Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020
Quarterly Journal of Economics, 2024

Derenoncourt, Ellora; Kim, Chi Hyun; Kuhn, Moritz; Schularick, Moritz
The racial wealth gap is the largest of the economic disparities between Black and white Americans, with a white-to-Black per capita wealth ratio of 6 to 1. It is also among the most persistent. In this article, we construct the first continuous series on white-to-Black per capita wealth ratios from 1860 to 2020, drawing on historical census data, early state tax records, and historical waves of the Survey of Consumer Finances, among other sources. Incorporating these data into a parsimonious model of wealth accumulation for each racial group, we document the role played by initial conditions, income growth, savings behavior, and capital returns in the evolution of the gap. Given vastly different starting conditions under slavery, racial wealth convergence would remain a distant scenario, even if wealth-accumulating conditions had been equal across the two groups since Emancipation. Relative to this equal-conditions benchmark, we find that observed convergence has followed an even slower path over the past 150 years, with convergence stalling after 1950. Since the 1980s, the wealth gap has widened again as capital gains have predominantly benefited white households, and convergence via income growth and savings has come to a halt.

Shattered Housing
Journal of Financial Economics, 2024

Happel, Jonas; Karabulut, Yigitcan; Schafer, Larissa; Tuzel, Selale
Do negative housing shocks lead to persistent changes in household attitudes toward housing and homeownership? We use the residential destruction of Germany during World War II (WWII) as a quasi-experiment and exploit the reasonably exogenous region-by-cohort variation in destruction exposure. We find that WWII-experiencing cohorts from high destruction regions are significantly less likely to be homeowners decades later, controlling for regional differences and household characteristics. Underlying this effect are changes in household attitudes toward homeownership that also extend to preferences for housing consumption, with little or no support for risk preferences, income and wealth effects, or supply-side factors.

Inflation and Individual Investors' Behavior: Evidence from the German Hyperinflation
Review of Financial Studies, 2023

Braggion, Fabio; von Meyerinck, Felix; Schaub, Nic
We analyze how individual investors respond to inflation. We introduce a unique data set containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the German hyperinflation. We find that individual investors buy fewer (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. Moreover, we document a positive relation between local inflation and forgone returns following stock sales. Our findings are consistent with individual investors suffering from money illusion. Alternative explanations, such as consumption needs, are unlikely to drive our results.

Independent Regulators and Financial Stability Evidence from Gubernatorial Election Campaigns in the Progressive Era
Journal of Financial Economics, 2024

Del Angel, Marco; Richardson, Gary
Regulatory independence forms a foundation for modern financial systems. The institutions' value is illuminated by a Progressive Era policy experiment when independent state-bank regulators came under governors' supervision. Afterwards, bank resolution rates declined during gubernatorial election campaigns for banks supervised by state but not national authorities. This gubernatorial-campaign effect diminished by two orders of magnitude, but did not disappear, after the FDIC became the independent resolver for all insured banks in 1935. In addition, during the Progressive Era, declines in bank resolutions led to declines in business bankruptcy rates, an effect that is not observed in the FDIC era. Our findings indicate regulatory independence can dramatically reduce but may not eliminate politics' impact on banks and the economy.

Real Effects of Supplying Safe Private Money
Journal of Financial Economics, 2024

Xu, Chenzi; Yang, He
Privately issued money often bears default risk, which creates transaction frictions when used as a medium of exchange. The late 19th century US provides a unique context to evaluate the real effects of supplying a new type of money that is safe from default. We measure the local change in "monetary" transaction frictions with a market access approach derived from general equilibrium trade theory. Consistent with theories hypothesizing that lowering transaction frictions benefits the traded and inputs-intensive sectors, we find an increase in traded goods production, in the share of manufacturing output and employment, and in innovation.