[PEN-L:32477] Political Economy Research Institute Newsletter

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

Political Economy Research Institute Newsletter Up-Date
November 2002

The Political Economy Research Institute (PERI) at the University of
Massachusetts is pleased to announce some recent publications. These are

described more fully below.

(1) NEW PERI RESEARCH BRIEF - "The Return of Finance and Finance's
Return"
by Gerald Epstein and Dorothy Power.
Link: http://www.umass.edu/peri/researchbrief.html.

(2) NEW WORKING PAPER - "Stock Market Liquidity and Economic Growth: a
critical appraisal of the Levine/Zervos model" by Andong Zhu, Michael
Ash,
and Robert Pollin.
Link: http://www.umass.edu/peri/pdfs/WP47.pdf.

For general information about PERI, please visit our website:
www.umass.edu/peri

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(1) NEW PERI RESEARCH BRIEF

This month's RESEARCH BRIEF is "The Return of Finance and Finance's
Return:
recent trends in rentier incomes in OECD countries, 1960-2000" by Gerald

Epstein and Dorothy Power.

Few contemporary observers would deny that, in the last several decades,
the
role of financial firms, financial markets and financiers has grown
dramatically in many parts of the globe. However, despite the increased
role
of finance and the greater attention economists have paid to it, there
has
been relatively little empirical work measuring the income accruing to
those
engaging in financial market activity and owning financial assets. This
PERI
RESEARCH BRIEF presents some new evidence on trends in the size of the
income share claimed by financial interests. Using measures of the
"rentier
share" of income for twenty-nine OECD countries from1960 to 2000, the
authors analyze trends in the rentier share compared with changes in the

income share accruing to non-financial corporations. They find that,
since
1980 or so, the rentier share has been rising in many, though not all,
of
the OECD countries, while the non-financial corporate share has held
steady
or declined.

Go to PERI Research Briefs:
http://www.umass.edu/peri/researchbrief.html.
Download this Research Brief:

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(2) WORKING PAPER - "Stock Market Liquidity and Economic Growth: a
critical
appraisal of the Levine/Zervos model" by Andong Zhu, Michael Ash, and
Robert
Pollin.

How does a country's financial system influence its overall economic
development?  This has been a long-standing issue in economics.  Ross
Levine
and Sara Zervos published a highly influential econometric analysis in
the
AMERICAN ECONOMIC REVIEW in 1998 which purported to show that between
1976
and 93, a sample of 47 countries grow more quickly when their financial
systems included a liquid stock market.  But in this new PERI WORKING
PAPER,
Andong Zhu, Michael Ash, and Robert Pollin demonstrate that the
Levine/Zervos findings are not robust.

Rather, the Levine/Zervos results are driven by outliers in their model,
and
in particular by the influence of Asian Tiger economies.  Zhu, Ash, and
Pollin show that once one utilizes appropriate measures to control for
outliers, one can no longer conclude that liquid stock markets promote
economic growth.  Consistent with a wide range of other literature, the
results rather suggest that, among the 47 countries in the data sample,
the
East Asian Tigers enjoyed accelerated economic growth during the 1976 -
93
period because of the unique features of their development model,
including
the unique aspects of their financial systems prior to liberalization.

Download this paper: http://www.umass.edu/peri/pdfs/WP47.pdf

[

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Michael Perelman
Economics Department
California State University
michael@xxxxxxxxxxxxxxxxx
Chico, CA 95929
530-898-5321
fax 530-898-5901