment Act (ARRA) were channeled directly to firms, with the primary goal of saving and creating jobs. Stimulus funds were sizable and valuable, with the average grant awarded exceeding $500,000. We find that firms’ campaign contributions to state politicians prior to the enactment of ARRA had a causal effect on the allocation of ARRA grants, and that only the share of ARRA grants allocated to non-politically connected firms contributes to job creation. Therefore, it is not only the size of the fiscal stimulus that matters for employment growth, but also how this stimulus is allocated across firms.

    In the first two years of ARRA, 2009 and 2010, over two-thirds of the funds were distributed to individual states through various grant programs and the state governments had near full discretion in allocating grant awards to firms. Firms accounted for about 37% of campaign contributions in state elections leading up to the recession. Consequently, some firms formed political connections to state politicians who would later be charged with disbursing ARRA resources. Even after controlling for firm size, industry and state fixed effects, there is a strong positive correlation at the firm level between political connections attained through campaign contributions and the awarding of ARRA grants. Furthermor, prior to the enactment of ARRA, there is little difference in the employment trajectory of states in the top and bottom quartiles of the share of stimulus channeled through politically-connected firms. Yet, after the enactment of ARRA, their paths diverge with states in the top quartile experiencing slower recovery from the crisis.”

    Link to the text.

    +  In a forthcoming paper, Donatella Sacconea, Pompeo Della Posta, Enrico Marelli, and Marcello Signorelli draw on local projections for 31 European countries from 1995–2019 to estimate multipliers “according to their respective function of government.” Link. And Vicente Ferreira considers public investment and debt sustainability in Portugal. Link.

    +  “Our main result shows that the response of GDP to government expenditure shock during a recovery period in developing countries is double that for developed ones.”  A recent article by Michal Hlaváček, Ilgar Ismayilov, and Ayaz Zeynalov. Link.

    +  “A law issued to combat Mafia infiltration of city councils in Italy has resulted in episodes of large, unanticipated, temporary contractions in local public spending. Using these episodes as instruments, we estimate the output multiplier of spending cuts at provincial level.” By Antonio Acconcia, Giancarlo Corsetti, and Saverio Simonelli. Link.

    NEW RESEARCHERS

    Walmart Supercenters & Monopsony Power

    Justin Wiltshire, PhD candidate in economics at UC Davis, examines Walmart Supercenters in the US, investigating the extent of monopsony power and related wage effects. 

    From the paper:

    “Walmart has long been pointed to as the archetype of a low wage firm which exercises harmful labor market power. Yet prior research has disagreed about how to satisfactorily identify the firm’s impact on local labor markets, leading to disharmonious estimates of the effects. This paper is the first to demonstrate the extent and impact of monopsony power exercised by Walmart Supercenters. I do this first by exploiting the rollout of Walmart Supercenters across the U.S., showing that Supercenter entry into counties had effects on local labor markets that cannot justifiably be described as ‘competitive’. I find that entry caused large and significant declines in overall local employment, earnings, and labor force participation, while the positive shock to retail employment was not long sustained. I then show that an exogenous minimum wage increase yielded large employment gains where Supercenters were already present, again inconsistent with competitive labor markets. These results admit negative spillover effects on local labor markets that extend well beyond a Supercenter’s walls. My results also suggest that minimum wage increases could actually yield employment gains if targeted at labor markets characterized by low-wage monopsony power.” 


    Link to the paper, link to Wiltshire’s website.

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   “In order to revive a developmental agenda, Kirchner was tasked with reconstituting a developmental coalition.” New on the site, Mariano Feliz on the history of Argentine developmentalism and President Fernández’s plans for green development. Link.

    +   “A major reason for these drastic cuts in social sector and welfare spending, and the increasing dependence on market borrowings to fund capital expenditure, is the shrinking share of corporate taxes.” On India’s 2022-23 budget proposal. Link.

    +   “In today’s policy conversation, it’s worth making sure that everyone is on the same page about the primary pathway by which Fed policy slows inflation.” Skanda Amarnath and Alex Williams on how the Fed slows down inflation through the labor market. Link.

    +   Lina Weber on the politics of national debt in 18th century Britain. Link. 

    +   “Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high.” By Antoine Bertheau, Edoardo Maria Acabbi, Cristina Barcelo, Andreas Gulyas, Stefano Lombardi, and Raffaele Saggio. Link. h/tSidhya

    +   Tansen Sen examines India’s decision to recognize PRC in 1949. Link. 

    +   “In Wyoming, schools were the architects of the Mexican race.” Gonzalo Guzmán on racially segregated Mexican schools in the Southwest US. Link. 

    +   Zac Taylor and Manuel Aalbers on climate risk-rent dynamics and gentrification in Miami. Link. h/tPaul

    +   “In the medieval period wool was the only English agricultural product with a substantial international market. From 1336, taxation of the international wool trade was significantly increased by the imposition of heavy subsidies (additional duties) payable to the crown on each sack of exported wool.  My article suggests that government taxation and regulation created a flourishing smugglers’ trade between England’s eastern seaboard and the Low Countries in the middle of the fourteenth century. Even a small quantity of wool was a valuable commodity: a single pound weight of high- quality wool was worth more than an average day’s wages for a skilled building worker such as a carpenter. The substantial costs associated with the wool subsidies prompted numerous smaller-scale exporters to risk the smuggling of relatively small quantities of wool in order to maintain the flow of trade and minimize costs. The practice of smaller-scale smuggling appears to have been endemic in the late 1330s and early 1340s, even though domestic wool prices were depressed.” By Matt Raven. Link. 

  3. Dream Machine

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    PORTS & WAREHOUSES

    The Port of Los Angeles and the Port of Long Beach processed respectively 10.7 and 9.3 million twenty-foot equivalent units of cargo volume in 2021, with the former setting a record high of shipping volume in the Western Hemisphere. Continuing supply chain disruptions have brought new attention to the region’s vast logistics industry.

    In his 2008 book, JUAN D. DE LARA provides a history of the Southern California’s rise as a supply chain hub after the 1970s, through the expansion of ports, transportation services, and inland storage facilities. 

    From the book: 

    “China’s incredible rise as a center of production, when combined with U.S. consumption capacity, created new opportunities for Southern California’s ports to establish themselves as vital transpacific gateways. A report commissioned by the Southern California Association of Governments (SCAG) argued that logistics was the ‘only route that the region has available to helping those workers achieve growing standards of living while simultaneously correcting the recent deep slide in Southern California’s relative prosperity vis-à-vis other major parts of the country.’  The SCAG economists and planners believed that the region’s declining manufacturing sector could be replaced by global logistics. Their rationale seemed to make sense. If regions in the United States were losing manufacturing jobs as a result of economic restructuring, some could gain them back on the other end of the commodity chain by building extensive distribution networks that connected imported products with the insatiable appetite of the American heartland.

    Cities like Los Angeles capitalized on macroeconomic shifts by transforming themselves into transpacific trade gateways. Such a transition was possible because U.S. consumer demand—combined with the shorter product cycles and readily available credit—drove imported commodity shipments to record heights at the same time that U.S. production declined. Values of imported commodities jumped from $790 billion in 1996 to $2.1 trillion in 2008. Los Angeles and Long Beach adopted the global logistics development strategy and pushed ahead of other ports by implementing regional policies that expanded their capacity to absorb a larger portion of Asian imports.”

    Link to the text.

    +  A 2016 article by De Lara, Ellen Reese, and Jason Struna looks at a campaign to organize immigrant, temporary, and subcontracted workers through Warehouse Workers United. Link. In a 2001 article Ruth Milkman and Kent Wong compare organizing efforts at the Los Angeles-Long Beach port to efforts in the custodial, construction, and garment industries. Link. And at Bloomberg, Josh Eidelson on the LA port truckers union push. Link.

    +  Quan Yuan looks at the location of warehouses in Southern California and negative environmental externalities. Link. And a PW newsletter from 2020 looks at supply chains and geographic dispersal. Link. 

    +  Thomas C. Patterson traces the long political and ecological history of California’s “Inland Empire,” from Native American settlement to the present logistics industry. Link. 

    NEW RESEARCHERS

    Affirmative Action in Brazil

    In his job market paper, Sebastián Otero, along with co-authors Nano Barahona and Cauê Dobbin, examines an affirmative action policy that prioritizes marginalized public high school students in Brazil. 

    From the abstract:

    “We examine the effects of a large-scale program in Brazil that mandated all federal public institutions to reserve half their seats for public high school students, prioritizing those from socioeconomically and racially marginalized groups. After the policy was put in place, the representation of public high school students of color in the most selective federal degrees increased by 73%. We exploit degree admission cutoffs to estimate the effects of increasing affirmative action by one reserved seat on the quality of the degree attended four years later. Our estimates indicate that the gains for benefited students are 1.6 times the costs experienced by displaced students. To study the effects of larger changes in affirmative action, we estimate a joint model of school choice and potential outcomes. We find that the policy creates impacts on college attendance and persistence that imply overall income gains of 1.16% for the average targeted student, and losses of 0.93% for the average non-targeted student. Overall, the policy prompted a negligible increase in predicted income of 0.1% across all students in the population. Taken together, we find that the affirmative action policy had important distributional consequences, which resulted in almost one-to one transfers from the non-targeted to the targeted group.”

    Link to the paper, link to Otero’s website.

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   “Given the widespread macroeconomic instability that confronts the Global South, instead of time-consuming and costly bilateral debt renegotiations that financially strained economies can ill afford in this pandemic, now is the time for debt restructuring to employ the principle of ‘economic necessity.'” Mona Ali on the dollar system and debt restructuring. Link.

    +   “This brief critically assesses the argument that a permanent, expanded Child Tax Credit will cause a significant number of parents to drop out of the labor force and dampen its anti-poverty impact. When subject to scrutiny, evidence predicting significant job loss is extremely thin.” JFI Fellow Jack Landry breaks down a recent UChicago paper on the CTC and job loss. Link. 

    +   “It’s only a matter of time before the United States attempts a more aggressive and maximalist use of financial warfare. Whether Russia will be the target after an invasion of Ukraine remains to be seen.” George Pearkes on dollar weaponization. Link. 

    +   Pilar Gonalons-Pons looks at international debates on domestic workers’ labor rights. Link.  

    +   A comparative analysis of individual and collective employment rights in Europe, by Andrew Cumbers, Karen Bilsland, Robert McMaster, Susana Cabaço, and Michael White. Link. 

    +   “The richest 98 Indian billionaires had the same wealth as the poorest 555 million people in India.” A new Oxfam report details growing inequality and the rise of billionaires in India. Link. 

    +   “Major earthquakes in Chile have become a window of opportunity for important fiscal reforms.” By Magdalena Gil and Jorge Atria. Link. 

    +   Brian Beach, John Parman, and Martin H. Saavedra on segregation and early water provision in the US. Link. 

    +   “We examine the effects on town locations of the collapse of the Western Roman Empire, which temporarily ended urbanization in Britain, but not in France. We find that from the Early Middle Ages (700-900) until the dawn of the Industrial Revolution (circa 1700), the persistence of towns compared to the Roman era in France was approximately three times higher than in Britain. The differences in persistence are still visible today; for example, only two of the twenty largest cities in Britain are located near the site of Roman towns, compared to sixteen in France. The resetting of Britain’s urban network gave it better access to natural navigable waterways, which mattered for town growth from 1200-1800. In both Britain and France, towns with coastal access in 1200 grew almost 10 percent faster per century over the subsequent 600 years.We conclude that history trapped many French towns in suboptimal locations.” By Guy Michaels and Ferdinand Rauch. Link.

  4. Sealife

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    HEALTH CARE PRICES

    Concerns over inflation have led to an uptick in research and policy debate over the specific sectoral drivers of price increases—and tools for their management. 

    In a new article in Health Affairs, ROBERT BERENSON and ROBERT MURRAY review the literature and policy thinking on healthcare price regulation.

    From the article: 

    “Acknowledging the pervasive pricing problem, pro-market advocates have offered proposals aimed at making the health care market function better. Proposals include greater price transparency, tiered- and narrow-provider networks, relaxation of provider network adequacy provisions, expanded use of nonphysician health professionals, greater patient cost sharing, wide adoption of telehealth, greater anti-trust enforcement, and prohibition of anti-competitive contract provisions. Regardless of their merits as system improvements, most would serve, at best, as Band-Aids.

    Hospital price regulation can support competition over important care delivery components other than prices, including quality and patient choice, creating stronger incentives for providers to improve operating efficiency while addressing high and rising prices directly. Legislators and policy makers should redirect their energies from debating whether to regulate hospital prices to discussing how best to do so.”

    Link to the article.

    +  In a Washington Post round-up of economists on policy responses to inflation, Employ America’s Arnab Datta, Skanda Amarnath and Alex Williams make the case for wielding existing policy tools to drive down health-care costs. Link. And link to Amarnath and Datta with a more in-depth report on disinflationary healthcare policy.

    +  A 1997 article in JAMA examines managed care and the “merger mania” of the 1990s. And a 2014 article in Health Affairs looks at the impact of consolidation on provider bargaining power. Link, and link. 

    +  A review of the 2020 book Which Country Has The Best Healthcare? revisits and reopens many of the core questions about comparative studies of healthcare systems, including “What exactly is ‘market price’ for a drug in the US?” Link. (And linked within, a 2009 NBER paper by Darius Lakdawalla and Wesley Yin on insurers’ bargaining power and Medicare D.) 

    NEW RESEARCHERS

    Hold-up Power

    In his Job Market Paper, JUSTIN BLOESCH, with co-authors BIRTHE LARSEN and BLEDI TASKA, examines the relationship between firm productivity and worker earnings. Using a measurement of “individual hold-up power,” the paper provides a new framework for understanding wage heterogeneity across firms and occupations.

    From the paper:

    “Workers have individual hold-up power if (i) labor is organized into distinct, differentiated positions (ii) the output of positions is individually complementary or “critical” in the production process, and (iii) skills are position-specific, i.e., skills are acquired on the job and are not transferable across positions or firms. If output losses from an unfilled position are larger at productive firms, incomplete contracts and on-the-job search incentivize productive firms to pay differentially high wages. We estimate individual worker hold-up power by occupation using the effect of worker deaths on firm profits in Danish administrative data and using a measure of within-firm, across-position task differentiation from US job posting data. High hold-up occupations exhibit both higher wage levels and higher long-run passthrough of permanent firm productivity innovations to wages.

    Individual worker hold-up power may also be a useful framework for exploring the borders of the firm, workplace fissuring, and internal pay equity constraints. The observation that industry pay premia in the US were once uniform across occupations, but now firm premia in the US only benefit college educated workers, combined with the pay losses from outsourcing, suggest that changes in internal pay equity constraints may be important for explaining changes in wage inequality. Knowing which occupations have individual hold-up power may predict which workers benefit from erosion of internal pay constraints. Individual hold-up power may also be useful for understanding the boundaries of the firm, as employers may use the boundary of the firm to mitigate hold-up power while outsourcing the lower hold-up jobs.” 

    Link to the paper, link to Bloesch’s research page. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   “This paper shows that racial composition shocks during the Great Migration (1940–1970) reduced the gains from growing up in the northern United States for Black families and can explain 27 percent of the region’s racial upward mobility gap today.” Ellora Derenoncourt’s paper on the Great Migration now published in the American Economic Review. Link.

    +   “Aggregate Demand Externalities, Income Distribution and Wealth Inequality.” By Daniele Tavani and Luke Petach. Link.

    +   “With austerity legally enshrined, new forms of private provision have become crucial to meet people’s essential needs.” Guilherme Leite Gonçalves and Lena Lavinas on “mass-based financialization” in Brazil. Link. And link to a PW discussion with Lavinas, André Singer, and Barbara Weinstein.

    +   Adam Tooze on the inflation debate in Germany. Link.

    +   “Results from our age-period-cohort model of literacy rates reveal a picture of overall stagnation in education quality in the developing world, and fairly stable gaps in quality across countries. We find virtually no case worldwide of dramatic improvements in education quality over a fifty-year time horizon.” By Alexis Le Nestour, Laura Moscoviz, and Justin Sandefur. Link.

    +   In The Guardian, Nicholas Mulder on Keynes and sanctions. Link. And link to Mulder’s new brand book The Economic Weapon.

    +   “Where is Standard of Living the Highest?” By Rebecca Diamond and Enrico Moretti. Link.

    +   A new paper by Luca Fornaro and Federica Romei on optimal monetary policy responses during unbalanced recoveries. Link.

    +   “In the Republic of Venice, the 1629 famine and the 1630–31 plague caused a unique negative macroeconomic shock, that the oligarchic government addressed using a particularly radical form of fiscal monetization that corresponds to the modern notion of ‘net-worth helicopter money.’ We analyze the money-financed fiscal stimulus implemented in Venice during the famine and plague, and argue that the strategy aimed at reconciling the need to subsidize inhabitants suffering from containment policies with the desire to prevent an increase in long-term government debt, but it generated much monetary instability and had to be quickly reversed.” By Donato Masciandaro, Charles Goodhart, and Stefano Ugolini. Link.

  5. Triumph of Bacchus

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    RESOURCE CURSE

    Earlier this month, a wave of protests spread across Kazakhstan. Though prompted by rising gas prices, the demonstrations soon came to target the country’s decades long trajectory of corruption and resource privatization.

    A 2001 article by ERIKA WEINTHAL and PAULINE JONES LUONG contextualizes this trajectory by comparing models of resource ownership in five post-soviet states.

    From the article: 

    “The Soviet Union’s collapse in 1991 produced not only several newly independent states but also a new set of major oil and gas producers: the Russian Federation, Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan. Together with Iran, these five energy-rich Soviet successor states make up the Caspian Basin, which is estimated to hold the largest oil and gas reserves in the world outside the Persian Gulf. They had almost identical starting points when they discovered the potential market value of their oil and gas reserves and assumed control over them. Despite these similarities, they pursued notably distinct strategies toward developing their energy sector. At one end of the spectrum, Turkmenistan and Uzbekistan maintained full state ownership over their respective oil and gas reserves and rejected the direct involvement of international actors in developing them. At the other end, Kazakhstan completely privatized its energy sector by selling the majority of shares in formerly state-owned oil and gas enterprises to foreign investors. In between these two extremes, the Russian Federation privatized its energy sector to domestic capitalists with only a minimal amount of international involvement, whereas Azerbaijan maintained full state ownership over its energy reserves and invited foreign companies to assume a direct role in developing them.

    The purpose of this article is to explain these empirical puzzles and, indoing so, formulate a broader theory of the initial formation of natural resource development strategies. In short, we argue that state leaders choose energy development strategies based on the domestic constraints they face when they either first discover or gain newfound authority over their energy reserves: (a) the availability of alternative sources of export revenue and (b) the level of political contestation. These two domestic factors determine the amount of resources that state leaders possess in the status quo versus the costs they must continue to incur to satisfy their supporters and to appease or defeat their opponents. Hence, they also determine the extent to which state leaders must rely on the energy sector to retain their power.”

    Link to the article.

    +  In a 2002 book, Weinthal analyzes the politics of water ownership in the Aral Sea. Link.

    +  A collection of essays from a 2005 conference on the cotton sector in Central Asia. Including: changing agrarian models in Uzbekistan, privatized production in South Kyrgyzstan, migrant labor conditions in Kazakhstan. Link.

    +  From 2013: Kobil Ruziev and Toshtemir Majidov analyze “the differing effects of the Global Financial Crisis on Kazakhstan, the Kyrgyz Republic and Uzbekistan through trade, foreign worker remittances and banking sector channels.” Link.

    NEW RESEARCHERS

    Infrastructure Financing in China

    In his job market paper, PhD candidate in economics at University of Colorado Boulder XIANG CHI argues that credit misallocation in China’s infrastructure financing widens interregional disparities. 

    From the paper:

    “Over the past decades, China has made remarkable achievements in infrastructure development. However, the 1994 fiscal reform shifted a large portion of local tax revenue to the central government. China’s budgetary law had prevented subnational governments from either running a fiscal deficit or borrowing directly from creditors. To circumvent this statutory restriction, local governments set up state-owned enterprises (SOE) to borrow indirectly for infrastructure investment. This special type of SOE is called the “Local Government Financing Vehicle” (LGFV). The debt raised by LGFVs skyrocketed in the aftermath of the 2008 financial crisis, which aroused widespread attention among policymakers, practitioners, and economists. How does the institutional arrangement in China’s financial market increase the cost of capital in infrastructure financing for underdeveloped areas? First, transportation infrastructure in fiscally strapped cities is more growth-enhancing, as evidenced by higher shadow price in a hedonic approach. However, their cost of capital can hardly rival those of wealthy ones. Second, LGFVs in wealthy and high-notch cities operate with higher leverage and utilize more bond financing, but do not outperform those of low-income cities in terms of profitability and liquidity.” 

    Link to the paper.

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   “We estimate that the program cumulatively preserved between 2 and 3 million job-years of employment over 14 months at a cost of $170K to $257K per job-year retained.” An evaluation of the Paycheck Protection Program. Link.   

    +   “How do we know how many people are working?” Skanda Amarnath and Alex Williams in Barron’s on prime-age employment rate versus the U-3 unemployment rate, and the implications of employment metrics the Fed’s dual mandate. Link.

    +   Sultan Mehmood, Shaheen Naseer, and Daniel Li Chen examine Pakistani policymakers’ responses to evidence. “Treated deputy ministers were willing to spend 50% more from their own pockets and 300% more from public funds for evidence in the form of randomised evaluations. In contrast, they were 50% less willing to pay for correlational evidence.” Link. h/t Paul

    +   Ilias Alami, Milan Babic, Adam Dixon, and Imogen Liu on the “new state capitalism.” Link.  

    +   “Something strange has happened to Yemen’s banknotes. Old rials and new rials have ceased to be fungible. Any rial note that was printed prior to 2016 is now worth around 10% more than newer rial notes.” JP Koning on Yemen’s bifurcated monetary system. Link to a 2020 post, link to a recent update.

    +   “Austerity measures taken to varying degrees by the Nixon, Ford, and Carter administrations coincided with accelerating price increases.” In Equitable Growth, Andrew Elrod looks to 1970s ‘stagflation’ to warn against austerity measures today. Link. See also: Elrod’s recent PW essay on the theory and history of price controls in the US. Link. 

    +   On the long-term environmental consequences of the Korean War, by Su-Kyoung Hwang. Link. 

    +   “Are There Too Many Farms in the World?” Mark Rosenzweig and Andrew Foster on farm size, output, and productivity. Link. 

    +   “This paper is about what we call the first digital revolution, a radical transformation of the world, particularly evident in the world of finance, which occurred under the reign of Queen Victoria, with bifurcation between 1850 and 1880. The computers that generated the first digital revolution were organic: They were human machines. Starting with the annuity, for which early calculators developed formulae enabling the determination of interest rates, a universe of financial calculations emerged comprising algorithms and the computers that employed them. These innovations were rapidly disseminated throughout the 19th century. The inflection point was 1848. To support this transformation, ‘human computers’ had to be trained, formatted, and organized to upload the latest information. This task fell upon the British Institute of Actuaries, created in the same year, which started the registration of ‘human machines.'” By Marc Flandreau and Geoffroy Legentilhomme. Link. 

  6. Blue

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    STEEL

    This week, the Indian megaconglomerate Adani Group and South Korean steel company POSCO announced plans to build a “green” integrated steel mill in Gujarat, India. The mill marks the latest in the Adani Group’s efforts to move into the green industrial sector and builds on India’s longstanding role as a major producer of steel. 

    Looking back on the founding of India’s first steel mill in 1907, Mircea Raianu’s 2021 book on the Tata corporation illuminates the industry’s role in the growth of institutions of corporate and public ownership, labor, and economic development.

    From the book: 

    “Jamshedpur was the first company town established by Indians and the site of the first successful experiment with heavy industry in the interior of the subcontinent. Tata’s pioneering foray into steelmaking marked a turning point in the spatial reorientation of Indian capitalism away from the coastal world of export trade. The ‘interior’ was perceived by nationalists and colonial administrators alike as a ‘repository of hidden wealth and resources.’ However, the advance of modern industry threatened to disturb the existing social order and undermine the state’s commitment to render the landscape ‘productive and secure for the formation of stable village communities.’ Colonial land law was still in the process of formation, caught between these contradictory impulses. The passage of the far-reaching Land Acquisition Act (1894) allowed for compulsory dispossession for the benefit of private companies if they fulfilled a ‘public purpose,’ which usually meant infrastructural improvements such as railways and ports. Even though the distinction between public and private was murky and ill defined, the state remained the ‘supreme landlord.’ If companies like the Tata Iron and Steel Company (TISCO) were allowed to administer vast tracts of land under the ‘public purpose’ clause, this supremacy risked being undermined. At the provincial level, the Chotanagpur Tenancy Act (1908) was meant to protect the customary rights of adivasi (aboriginal/tribal) cultivators by expressly prohibiting the transfer of land to nontribals. Its passage was part of the countervailing tendency to forestall the decay of a settled agrarian order.

    By exploiting these ambiguities and contradictions, Tata seized the weapons of colonial lawfare, deploying them against the weak while also turning them against the state. From 1909 to 1919, Tata cemented control over the space that became Jamshedpur in stages. Some villages were left undisturbed, only to be acquired later. Others were immediately displaced, with recalcitrant tenants facing a barrage of lawsuits. Through this process, TISCO became a quasi-sovereign power, simultaneously acting as employer, landlord, and municipal government. Neither the colonial state nor its postcolonial successor was ever able to undo this anomalous arrangement. The Jamshedpur model of private urban governance proved exceptionally resilient. It represented a flexible, heterogeneous form of corporate sovereignty, dependent on the state in some respects but fiercely resistant to it in others.”

    Link to the book.

    +  Vinay Bahl’s 1995 book examines how TISCO and worker struggles through the colonial period shaped India’s working class. Link. And a 1959 article by Subbiah Kannappan details a significant strike at TISCO’s Jamshedpur. Link

    +  “The aim was to triple the domestic production of steel, establish large-scale integrated steel plants at Rourkela, Bhilai and Durgapur with international assistance from West Germany, the then USSR and the United Kingdom.” Miho Mazereeuw,  Mayank Ojha, and Aditya Barve look at the development of India’s steel towns post-independence. Link. And a closer look at Bhilai, a Soviet-built steel town, by Jonathan Parry. Link. 

    +  Anthony P. D’Costa compares twentieth-century state-led industrialization of the steel industry in India, Brazil, and Korea. Link. And Nagesh Kumar and Alka Chadha look at foreign acquisitions by Indian and Chinese steel companies. Link. 

    NEW RESEARCHERS

    Outsourcing & Collective Bargaining 

    In his job market paper, PhD candidate in economics at Columbia University DANIEL MARK DEIBLER studies the effects of outsourcing on wages in the German labor market. 

    From the abstract:

    “Firms can decide whether to produce some goods and services in-house or purchase them from the market. Increasingly, they are purchasing from the market—using subcontractors, temp agencies, and other outsourced labor. This paper measures the impact of occupational layoff (OL) outsourcing, where firms outsource some occupations, on the earnings and separations of workers who remain employed by those firms. Using employer-employee data based on German social security records in a dynamic difference-in-differences design, outsourcing increases remaining workers’ long-run earnings by 6% in a sample of 260 OL outsourcing events. Remainers are also more likely to stay at the outsourcing firm—outsourcing decreases the probability of remainers switching firms by 7.5 percentage points. Higher earnings and fewer separations are consistent with remainers receiving additional rents. Earnings gains are larger for workers in the bottom-half of the within-firm earnings distribution. Outsourcing only increases remainers’ earnings in firms with collective bargaining agreements (CBAs). In firms with CBAs, outsourcing increases remainers’ long-term earnings by 6%. In firms without CBAs, outsourcing lowers short-term earnings by 3%.” 

    Link to the paper, link to Deibler’s website. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   JFI is thrilled to announce that Claudia Sahm is joining the organization to direct a new initiative in macroeconomic research. Link to the announcement, and link to a full description of the program.

    +   “Despite the post-Nixon taboo, price setting continues to characterize the economy of the United States.” New on PW this week, Andrew Yamakawa Elrod writes on the history of American price controls. Link. 

    +   In the New York Times, a summary article on the recent spate of interest and debate in the history of price controls, see by Ben Cassleman and Jeanna Smialek. Link.

    +   And on the specific issue of corporate profits and inflation, see: this post by Joseph Politano, arguing against a correlation; this article by Matthew Boesler, Joe Deaux and Katia Dmitrieva on the “fattest margins since 1950”; and this article by Molly Smith and David McLaughlin on the possibility of “sticky” inflation due to corporate pricing plans. 

    +   Dina Siddiqi on 40 years of Bangladesh’s garment industry. Link. 

    +   Akshaya Jha, Louis Preonas, and Fiona Burlig on blackouts and wholesale electricity markets in the developing world. Link.

    +   The Arpit Gupta Stijn, Van Nieuwerburgh, and Constantine Kontokosta on the Q train expansion and value capture in New York City. Link.

    +   A study of India’s pharmaceutical production and its status as the “pharmacy of the developing world” post-TRIPS. Link. 

    +   Stephany Griffith-Jones and Moritz Kraemer on credit ratings agencies and developing economy debt. Link.

    +   “In nineteenth-century Westphalia, the practice of impartible inheritance excluded the siblings of farm successors from access to their parents’ land. Without a land market, the only way for children who did not inherit a farm to obtain landed property, as well as high social and economic status, was to marry the heir to someone else’s farm. Social-network and regression analyses show that the attainment of status depended not only on the socioeconomic standing of young people’s families of origin but also on their parents’ social networks. The parents who were most successful at placing their children in desirable social stations were those who occupied central positions in the godparenting network.” By Christine Fertig. Link. 

  7. Man on Moon

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    PROPERTY RECORDS

    Wealth and political power often come from property ownership, but the dynamics of real estate transactions are often invisible to the general public. Absent a national property database, researchers in the United States are left sifting through tax parcel data scattered across 3,000+ counties or purchasing proprietary data on public transactions. Transparency is further clouded by the use of shell companies like limited liability companies, where no owner is easily discernible. Examining landownership at scale—crucial to studies of contemporary inequality—means contending with a bevy of structural barriers.  

    A 2020 paper by LOKA ASHWOOD, JOHN CANFIELD, MADELEINE FAIRBAIRN, and KATHRYN DEMASTER delivers tools to confront this obstacle to research. While they focus on property ownership across US farmland, their framework and methodology lays out a crucial path for urban land and real estate researchers as well.  

    From the paper: 

    “We devised a new methodology for uncovering corporate organization and actors who benefit from farmland investment through an analysis of creditors and proprietors. Our study begins at the bottom, studying corporate landownership in west central Illinois, known for its landscape of flat black eighties—a descriptor for the richest, blackest plots of eighty acres, but an area that also includes lower-grade ground. We researched corporate names, ownership addresses, and creditor–debtor relationships by combining county-level tax parcel data with documents available through LexisNexis Public Records, a paid subscription database that includes Uniform Commercial Code (UCC) filings and SmartLinx Comprehensive Business and Person Reports. We uncovered a suite of structures and practices unique to corporations that enable land investment, such as limited liability, subsidiaries, and internal markets for credit. We found that the extent of absenteeism increases with the more complex forms of corporate investment, which often are more recent, but increasingly powerful, actors. Those corporations most active in the financialization of farmland bring together constellations of subsidiaries, even making their own internal markets for the intra-company exchange of capital.”

    Link to the text.

    +  Focusing on Milwaukee, Adam Travis examines shell companies commonplace in rental housing markets, which are linked to absentee and neglectful landlords. Link. Margot Gibbs and Agustin Armendariz investigate how LLCs, trusts, and other shell companies hide wealth in offshore tax havens. Link.

    +  How do you make data accessible and transparent? Two examples offer a path: a 2007 National Research Council framework for a US land parcel data (cadastral) system, and British Columbia’s 2020 Land Owner Transparency Act and registry. Link and link. Find more information on global property ownership resources and databases here. 

    +  In 1978, Doreen Massey and Alejandrina Catalano’s Capital and Land: Landownership by Capital in Great Britain called attention to often the largest national landowner: the state. Brett Christophers’s 2018 update shows how the UK sold off £400bn worth of public land and buildings to the private market. Link. 

    The spotlight of this newsletter was written by guest contributor Renee Tapp, Urban Studies Foundation Postdoctoral Research Fellow in the Department of Urban Planning and Policy at the University of Illinois at Chicago. Her research interests include housing, real estate finance and property ownership, taxation, and urban politics. Link to her website.

    NEW RESEARCHERS

    Community College & Local Labor Markets

    Assistant professor of economics at Miami University RILEY ACTON studies the economics of education. In her job market paper, she looks at how enrollment in community college programs responds to local job losses. 

    From the abstract:

    “In this paper, I use administrative data on the postsecondary education choices of recent Michigan high school graduates to determine how local, occupation-specific job losses affect community college program enrollments. My empirical approach exploits plausibly exogenous variation in students’ exposure to local job losses resulting from mass layoffs and plant closings that differentially affect particular occupations. I find that, on average, an additional layoff per 10,000 working-age residents in a county reduces the share of the county’s high school graduates enrolling in related community college programs the following year by 0.8%. Correspondingly, a one standard deviation increase in layoff exposure reduces enrollment by 3.8%. This effect is driven by students substituting enrollment between community college programs rather than forgoing higher education opportunities. Leveraging data on occupational skill requirements from the U.S. Department of Labor’s Occupational Information Network, I document that students primarily shift their enrollment into programs that require similar cognitive and technical skills to the field affected by layoffs.”

    Link to the paper, link to Acton’s website. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   “An environmental mandate, now what?” A new report by Yanis Dafermos, Daniela Gabor, Maria Nikolaidi, and Frank van Lerven on the BoE’s greening of its corporate bond purchases. Link. (And link to coverage in Bloomberg.) 

    +   Jonas Meckling on the potential and limitations of green industrial policy. Link.

    +   “To pursue the new policies within the old constitutional structures, policymakers engage in strategic ambiguity.” Jens van ’t Klooster on policy shifts without legislative change in the EU. Link. 

    +   Michela Giorcelli and Nicola Bianchi on the Marshall Plan’s impacts on infrastructure in Italy. Link. 

    +   “Combining new municipal and survey data from the Colombian armed conflict, I find evidence that the expansion of a land-intensive industry—African palm oil—precipitated opportunistic displacement by elites and paramilitary allies.” Juan Fernando Tellez on demand for land and displacement. Link.

    +   “Efforts to marketize and commercialize agricultural credit through these projects often reflected mundane operational challenges as much as ideological shifts, and themselves largely failed even on their own terms.” Nick Bernards on the World Bank’s agricultural credit programs. Link.

    +   Jason Feldman on the last year of the pandemic. Link.

    +   A study of employment decentralization and the Black-White housing gap since the Great Recession, by Jared Ragusett. Link.  

    +   “This paper focuses on the price of nails since 1695 and the proximate source of changes in those prices. First, from the late 1700s to the mid 20th century real nail prices fell by a factor of about 10 relative to overall consumer prices. These declines had important effects on downstream industries, most notably construction. Second, while declining materials prices contribute to reductions in nail prices, the largest proximate source of the decline during this period was multifactor productivity growth in nail manufacturing, highlighting the role of the specialization of labor and re-organization of production processes. Third, the share of nails in GDP dropped back from 0.4 percent of GDP in 1810—comparable to today’s share of household purchases of personal computers—to a de minimis share more recently; accordingly, nails played a bigger role in American life in that earlier period.” By Daniel Sichel. Link. 

  8. The Banquet

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    A YEAR IN REVIEW

    Over the last year, PW Sources has covered a wide range of issues—from caste and labor, to social policy in Brazil, to capital flight, and more. We will be off until 2022. As we look forward to the new year, here’s a roundup of favorite newsletter spotlights, new researcher features, and Phenomenal World articles from 2021. 

    Thank you for reading, and best wishes for the holiday season.  

    SOURCES

    +  Near the start of the year, we spotlighted a working paper that probed the question of 1970s inflation and the Volcker shock. Jonathon Hazell, Juan Herreño, Emi Nakamura, and Jón Steinsson write: “An alternative to the standard narrative of the Volcker disinflation is that the decline in inflation was driven not by a steep Phillips curve but by shifts in beliefs about the long-run monetary regime in the United States that caused the rapid fall in long-run inflation expectations. Volcker’s monetary policy constituted a sharp regime shift that was imperfectly credible at the outset but became gradually more credible as time passed.” Link to the paper, and link to the archived newsletter. 

    +  Weeks after a massive earthquake subsequently followed by a coup in Haiti, guest contributor Simon Hinrichsen looked at a recent paper arguing for the inclusion of Haiti’s post-independence debt in broader sovereign debt literature: “By any reasonable definition, the Haitian Independence Debt would seem to be odious. The circumstances suggest coercion, as does the fact that the agreement obliged Haitians to pay compensation for the freedom they had already won. The amount has been reported at around 300% of Haitian GDP (270% in our estimates), and it was understood that Haiti could pay only by borrowing vast sums from French banks, thus transforming the indemnity into a debt burden that would persist for generations.” Link to the paper by Kim Oosterlinck, Ugo Panizza, Mark C. Weidemaier, and Mitu Gulati, and link to the archived newsletter. 

    +  In November, the Modi administration announced it would repeal the three farm laws that had been the center of massive protests over the past year. In a newsletter from February, we shared a paper by Abhijit Sen and Jayati Ghosh that investigated the impacts of the nation’s 1990s liberalization measures on farming: “Even if no explicit attention was paid to agriculture, various economic policies and other changes in patterns of government spending and financial measures had significant implications for the conditions of cultivation. Over the initial period of economic reforms, which coincided with government attempts at fiscal stabilisation, there were actual declines in government expenditure on agriculture and rural development.” Link to the paper, and link to the newsletter. 

    NEW RESEARCHERS

    + Michael Glass studies suburban inequality and pension management: “Throughout the 1950s, the comptrollers who managed the New York State Employee Retirement System (NYSERS), the nation’s largest state pension, underwrote the boom in suburban school construction by purchasing the municipal bonds of local school districts.” Link to the paper, and link to the newsletter where Glass was featured. 

    + Felipe González examines Chilean firms’ responses to the end of the Pinochet dictatorship: “We find that firms with links to the Pinochet regime (1973–1990) were relatively unproductive and benefited from resource misallocation under dictatorship. After learning that the dictatorship was going to end, firms in the dictator’s network increased their productive capacity, experienced higher profits, and obtained more loans from the main state-owned bank.” Link to the paper, and link to the archived newsletter. 

    +  Jennifer Withrow looks at women in the Great Migration: “I find that Black and white women were up to 7 to 13 percentage points more likely to leave the farm than their male counterparts. I also find that racial segregation in urban employment and in farming had important ramifications for who among rural women were most likely to leave, as Black women were more constrained by family responsibilities and had fewer options for urban work that rewarded education than white women.” Link to the paper, and link to the newsletter. 

    PHENOMENAL WORLD

    +  New this week on PW: A report by Eduard Nilaj in the Millennial Student Debt series analyzes the link between homeownership and rising student debt, finding a 24% decline in the homeownership rate among student borrowers from 2009 to 2019.  Link. And Francisco Durán Del Fierro and Will Kendall examine growing neofascism in Chile’s upcoming elections. Link.

    +  In our first post of 2021, Yakov Feygin looked at the power of ‘the deflationary bloc.’ “Redistributing gains away from workers, financial deregulation integrated global economies in a manner that allowed states to pursue growth strategies benefiting an exclusive class of rentiers. This new class supported deflationary policies long after inflation posed an imminent threat.” Link. 

    +  This year saw the publication of PW’s first book volume, Market Economy, Market Society: Interviews and Essays on the Decline of European Social Democracy. In his introductory essay, Adam Przeworski writes: “While communists continued to adhere to ‘class contra class’ strategy, socialists formed coalitions and fronts aimed at appealing to ‘the people.’ Thus was born reformism: the strategy of proceeding towards socialism by steps, and through electoral expression of popular support.” Link to the piece. 

    +  In the weeks around a contested New York City mayoral primary, Kim Phillips-Fein and Ben Holtzman discussed the legacy of the 1970s fiscal crisis: “We see this complete change to tax incentives being used to subsidize upper-income housing. Incentives for luxury housing are used to attract people from outside the city, instead of supporting those who are in desperate need of housing within the city.” Link. 

    +  Amidst growing discussion around labor shortages, Andrew Yamakawa Elrod analyzed the construction industry: “Long before the proliferation of app-based employment in transportation, the shift in the construction industry towards independent contracting by nonunion employers marked the emergence of the gig economy.” Link. 

    +  In September, Ernest Ming-Tak Leung examined the origins of East Asian developmentalism: “What the history of planning in the region suggests is that China’s model owes much to this older ideology of State Socialism. Even today, the legacy of State Socialism and the Saint-Simonian spirit can still be felt in the 14th Five Year Plan, now under execution in China, and its ‘Belt and Road Initiative.'” Link. 

  9. Winter

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    SOVEREIGN DEBT

    In the 1970s, the study of Latin America was an intellectual crossroads for scholars of political economy, with discussion around theories of dependency, growth, and development being evaluated against the contemporaneous experience of Latin America states. But the lost decade of debt crisis in the 1980s saw a rich interchange around historical terrain collapse into a desire for “historical lessons.” 

    In his 1990 monograph on the Latin American debt crisis of the 1820s, international lawyer and historian Frank Griffith Dawson resurfaced the fascinating contingencies, innovations, and human dilemmas of the world’s first modern debt and investment boom. The book provides an eminently useful account of the tangle of statecraft, geopolitics, and private capital that defined the fundamental structure of sovereign debt markets. 

    From the book: 

    “The public’s eagerness to subscribe to the new Latin American loans was not solely attributable to apparently high yields and pledged revenues. The early 1820s were years of extravagant dressing, living, eating and drinking – and of frantic gambling. The gambling fever infected all classes. In the smoke-filled upper rooms of disreputable London taverns the less affluent even would wager on how many rats a terrier could kill in a few minutes. The rodents were enclosed in a wooden-sided arena and the terrier released among them. In one particularly gruesome encounter one hundred rats were massacred in a record-breaking eight minutes. Nor was the gambling vice confined to towns. In the country, cockfights, race meetings and bare-knuckle prize fights provided additional opportunities to win or lose purses weighted with the newly introduced gold sovereigns. The chance to speculate in Latin American bond issues provided but another outlet for the national gambling instinct.

    The pattern of dashed hopes and broken promises will seem distressingly familiar to bankers who over the last eight years have watched the Latin American loans which they happily put on their books in the 1970s turn inexorably into non-producing assets. The total borrowed in 1822-5 is of course dwarfed by today’s US$416 billion debt overhang. Moreover, the structure of today’s international capital market is vastly different from the far simpler financial environment in which the first Latin American credits were launched. Nevertheless, many of the remedies which modern bankers and the creative lawyers have devised to ameliorate, if not resolve, the present debt crisis, were invoked by their financial predecessors one hundred and fifty years ago. Capitalization of interest arrears, extension of repayment periods, interest rate concessions, exchanging equity for debt, providing new money with which to service prior obligations, and accepting goods in lieu of monetary repayments were all suggested or utilized to cope with the first Latin American loan defaults—with but limited success.”

    Link to the text.

    +  Carlos Marchial’s classic work examines every subsequent Latin American debt crisis after the 1820s. Link. And in a volume edited by Barry Eichengreen and Peter Lindert, prominent economists and historians emphasize parallels between the 1980s debt crisis and earlier lending. Link. 

    +  Richard Salvucci offers a case study of Mexico’s troubles with sovereign debt in the nineteenth century. Link. 

    +  Pierre Penet and Juan Flores’s recent edited volume widens the lens of sovereign debt across the world, from the colonial era until the present. Link. 

    The spotlight of this newsletter was written by guest contributor Felipe Ford Cole, a legal historian and Sharswood Fellow and Lecturer-in-Law at the University of Pennsylvania Carey Law School. His research examines how the law shapes the balance between sovereign power and the power conferred to private capital at different levels of government. His current projects focus on the legal historical evolution of public debt markets and the theory of sovereignty.

    NEW RESEARCHERS

    Private Equity & Hospitals 

    In his job market paper, TONG LIU, a PhD candidate in finance at the Wharton School, University of Pennsylvania, studies the effects of private equity hospital buyouts on prices and welfare. 

    From the abstract:

    “I use proprietary health insurance claims data covering over 60% of privately insured individuals in the United States to study the impact of private equity (PE) hospital buyouts on hospital–insurer price negotiations, health spending, and patient welfare. I apply a novel structural approach that exploits state-level regulation changes as PE entry shocks. I find that PE buyouts lead to an 11% increase in total healthcare spending for the privately insured in affected markets, driven mostly by higher bargained prices at PE-backed hospitals and price spillovers to local rivals. PE investors’ superior bargaining skills account for 43% of the price and spending increases, while financial engineering and bankruptcy threats contribute 40%, changes in patient demand contribute 10%, and reduced focus on social objectives contributes 8%. Operational efficiency gains reduce spending, but only by 1%. A counterfactual ban on PE hospital buyouts would increase patient surplus by an amount equivalent to 10.7% of health expenses.” 

    Link to the paper, link to Liu’s website. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

    + + +

    +   “Contrary to the widespread view, we demonstrate that Europe’s lower inequality levels cannot be explained by more equalizing tax-and-transfer systems.” A comparison of inequality in the US and Europe, by Thomas Blanchet, Lucas Chancel, and Amory Gethin. Link.

    +   JW Mason outlines a Keynesian theory of climate policy. Link.

    +   Michela Giorcelli and Bo Li on Sino-Soviet technology transfers in the 1950s and implications for early industrial development. Link. 

    +   On the structural power of BRICS nations and the New Development Bank, by Niall Duggan, Juan Carlos Ladines Azalia, and Marek Rewizorski. Link. 

    +   “In the present, multinational corporations and Euro-American governments are trying to reverse some of the key political visions and victories of HIV-AIDS internationalism.” Dwaipayan Banerjee on vaccine access and health internationalism. Link. 

    +   In Rest of World, Marcela Del Muro González looks at the effects of the global chip shortage on Mexican workers. Link. 

    +   “It takes a few minutes in space travel to emit at least as much carbon as an individual from the bottom billion will emit in her entire lifetime.” From the 2022 World Inequality Report. Link. 

    +   Antonio Coppola, Matteo Maggiori, Brent Neiman, and Jesse Schreger examine offshore tax havens and map global capital flows. Link. 

    +   “We identify a structural asymmetry in which public finance consistently supports the profitability of the private financial sector, but not vice versa.” By Martine August, Dan Cohen, Martin Danyluk, Amanda Kass, CS Ponder, and Emily Rosenman. Link. h/tPaul. 

    +   “How did rats spread through the western provinces of the Roman empire? The answer entails two further historical and zoological problems—black rats’ sedentary nature (and, therefore, their limited range of active movement) and their differences in behavior due to the ecological gradient. With respect to the first, the consensus is that black rats normally do not range much beyond 200 m. Hence, absent human assistance, over land rat colonization would proceed at a rate of about 20 km per century.  If this rate of selfpowered locomotion is even remotely accurate, rats clearly did not traverse under their own power the more than 800 km from the Mediterranean coast to a first-century archaeological site at Baron, near Senlis, in only two to four centuries. Most Roman rat finds occur within 10 km of sea coasts or river banks. In many, if not all, of these cases, the rat colonies could have been established and reinforced via passive transport on sea or river vessels.” By Michael McCormick. Link. 

  10. The Spinning, Spinning, Turning, Directing

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    DEFORESTATION

    Deforestation in Brazil’s Amazon rainforest has reached its highest rate in 15 years, with satellite footage recording 5,110 square miles of deforested land. Despite coordinated threats of divestment, institutional investors have thus far failed to act.

    A recent book by KEITH PLUYMERS historicizes these conflicts. Looking at 17th century debates over domestic wood scarcity, it considers the role of deforestation in shaping the ambitions and structure of the English empire.

    From the introduction: 

    “In 1611, the agricultural writer Arthur Standish worried that England faced a wood supply crisis. ‘Want of wood’ led undermined tillage and led desperate people to burn straw for fuel instead of feeding their cattle. Moreover, he cautioned, scarcity sparked ‘discontents and mutinies among the common sort.’ Standish saw wood shortages as a threat to England’s material, social, economic, and political order. As he succinctly put it, ‘No wood, no Kingdom.’ By contrast, in 1615, Sir Dudley Digges wrote a pamphlet in defense of the East India Company and foreign trade. He denounced anxieties about wood scarcity as hollow rhetoric deployed by aesthetes, the parasitic poor and the feckless landlords who profited from them, and desperate colonial promoters seeking to justify their poor investment.

    Wood scarcity became a critical issue for early modern people because the early modern world was a wooden one. Wood was crucial to the survival of the poor and the security of the state. It built and fueled commercial enterprises, ranging from cottage industries to manufacturing projects aimed at international markets. Rethinking the meaning of English wood scarcity forces us to reasses why English people sailed across the sea to colonize, what they found when they arrived, and how those colonies fit into different early modern English politcal ecologies. Though North American colonies were essential for Europe to be able to evade hard natural limits, the colonies did not begin to supply significant quantities of timber to Britain until the nineteenth century. This does not mean that wood scarcity played no role in English expansion. Instead, it requires that we look at early modern politics and perceptions to see how competing claims about depleted domestic forests and abundant colonial woods sought to forge or sever connections among places, people, and trees.”

    Link to the text.

    +  Paul Warde presents a cross-national synthesis of wood shortage fears across Europe from 1450-1850. He concludes: “A general shortage of wood was not plausible before the later eighteenth century. Earlier fears were generated above all by competition among different users of the woodland.” Link.

    +  From 2008, K. Sivaramakrishnan reviews six key texts on forestry in colonial India. Link. And from 2010, Gregory A. Barton and Brett M. Bennett analyze “Anglo-Siamese Relations and the Origins of Britain’s Informal Empire in the Teak Forests of Northern Siam, 1883–1925.” Link. 

    +  “A meta-analysis of 268 case studies of tropical forest cover change indicates that deforestation shifted from a state initiated to an enterprise driven process between 1970 and 2000.” Thomas K. Rudel on the changing composition of forestry investment. Link.

    +   A 2017 paper by Alessandro Baccini et. al finds that “tropical forests are a net carbon source,” with “with losses owing to deforestation and reductions in carbon density within standing forests being double that of gains resulting from forest growth.” Link.

    NEW RESEARCHERS

    Nativism in the Labor Market

    PhD candidate in sociology at Brown University NICOLE KREISBERG focuses on immigration, population studies, and the labor market. Her dissertation examines the effects of nativity and legal status on Latino men’s employment. 

    From the abstract:

    “This article examines whether and why employers screen higher-educated Latino men based on nativity and legal status. The field experiment, a correspondence audit study of 1,364 real jobs in eight cities, shows that employers are twice as likely to call back native-born as foreign-born Latinos. Paradoxically, however, employers do not differentially screen foreign-born Latinos based on legal status: employers called back documented green card holders with full work rights at almost the same rates as undocumented Latinos without the right to work. A national survey experiment of 468 HR representatives, and interviews with 23 HR representatives and immigration lawyers, reveal that individual and organizational mechanisms explain why employers are reluctant to hire Latino immigrants, regardless of their legal standing. Individually, employers hold nativist views about Latino immigrants’ English language ability, which they perceive could threaten workplace culture. And organizationally, employers associate Latino immigrants with immigration enforcement and deportation, which they perceive could threaten workplace stability.”

    Link to the paper, link to Kreisberg’s website. 

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    +   “The Peasants’ Revolt, which erupted in England in the summer of 1381, was by far the largest and most widespread popular uprising in the nation’s history. Questions about the relative importance of the various discontents that provoked
    rebellion, and the historical legacy of this momentous event, remain unanswered. Systematic analysis of the victims’ backgrounds and a detailed investigation of the rebels’ actions, demonstrates that the rebels were highly selective in choosing targets. My data indicate that the targets of the Cambridgeshire rebels were overwhelmingly the state and its functionaries — both local and national — and that attacks on landlords, simply because they were landlords, were rare.” By Mingjie Xu. Link. And read a PW Sources from earlier this year marking the 640th anniversary of the revolt. Link.