Monday NBER round-up
"The Institutional Causes of China's Great Famine, 1959-61," by Xin Meng, Nancy Qian and Pierre Yared:
This paper investigates the institutional causes of China’s Great Famine. It presents two empirical findings: 1) in 1959, when the famine began, food production was almost three times more than population subsistence needs; and 2) regions with higher per capita food production that year suffered higher famine mortality rates, a surprising reversal of a typically negative correlation. A simple model based on historical institutional details shows that these patterns are consistent with the policy outcomes in a centrally planned economy in which the government is unable to easily collect and respond to new information in the presence of an aggregate shock to production.
"The Lessons From the Banking Panics in the United States in the 1930s for the Financial Crisis of 2007-2008," by Michael D. Bordo and John Landon-Lane:
In this paper we revisit the debate over the role of the banking panics in 1930-33 in precipitating the Great Contraction. The issue hinges over whether the panics were illiquidity shocks and hence in support of Friedman and Schwartz (1963) greatly exacerbated the recession which had begun in 1929, or whether they largely reflected insolvency in response to the recession caused by other forces. Based on a VAR and new data on the sources of bank failures in the 1930s from Richardson (2007), we find that illiquidity shocks played a key role in explaining the bank failures during the Friedman and Schwartz banking panic windows.
In the recent crisis the Federal Reserve learned the Friedman and Schwartz lesson from the banking panics of the 1930s of conducting expansionary open market policy to meet demands for liquidity. Unlike the 1930s the deepest problem of the recent crisis was not illiquidity but insolvency and especially the fear of insolvency of counterparties.
"Technology Diffusion and Postwar Growth," by Diego A. Comin and Bart Hobijn:
In the aftermath of World War II, the world's economies exhibited very different rates of economic recovery. We provide evidence that those countries that caught up the most with the U.S. in the postwar period are those that also saw an acceleration in the speed of adoption of new technologies. This acceleration is correlated with the incidence of U.S. economic aid and technical assistance in the same period. We interpret this as supportive of the interpretation that technology transfers from the U.S. to Western European countries and Japan were an important factor in driving growth in these recipient countries during the postwar decades.
| September 20, 2010; 3:26 PM ET
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