This note challenges the proposition David Lam made in his attempt to examine the relationship between population growth and the distribution of income. In the first 2 sections of his paper in which no income mobility was allowed Lam successfully analyzed the effects of adding to the economy a group of immigrants (with income distribution different from the original residents) on 2 inequality measures. In the 3rd section Lam made the strong proposition that claims in effect in order to determine whether an increase in the ith-income groups fertility would increase or reduce the steady-state proportion of the ith-income group all the information needed is the ith row of the mobility matrix. A counterexample is presented here along with a correction for the error that is made in the derivation of Lams proposition.

In a recent issue of this REVIEW, a note by Peter Schmidt (1976) was published that commented on a paper by Dennis Aigner and myself (1968) that appeared in the American Economic Review. Schmidt's paper is interesting and stimulating, and contributes to the understanding of the problems of estimating production functions in some respects. However, some statements made in the article seem to be based on a misunderstanding of our original paper. Therefore, a response is in order to clarify some of the points discussed in his article.

I study asset fire sales by commercial banks during the financial crisis. Specifically, I find that banks with lower liquidity levels post lower asking prices, receive lower sale prices, and are less likely to sell REO properties to natural buyers. Further analysis shows that the results are unlikely to be driven by omitted variables related to local conditions, property characteristics, or bank characteristics. To establish causality, I use the losses banks incur due to house price drops as the instrument for bank liquidity and find similar results in two-stage least-squares instrumental variable regressions.

This paper studies how interstate banking deregulation affects credit supply, focusing on distinguishing the balance sheet and bank competition channels. Using a regression discontinuity design, I find that interstate banking deregulation affects credit supply, not only by legally impacted commercial banks, but also by non-legally impacted non-bank lenders. Controlling for lender-year fixed effects to isolate the balance sheet effect, I find that credit supply by the same lender varies with interstate banking restrictions in different states. Overall, the results suggest that the impact of interstate banking deregulation is mostly driven by the bank competition channel.

One question development economists are especially interested in but so far left unanswered is: how would the societal income distribution be affected by introducing a family-planning program to reduce the reproduction rate of the poor which is usually high in developing countries? The purpose of this paper is to search for analytical answers to this question. We are able to make definite comparisons about some class of inequality measures of the steady-state societal income distributions and these comparisons provide strong theoretical support in favor of the above-mentioned family-planning program. (EXCERPT)

On the basis of anthropologists' area-specific research of primogeniture, I propose a Becker-Barro type of dynastic model in which primogeniture may emerge as family heads' optimal policy to minimize their respective lineal extinction probability. I show that parents' bequest division will be affected by the intrinsic mobility structure of the society, contrary to previous causality conjecture. Although an unequal division of bequests widens the within-generation inequality, it may increase the intergenerational upward mobility for the well-endowed child, which in turn improves the originally rigid upward mobility of the poor and middle-income groups and, as a result, reduces the steady-state income inequality.

I study how shareholder litigation affects the cost of bank loans via its impact on the distribution of bankruptcy estate and the conflict of interests between shareholders and creditors. Using a natural experiment based on a ruling by the Ninth Circuit Court of Appeals, I find that increasing the difficulty of class action suits decreases loan spreads. The effect is stronger for firms with higher institutional ownership, which is consistent with the argument that class actions suits help shareholders extract wealth from creditors when the firm is in bankruptcy. Further analysis shows that the effect is weaker for firms with stronger creditor protection in bankruptcy.

Transfer-function estimation results for bank M&As in Canada during 1867–1935 support the concentration-stability hypothesis. The systemic stability is attributed to risk reduction through geographic diversification as 2/3 of the M&As were cross-province acquisitions. Furthermore, our empirical findings together with a probabilistic theoretical model support the efficiency hypothesis rather than the imminent failure hypothesis. They not only shed light on the debate in the literature but also have policy lessons for M&As today. More specifically, two mega-mergers would have been denied according to the concentration ratio or HHI criteria commonly used in merger guidelines today, thus hindering banks’ risk reduction through consolidation.