Inequality, Foreign Investment, and Imperialism. Cambridge Journal of Economics (Revise and resubmit Jan 2019)

with Branko Milanovic (CUNY Graduate Center) and Suresh Naidu (Columbia)

Abstract: We present an empirical restatement of the classical economic theory of imperialism and the origins of World War I. Using recent data, we show 1) inequality was at historical highs in all the advanced belligerent countries at the turn of the century, 2) rich wealth holders invested more of their assets abroad, 3) risk-adjusted foreign returns were higher than risk-adjusted domestic returns, 4) establishing direct political control decreased the riskiness of foreign assets, 5) increased inequality was associated with higher share of foreign assets in GDP, and 6) increased share of foreign assets was correlated with higher levels of military mobilization. Together, these facts suggest that the classic theory of imperialism may have some empirical support.

.pdf Booth blog post

Aggregate Wealth and Its Distribution as Determinants of Financial Crises. Journal of Economic Inequality (Revise and resubmit Nov 2018)

Abstract: This paper investigates the relationship between wealth inequality and financial crises. While substantiation of a role for income inequality remains ambiguous in the literature, evidence is presented suggesting a positive relationship between the interaction of wealth inequality with aggregate wealth on systemic financial crises. The evidence is based on panel data for nine countries, some of which expand into the last century, and a linear probability model estimated with country and year fixed effects. The relationship is consistent when accounting for overall financial sector size, credit growth, the money supply, current account, asset bubbles, and robust to estimation method. No significant role is found for income inequality. Predicted probabilities of financial crisis closely track the incidence of financial crises over the last century, remarkably so when compared against a leading benchmark model. It is argued that the empirical relationship between wealth inequality, aggregate wealth and financial crises reveals an important role for the distribution of accumulated assets in the macro-financial stability of rich countries. The distribution of stocks may capture structural vulnerabilities that the distribution of flows cannot expose, and hence more unequal countries in wealth face greater financial instability. An economic network hypothesis is proposed for interpreting the empirical results.

.pdf OSM

Wealth Inequality, Network Topology and Financial CrisisEconomic Theory (Submitted for initial review Dec 2018)

Abstract: A theoretical financial network model is proposed for understanding the relationship between wealth inequality and financial crises, or instability. Financial assets link individual asset and liability holders to form a static economic network. The total number of financial assets an individual owns represents their in-degree and the distribution of those assets is imposed by an in-degree distribution---equivalent to the wealth distribution. A network's topology varies with the level of wealth inequality and total wealth, and together they determine network contagion in the event of a random negative income shock to an individual. Simulations demonstrate that increasing wealth inequality, imposed exogenously through the degree distribution's skewness parameter, makes a wealthy network less stable---as measured by the share of individuals failing financially. Aggregate wealth also has an inverted U-shaped effect on the model's network stability. The simulation results suggest a unique structural role for the distribution of accumulated assets in macro-financial stability.

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Instability, Credit, and Inequality in the Twentieth Century

Working Paper: May 2017

Abstract: This paper studies the long-run relationship between financial instability, wealth inequality and aggregate wealth, and household debt. Specifically, it examines whether wealth inequality and aggregate wealth are contributing forces to the level of financial instability in the United States over the 20th century, or whether debt is a more crucial lever. A more traditional role for income inequality is also investigated and compared, in which its long-run increases may add to household debt and, from there, to a financial crisis. Applying a vector autoregression model, which assumes the endogeneity of the variables, and studying any cointegrating relations provides statistical validity to these relationships through rigorous specification and hypothesis testing. Results show that wealth inequality, acting in concert with the large accumulation of aggregate financial wealth, contributes significantly and positively to financial instability. A second long-run relationship is found between household debt and wealth inequality, whereby increases in financial instability are the main adjusting force back to stationary levels. Less robust evidence is found strongly linking household debt to financial instability, though income inequality does significantly contribute to debt long-term. Together, these results emphasize the important role for the distribution of accumulated wealth in the stability of the US economy.



Application of Social Network Analysis in the Estimation of Bank Financial Strength During the Financial Crisis. (April 2014) NLP Unshared Task in PoliInformatics.

with Michelle Morales, David Guy Brizan, Hussein Ghaly, Min Ma, Syed Reza, and Andrew Rosenberg

Abstract: The Financial Crisis of 2007--2008 was a very complex and impactful global event. The goal of this research is to explore the possibility of using a bank’s social relations to estimate a bank’s financial strength. We apply Natural Language Processing techniques to a corpus of financial data released by the NLP Unshared Task in PoliInformatics in 2014 in order to explore and better understand this possibility. Our work begins with the extraction of named entities from the corpus to establish names of people involved in the crisis. We then aggregate the social histories of these individuals from an online collaborative knowledge base: Freebase. Accordingly, we use the social histories of entities to establish social connections between them. We end with a visualization of the connections we found: a presentation of a social financial crisis network.

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Effects of Inequality on the US Current Account: A Long-Run Perspective

Working Paper: June 2014

Data .pdf



Income and Wealth Distributions: An Application of Copulas

with Hui Liu

Working Paper: May 2014

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Cointegration of US Income Inequality and Financial Sector Size

Working Paper: Dec 2013

Data .pdf

Works in Progress



Income Inequality and Innovation the US Since 1975 with Russell Funk (Minnesota)



Policing Tactics and Income Inequality: Another Perspective on NYPD Stop and Frisk.

Files

CUNY GC Beamer Template

CUNY Graduate Center LaTeX Beamer template that I created (based on a University of Copenhagen theme).

To use, download .tex file and .pdf images and place in same folder.

.tex Image 1 Image 2

Other Publications

Svejk vs. Cimrman: A Comparison in Satire. KOSMAS Czechoslovak and Central European Journal, Vol. 21(3) (2007), 84-89.

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