Richard C. Sutch, University of California, Riverside and NBER
Hard Work, Nonemployment, and the Wealth-Age Profile: Evidence of a Life-Cycle Strategy in the United States During the Nineteenth Century
Sutch examines a series of surveys of (primarily) industrial workers taken in the late-nineteenth century United States to support the proposition that life-cycle saving was common and that, as a consequence, saving rates of the working class were surprisingly high. The surveys have detailed information on income, wage rates, occupation, unemployment, self-reported "productivity," savings, and also some limited information on asset holdings. There are also retrospective questions that allow him to examine how things changed for individual workers over time. Saving behavior in this era seems to have been motivated by the challenges that industrial workers of the time faced as they aged: declining incomes, more frequent and longer episodes of unemployment, and voluntary or unavoidable downward occupational mobility. While full retirement was also common for the very old, accumulated assets were primarily a protection against falling income and enforced idleness at a time when many elderly could not depend upon their grown children to support them. Sutch supplements the worker surveys with evidence of wealth holdings from the public-use samples of the 1870 U.S. Census of Wealth material previously under-appreciated by economic historians. The information collected has, as should be expected, some deficiencies, but with due attention to the quality of the data and the conceptual problems that confound its interpretation, he is willing to proceed. The conclusions challenge the findings of life-cycle skeptics such as Michael Darby, Laurence Kotlikoff, Lawrence Summers, and others.
Daniel K. Fetter, Wellesley College and NBER
How Do Mortgage Subsidies Affect Home Ownership? VA Home Loans and the Mid-20th Century Transformation in U.S. Housing Markets
The sharpest increase in U.S. home ownership over the last century occurred between 1940 and 1960, driven largely by a decrease in the age at first ownership. To shed light on the contribution of several coincident large-scale government interventions in housing finance, Fetter examines veterans' home loan benefits provided under the postwar GI Bills. He applies a regression discontinuity design to two breaks in the probability of military service by date of birth, for cohorts coming of age at the end of World War II and the Korean War, to estimate the impact of veteran status on home ownership. He finds significant, positive effects of veteran status on home ownership in 1960. Consistent with a model in which the impact of easier loan terms declines with age, these effects are larger for younger veterans and diminish in 1970 and 1980 as the cohorts age. Complementary analyses suggest veterans' non-housing benefits and military service itself are unlikely to explain the observed differences in home ownership. The baseline estimates here imply that veterans' housing benefits can explain approximately 10 percent of the increase in aggregate home ownership from 1940 to 1960.
Leah Platt Boustan, University of California, Los Angeles and NBER, and Robert A. Margo, Boston University and NBER
White Suburbanization and African-American Home Ownership, 1940-1980 (NBER Working Paper No. 16702)
Between 1940 and 1980, the rate of homeownership among African-American households increased by close to 40 percentage points. Most of this increase occurred in central cities. Boustan and Margo show that rising black homeownership was facilitated by the filtering of the urban housing stock as white households moved to the suburbs, particularly in the slower growing cities of the Northeast and Midwest. Both OLS and IV estimates imply that up to one half of the national increase in black homeownership over the period can be attributed to white suburbanization.
Karen Clay, Carnegie Mellon University and NBER; Jeff Lingwall, Carnegie Mellon University; and Melvin Stephens, University of Michigan and NBER
Compulsory Attendance Laws and Nineteenth Century Schooling
Clay, Lingwall, and Stephens use census and administrative data and difference-in-difference estimation to identify the effects of compulsory attendance laws on the school attendance of white children outside the South during 1860-1920. The previous literature found little effect of the laws, which is somewhat surprising, given that the passage of laws coincided with rising attendance. This paper finds modest average effects of the laws, 2-4 percent increases in enrollment, for the 1880-1900 and 1900-1920 periods. The effects were larger for specific age and demographic groups, including thirteen-year-olds, children of immigrants, urban children, and males.
Erik Heitfield, Federal Reserve Board of Governors; Gary Richardson, University of California, Irvine and NBER; and Shirley Wang, Cornell University
Contagion During the Initial Banking Panic of the Great Depression
Throughout the 1930s bank failures were highly clustered in time and space. This suggests that financial linkages between banks and/or systematic shocks that affected many banks simultaneously played important roles in depression era banking panics. Heitfield, Richardson, and Wang use a Bayesian hazard rate model of bank suspensions with spatial and network effects to explore modes of contagion during the banking panic of 1930 in Tennessee, Mississippi, and Alabama.
Douglas A. Irwin, Dartmouth College and NBER
Did France Cause the Great Depression?(NBER Working Paper No. 16350)
The gold standard was a key factor behind the Great Depression, but Irwin asks why it produced such an intense worldwide deflation and associated economic contraction? While the tightening of U.S. monetary policy in 1928 is often blamed for having initiated the downturn, France increased its share of world gold reserves from 7 percent to 27 percent between 1927 and 1932 and effectively sterilized most of this accumulation. This "gold hoarding" created an artificial shortage of reserves and put other countries under enormous deflationary pressure. Counterfactual simulations indicate that world prices would have increased slightly between 1929 and 1933, instead of declining calamitously, if the historical relationship between world gold reserves and world prices had continued. The results indicate that France was somewhat more to blame than the United States for the worldwide deflation of 1929-33. The deflation could have been avoided if central banks had simply maintained their 1928 cover ratios.