Research

This paper argues that international and domestic political economy factors are key determinants of creditor countries’ commercial policy responses to sovereign debt defaults. We illustrate this argument using a unique historical case study: the German external default of the 1930s. Our new historical narrative of this episode reveals that the various creditor countries adopted markedly different trade policy responses to the default depending on their degree of economic leverage on Germany and on the relative political influence of various interest groups within their domestic economy. These factors account for the pattern of Germany’s bilateral trade with the different creditor countries during the 1930s as well as for the differential treatment of various countries’ bondholders by the German government. 

(Download ungated SSRN version here)

German history over the past 125 years has been turbulent. Marked by two world wars, revolutions and major regime changes, as well as a hyperinflation and three currency reforms, expropriations and territorial divisions, it provides unique insights into the role of country-specific shocks in shaping long-run wealth dynamics. This paper presents the first comprehensive study of wealth and its distribution in Germany since the 19th century. We combine tax and archival data, household surveys, historical national accounts, and rich lists to analyze the evolution of the German wealth distribution over the long run. We show that the top-1% wealth share has fallen by half, from close to 50% in 1895 to 27% today. Nearly all of this decline was the result of changes that occurred between 1914 and 1952. The interwar period and the wealth taxation in the aftermath of World War II stand out as the great equalizers in 20th century German history. After unification in 1990, two trends have left their mark on the German wealth distribution. Households at the top made substantial capital gains from rising business wealth while the middle-class had large capital gains in the housing market. The wealth share of the bottom 50% halved since 1990. Our findings speak to the importance of historical shocks to the distribution and valuations of existing wealth in explaining the evolution of the wealth distribution over the long run.

(Download  CEPR paper here  , Data Appendix here )

(Download  (old) Econtribute study here )

Sovereign governments often discriminate between creditors during debt default episodes. This paper explores how expectations of selective default affect sovereign bond trading and sovereign risk premia based on a historical laboratory: the German external default of the 1930s. We exploit a unique feature of the interwar sovereign bond market: identical German government bonds were traded on different creditor countries' secondary debt markets but investors expected creditors from various countries to be treated differently in case of default. We show that, when creditor countries' secondary debt markets are integrated, selective default expectations are not reflected in bond yields but affect the volume of bonds traded across markets. By contrast, when creditors' debt markets are geographically segmented, a large selective risk premium can be priced in sovereign bonds. This premium accounted for up to half of the total risk premium on German external bonds during the 1930s. We establish that creditor countries' seniority ranks can be explained by their economic power over the debtor government.

(Download CEPR Working Paper here, ungated SSRN version here)

Why do large differences in fiscal capacity exist between states in the Global South? We construct a comprehensive new dataset of tax and revenue collection for 46 African polities from 1900 to 2015. Descriptive analyses show that many polities in Africa have been characterized by strong growth in real tax collection. As a next step, we employ these data to test theories of fiscal capacity in a long-run panel setting, using fixed-effects and causal estimation techniques. The results show democratic institutions and interstate warfare can increase fiscal capacity, while government turnover reduces it. However, these factors are conditional on the availability of debt financing and external aid, which by themselves reduce incentives to invest in fiscal capacity. Leveraging new data on exogenous movements in commodity prices, we show that resource income does not generally lead to lower capacity. These insights add important nuance to established theories of state-building.

Download AEHN Working Paper here, featured by Brookings Institute (Figures of the Week) and VoxEU

Historical city directories are rich sources of micro-geographic data. They provide information on the location of households and firms and their occupations and industries, respectively. We develop a generic algorithmic work flow that converts scans of them into geo- and status-referenced household-level data sets. Applying the work flow to our case study, the Berlin 1880 directory, adds idiosyncratic challenges that should make automation less attractive. Yet, employing an administrative benchmark data set on household counts, incomes, and income distributions across more than 200 census tracts, we show that semi-automatic referencing yields results very similar to those from labour-intensive manual referencing. Finally, we discuss potential applications in economic history and beyond.

(Download published EEH paper here,  CRC Working Paper (preprint) here, the algorithm is available on GitHub, paper is forthcoming in the   Special Issue on "Methodological Advances in the Extraction and Analysis of Historical Data"  by Explorations in Economic History)

Based on a novel monthly dataset of about 1150 time series, this study provides monthly GDP per capita estimates for 28 countries for the Great Depression. These facilitate more adequate cross-country comparisons of the prelude, timing, depth and duration of the crisis than commonly employed industrial production indices do. We show that steady growth in the second half of the 1920s was far from universal. While the start of the Great Depression was very synchronised around the globe, the sequence of countries entering it suggests that the transmission of American monetary policy through the gold standard played an important role for its onset. However, mapping the Great Depression’s cumulative loss and duration indicates a rising importance of the trade channel at later stages of the crisis. Moreover, the recovery from the recent crisis appears less gloomy if GDP rather than industrial production data is used. 

(Paper , Full Data and Replication files)                                        

Albers Interwar Macro Panel Dataset: To import the main indicators (monthly GDPs, imports, exports, and prices) as a panel data set into stata, you can simply type "use https://sites.google.com/site/tnhalbers/data/Albers_Interwar_MacroPanel.dta" in the command line or download it here.

This book chapter provides an overview about our knowledge about inequality in the 19th century in Germany. Drawing on new data and existing models, we rationalise the observed patterns of inequality with the effects of globalisation and industrialisation as well as the growing importance of wage growth.

This book chapter provides an overview about the available data and challenges regarding the emergence of the fiscal state in Africa. We characterise the heterogeneity and common trends in the experience of 46 polities for more than 100 years. 

This book chapter provides an overview about our knowledge about inequality in the 19th century in Germany. Drawing on new data and existing models, we rationalise the observed patterns of inequality with the effects of globalisation and industrialisation as well as the growing importance of wage growth.

To access my full thesis, including the four articles above as well as an introductory chapter comparing the Great Depression with all other economic crises since 1870 and a concluding chapter discussing implications, please click here.

We harness big data to detect prime locations - large clusters of knowledge-based tradable services - in 125 global cities and track changes in the within-city geography of prime service jobs over a century. Historically smaller cities that did not develop early public transit networks are less concentrated today and have prime locations farther from their historic cores. We rationalize these findings in an agent- based model that features extreme agglomeration, multiple equilibria, and path dependence. Both city size and public transit networks anchor city structure. Exploiting major disasters and using a novel instrument - subway potential - we provide causal evidence for these mechanisms and disentangle size- from transport network effects.

(Download CEPR Working Paper here, Theory appendix here, Global Cities Dataset appendix here)

 We propose that false beliefs about the own current economic status are an important factor for explaining populist attitudes. Along with the subjects’ receptiveness to right-wing populism, we elicit their perceived relative income positions in a representative survey of German households. We find that people with pessimistic beliefs about their income position are more attuned to populist statements. Key to understanding the misperception-populism relationship are strong gender differences in the mechanism: Misperception triggers income dissatisfaction for both men and women, but the former are much more likely to channel their discontent into affection for populist ideas.

We develop a granular spatial model (GSM) which introduces indivisible workers and firms into the canonical quantitative urban model. Assortative matching between heterogeneous employers and employees leads to the formation of large granular firms, which generates realistic agglomeration patterns with many empty locations and a few extremely dense ones, even with flat location fundamentals. This feature makes the GSM particularly suitable for the study of multiple equilibria and the long-run effects of temporary spatial shocks such as natural disasters or place-based policies. As almost all firms are inframarginal in the GSM, especially the most productive ones in the most dense locations, place-based policies become ‘place-based lotteries’: their expected payoff critically hinges on the probability to attract a few large firms. We illustrate these insights using as an example the spectacular recent rise of Chicago’s Fulton Market district west of the Loop.

(Download CEPR Working Paper here, Ungated version here )

How do macroeconomic crises spread from developed economies to the rest of the world? To what extent does the fate of small open economies depend on the economic powerhouses of the world? Drawing on evidence from the mother of all modern economic crises, the Great Depression, this study sets out to shed light on these questions. Making use of cross-sectional and time-series variation deeply rooted in the history and geography of trade, a causal estimate of the foreign trade multiplier allows me to assess the role of trade destruction in the fall of incomes during the 1930s. Indeed, the trade channel can explain large parts of the downturn in small open economies. If there had not been a fall in export demand, some countries would not have suffered a downturn in the initial phase of the Depression at all.

This paper relates physical and political trade frictions in the interwar period from a micro, macro and theoretical perspective. Results from a gravity model suggest that the elasticity of trade with respect to distance was declining in absolute terms, thus documenting a diminishing importance of the physical trade barrier. In contrast, novel micro data on transport costs and prices for wheat substantiate previous findings on increasing real transport costs, which should drive countries further apart and render distance more important. Taken together, this evidence constitutes the interwar distance puzzle, which strikingly mirrors the missing globalisation puzzle found for the post-war period. Theoretical considerations illuminate a potential mechanism to solve both puzzles. Instead of being a proxy for transport costs only, the distance elasticity depends on transport costs and tariffs. As tariffs increase, the importance of distance as a trade friction between countries declines. Relating data on maritime freight rates, tariffs, and prices for wheat lends further support to the proposed mechanism: the change in tariffs was much larger than in maritime freight rates, if one calculates their ad valorem equivalents. Besides substantiating the proposed solution to the puzzle, this finding confirms doubts that transport costs were a more important driver of the interwar trade collapse than tariffs.