On the Origin of Money

Abstract : The paper develops a theory of the origin of money that is consistent with the historical and anthropological fact that money usually replaced fairly sophisticated credit arrangements and did seldom grew out of barter, contrary to the usual explanation in economics (e.g. Smith, 1776; Menger, 1892). Our theory compares money as an anonymous payment instrument with credit as a record keeping technology that records transactions and names of debtors. We show that the introduction of money can be explained by the fact that governments may be able to better tax agents if trade is conducted through money instead of credit even if credit trade is more efficient than the monetary trade. In this economy money circulate because by implementing a higher taxation rate on people holding no cash, the ruler is effectively incentivizing traders to constantly trade in order to acquire cash and hence reduce the chance to pay the higher tax rate associated with having no cash. The net effect of the introduction of money in this economy in terms of welfare depends on whether the credit system is both encompassing and cheap. We present evidence that this theory can go a long way in explaining why during the antiquity money, was introduced when a ruler was in need for more taxes, for example because of war, and that its introduction was not necessarily associated with an increase in prosperity.

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The Selection of Litigation Against Government Agencies: Evidence from China

Abstract : We test the relevance of the selection theory of litigation in a contemporary, civil law setting, using Chinese judicial data that span 25 years regarding lawsuits against government agencies. Civil law systems may be characterized by lower costs of litigation and lower rates of settlement than the U.S. legal system, and therefore the presence of selection effects cannot be assumed. We show that selection effects are indeed manifest in Chinese administrative litigation, and suggest that this may be explained by hidden or intangible litigation costs. Our test for selection effects builds on the approach of previous U.S. studies and potentially allows the identification of selection effects to help improve inferences from decided cases. Finally, we examine patterns of settlement and plaintiff wins in pre-litigation administrative appeals in China, and do not find sufficient evidence for selection effects in this process. This could potentially be explained if most appellants pursuing administrative appeals do not intend to litigate.

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Homeownership, Mobility, and Unemployment: Evidence from Housing Privatization

Abstract : Homeownership is believed to cause higher unemployment. This is because homeowners face higher mobility costs -- limiting their job search to local labor markets. Empirical tests of this prediction have yielded mixed results so far. However, since homeownership in these studies is not randomly assigned, their interpretation is unclear. This paper documents that privatization of public dwellings in Central and Eastern Europe resulted in a quasi-experimental assignment of homeownership to individual households. This facilitates a new test of the effects of homeownership on mobility and unemployment. Using a 2010 micro data on privatizers and renters, we find only weak evidence that homeowners are less willing to move and no evidence of higher unemployment risks relative to renters.

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