J. R. Kearl

Inflation, Mortgages, and Housing

It is hypothesized that constant payment mortgages (imposed, in part, by regulation) lead to distortions in the housing market in the face of anticipated inflation. The nature of this distortion is specified within a model of the housing market. Evidence is presented supporting the existence of the distortion. Moreover, this evidence is found to be robust to various structural and reduced form specifications of the model. A concluding section uses simulation to estimate the total loss to the housing stock up to 1974 attributable to the distortion. It is also shown that the production mix is affected by the inflation-induced distortion.

Household Wealth in a Settlement Economy: Utah, 1850–1870

The economics of David Ricardo and the contemporary evidence for the economic importance of information suggest that time of entry into an economy should be an important determinant of wealth. This hypothesis is validated for nineteenth-century Utah, since time of entry into the economy had a larger impact on the level of wealth than did occupation, birthplace, sex, region of settlement, or age. This finding suggests that the effect on wealthholding of variables often given a discriminatory interpretation such as foreign birth may be overstated if time of entry into the economy is ignored. It also helps to explain the increase in inequality as the settlement process continues.returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong neither yet bread to the wise, nor yet riches to men of understanding, nor yet favor to men of skill; but time and chance happeneth to them all.

Unobservable Family and Individual Contributions to the Distributions Ofincome and Wealth

This paper uses combinations of full brothers, half brothers, and fathers and sons to measure the effect of common family background on a households income and wealth. While the data are drawn from a nineteenth-century population, the intraclass correlation for income ranges from .13 to .18, which is similar to that found in modern samples. Intraclass correlations for wealth are significantly higher (.18-.35) than are those for income. Intraclass correlations of half brothers compared to those for full brothers suggest that fathers play a dominant role in the transmission of the common family effect. When unobserved background is decomposed into individual and family effects, the individual effect dominates the family effect for income, while the family effect dominates the individual effect for wealth.

The Life Cycle in Economic History

The life cycles of income and wealth form important traces of the economic history of households. Comparisons of cross-sectional estimates of the age-wealth profiles from 1774 to 1962 reveal little change in the basic pattern although crosssectional age-income or earnings profiles peak later in modern periods because of the increased investment in human capital.The wealth-income ratio appears to be declining. Multivariate regressions for Utah households show wealth-income patterns consistent with a life cycle model based on smoothing of consumption with little interaction between age and other determinants of economic position. Foreign birth has a positive effect on income while reducing wealth.

Mobility and Distribution

This article examines the mobility of Utah households as measured by their wealth holdings reported in the census manuscripts of 1860 and 1870. Substantial mobility is observed though there is a tendency for the households to remain in the richest decile. Control for age, nativity, or dichotomies such as urban-rural or farm and nonfarm does not substantially reduce mobility. The lack of association of characteristics with the observed mobility, combined with high levels of cross-sectional inequality, highlights the importance of measuring mobility as well as wealth or income dispersion in order to make valid normative inferences. S UBSTANTIAL effort has been devoted to analyses of distributional inequality, whether measured by individual incomes, earnings, or wealth holdings. As a consequence, we know a good deal about dispersion at various points in time for measures of economic position and hence about the changes in dispersion across decades and even centuries: income, earnings and wealth distributions evidence considerable dispersion and the dispersion appears to have narrowed somewhat in the twentieth century after earlier increases in inequality. However, the small changes happen slowly so that the stability of measured dispersion over decade or longer intervals is remarkable (Williamson and Lindert, 1980). We know a good deal less about economic mobility-the movement of individual households through these disperse distributions (cf. McCall, 1973, or Schiller, 1976). This paper considers evidence of mobility for a panel of households with a relatively stable distribution through time sampled from an economy with increasing inequality in wealth holdings. We find substantial mobility over a two-decade interval. Mobility of the sort we observe poses some difficulties for normative judgments when distributional dispersion is an element in welfare evaluations of a society or of policies likely to have distributional impacts. We return to this issue briefly in a concluding section. I. The Distribution of Wealth in Utah,

Rules, rule intermediaries and the complexity and stability of regulation

Abstract Regulating imposes costs. I suggest that an understanding of the dynamics of the regulatory process rests on a consideration of responses to these costs. In particular, I suggest that specialist or rule intermediaries will emerge who serve a useful function in lowering the social costs of a given regulatory scheme but who enter with two interests, one in the complexity of the regulatory process, particularly its procedural aspects, and a second interest in the relative stability of the regulatory environment. Hence, I provide an alternative to the regulation-as- redistribution models that explains the existence of interested third parties to regulation as well as ‘red tape’. Moreover, an explanation of ‘red tape’ does not need to rest on peculiar interests of the regulators or bureaucrats but on an economic interest of the third party. In addition, my analysis suggests that regulation need not be effective at redistribution.

The Covariance Structure of Earnings and Income, Compensatory Behavior and On-the-Job Investments

Observationally alike individuals who make different choices about on-the-job investments should have earnings profiles that differ in systematic ways. In particular, investments in non-specific human capital should result in lower initial earnings but higher earnings growth rates. Human capital models of this sort admit testing, then, by examining the covariance between the level of earnings and the growth rate of earnings. This paper reports estimates of this covariance using the sample covariance among income observations across time for the same individuals. The sample covariances are drawn from the Utah Panel Data, a panel of some 16,000 households with income and wealth observations at various intervals over the period from 1850 to 1900. The parameter of interest is negative. This estimate is robust to various specifications of the model. I also reexamine earlier work by Lillard and Weiss and Hause, who use data on earnings, and conclude that there is strong support for the on-the-job investment hypothesis using data from thre equite different sources covering different economies and different time periods.

Wealth Mobility: The Missing Element

We consider the problems that may arise when cross sectional data alone are used for inferences about individual welfare, the existence of elites, the possibilities of class boundaries, the openness of a society, etc. We also consider problems with alternative measures of socio-economic position. We then use a sample of 2400 households observed over one or two decade intervals together with data on the population of households at each observation point to examine mobility within the distribution of wealth for an almost closed economy, Utah, 1850-1870. We use information on households to examine those characteristics that contribute to mobility. We find considerable mobility, much apparently stochastic, within quite highly skewed distributions of wealth that also exhibit increasing inequality through time.