12:00-12:50

Financial Fragility and Central Bank Liquidity Operations
Christiaan van der Kwaak (University of Amsterdam)

At the end of 2011 and the beginning of 2012, the ECB engaged in large scale liquidity provision to the European commercial banking system in exchange for eligible collateral. The interest rate against which banks could borrow from the ECB was substantially below prevailing interest rates on the unsecured interbank market. Theoretically, the provision of cheap liquidity by the central bank should have an expansionary effect on output. But when commercial banks are undercapitalized, cheap liquidity provision can actually be contractionary in the short run. Commercial banks shift out of private loans, since they are not eligible as collateral, to purchase assets that are eligible as collateral, leading to a contraction in private credit, investment and output. I construct a DSGE model that contains balance sheet constrained financial intermediaries that finance private loans and long term government bonds. The central bank provides cheap liquidity to commercial banks, for which commercial banks need to post collateral in the form of government bonds. I calibrate the model on data from the European periphery. Although bank balance sheets recover faster when cheap central bank funding is available, with positive long run effects on investment and output, the cumulative impact of the central bank policy is approximately zero. I therefore investigate a direct recapitalization by the fiscal authority, for which the crowding out of private credit does not occur, and find that it is much more effective in advancing the economic recovery

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13:00-13:50

Buying First or Selling First in Housing Markets (JMP)
Florian Sniekers (University of Amsterdam and VU University Amsterdam)

Housing transactions by owner-occupiers take two steps, a purchase of a new property and sale of the old housing unit. These two decisions are not independent, and their sequence may depend on the state of the housing market. This paper shows how the transaction sequence decision of owner-occupiers depends on, and in turn, affects housing market conditions in an equilibrium search-and-matching model of the housing market. We show that home-owners prefer to buy first whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to self-fulfilling fluctuations in prices and time-on-market. Equilibrium switches creates large fluctuations in the housing market, which are broadly consistent with stylized facts on the housing cycle

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14:00-14:50

Turnover Costs in the Postbellum South
Guilherme Vala Elias Pimentel de Oliveira (University of Amsterdam)

This paper analyzes the role of turnover costs in agriculture in the distribution of sharecroppers and in the emergence of legislation restricting labor mobility in the US South after the American Civil War/Reconstruction period (1861-1877). I follow Hanes (1996) and define turnover costs as “an employer’s costs of searching for a new worker, going without labor in the meantime, and providing a new hire with firm-specific skills”.

Economics literature and historiography repeatedly underline the importance of turnover in Postbellum South. More specifically, sharecropping and legislation limiting labor mobility were solutions to minimize turnover costs, since slavery, the previous solution, was abolished in 1865.

However, to my knowledge, no econometric analysis has verified such claims. Moreover, the literature worries about labor availability without attending to technological heterogeneity across agriculture crops, failing to explain the wide spatial variations in sharecropping and legislation. For instance, some crops have narrower harvesting periods.

Therefore, uncovering these details contributes to the literature on the economic origins of labor institutions. It also sheds new light on the use and persistence of sharecropping contracts in farming.

The empirical strategy runs on panel-data referring to the period 1880-1950 but with different geographical units. In order to study the origins of sharecropping, I run county-level regressions explaining the number of sharecroppers. The historical analysis identifies the main types of legislation reducing labor mobility at the state level. Thus, for instance, I run a state-level regression to explain the maximum fine of anti-enticement laws, which forbade a third-party to hire a worker with a contract with another employer. Variables range from demographic data to historical climate data, from census to archival data.

On the one hand, I find some evidence supporting the turnover cost theory in crops’ technology. On the other hand, I find no evidence for the availability of labor force. Therefore, there is evidence pointing for sharecropping and labor legislation more as means of labor exploitation than as minimizers of turnover costs.

Discussant: Yuan Yue

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