Foreign Debt, Capital Controls, and Secondary Markets: Theory and Evidence from Nazi Germany
Journal of Political Economy, 2024

Papadia, Andrea; Schioppa, Claudio A.
We investigate how internal distribution motives can affect the implementation of an important macroeconomic policy: capital controls. To do this, we study one of history's largest debt repatriations, which took place under strict capital controls in 1930s Germany, providing a wealth of quantitative and historical evidence. We show that the authorities kept private repatriations under strict control, thus avoiding detrimental macroeconomic effects, while allowing discretionary repatriations in order to reap internal political benefits. We formalize this mechanism in a model in which elite capture can affect optimal debt repatriations and the management of official reserves under capital controls.

The Effects of Banking Competition on Growth and Financial Stability: Evidence from the National Banking Era
Journal of Political Economy, 2022

Carlson, Mark; Correia, Sergio; Luck, Stephan
How does banking competition affect credit provision and growth? How does it affect financial stability? In order to identify the causal effects of banking competition, we exploit a discontinuity in bank capital requirements during the nineteenth-century National Banking Era. We show that banks operating in markets with lower entry barriers extend more credit. The resulting credit expansion, in turn, is associated with additional real economic activity. However, banks in markets with lower entry barriers also take more risk and are more likely to default. Thus, we provide causal evidence that banking competition can cause both growth and financial instability.

Discrimination, Managers, and Firm Performance: Evidence from 'Aryanizations' in Nazi Germany
Journal of Political Economy, 2021

Huber, Kilian; Lindenthal, Volker; Waldinger, Fabian
Large-scale increases in discrimination can lead to dismissals of highly qualified managers. We investigate how expulsions of senior Jewish managers, due to rising discrimination in Nazi Germany, affected large corporations. Firms that lost Jewish managers experienced persistent reductions in stock prices, dividends, and returns on assets. Aggregate market value fell by roughly 1.8% of German GNP because of the expulsions. Managers who served as key connectors to other firms and managers who were highly educated were particularly important for firm performance. The findings imply that individual managers drive firm performance. Discrimination against qualified business leaders causes first-order economic losses.

Income and Wealth Inequality in America, 1949-2016
Journal of Political Economy, 2020

Kuhn, Mortiz; Schularick, Mortiz; Steins, Ulrike I.
This paper introduces a new long-run data set based on archival data from historical waves of the Survey of Consumer Finances. Studying the joint distribution of household income and wealth, we expose the central importance of portfolio composition and asset prices for wealth dynamics in postwar America. Asset prices shift the wealth distribution because of systematic differences in household portfolios along the wealth distribution. Middle-class portfolios are dominated by housing, while rich households predominantly own business equity. Differential changes in equity and house prices shaped wealth dynamics in postwar America and decoupled the income and wealth distribution over extended periods.