Tag: Faculty


Olin Professor Phil Dybvig joined a select group of foreign experts last week in a meeting with Chinese Premier Li Keqiang. The annual event has very high visibility in China, part of a series of events wrapped into Chinese media coverage of the lead-up to the Spring Festival Celebration—the lunar New Year.

Dybvig is WashU Olin’s Boatmen’s Bancshares Professor of Banking and Finance and Director of the Institute of Financial Studies at the Southwest University of Finance and Economics in Chengdu, Sichuan, China. He was invited to the event, offering insights and ideas to the Chinese premier, by a member of China’s State Administration of Foreign Experts Affairs. That body certifies foreign experts who provide expertise on the Chinese mainland.

Olin’s Phil Dybvig (blue patterned jacket) among a group of academics and experts invited to share insights at a symposium in January 2020 with Chinese Premier Li Keqiang (image captured from Chinese state video).

Dybvig was flanked at the event by Peter D. Lund from the department of applied physics, New Energy Technologies Group at Aalto University in Finland (on his left) and Jean-Mark Bovet, executive senior vice president, Cirrus Pharmaceuticals Inc., who has a PhD in chemistry from the University of Michigan.

“The premier thanked the foreign experts for their service and solicited their advice on subjects such as improving research in China, speeding technological development and improving education,” Dybvig wrote to the Olin Blog after the series of meetings ending on Friday, January 17, 2020.

See a video from Chinese state media giving an overview of the symposium.

Chinese Premier Li Keqiang (public domain image from Wikipedia)

Dybvig said the Chinese premier—the top administrator of the government’s massive civil service bureaucracy—hosted about 60 foreign experts for the meeting. “There were a lot of smart people there, including some Nobel laureates,” he said. Some were business people, some school administrators, but most seemed to be scholars.

“The premier gave a warm welcome to the foreign experts and thanks for our contributions to China,” he said. “He also talked about Chinese plans, including a commitment to spend 4% of GDP on education even though that implies cutting spending on other things.”

“It was also fun chatting with all the other smart people in attendance,” Dybvig said. “I enjoyed learning from Gérard Mourou about the work on high-intensity short-duration lasers that lead to his Nobel Prize in physics.”

Pictured above: Olin’s Phil Dybvig (blue patterned jacket) in a screen grab from Chinese state television covering a January 2020 symposium with Chinese Premier Li Keqiang with academics working in the country.

The effects of the African slave trade persist today among firms in parts of the continent, with companies more often tightly controlled by individuals or families—often because those firms have limited access to equity funding and shared ownership.

Meanwhile, firms in African countries less affected by the slave trade have more diversified ownership structures.

Lamar Pierce
Lamar Pierce

While closely held ownership isn’t necessarily bad, research from a WashU Olin professor suggests some African firms may miss 21st century growth opportunities without the ability to raise capital through shared ownership.

“The slave trade appears to predict ownership structure in ways that nothing else can explain,” said Lamar Pierce, Olin professor of organization and strategy and coauthor of the new study.

In particular, the research showed that manufacturing firms—heavily dependent on investment capital through debt or equity—tend to have much more closely held ownership structures in countries heavily affected by slavery, primarily in western and central Africa.

“Although ownership concentration can be very useful, not having the option to diversify ownership is bad,” Pierce said.

Pierce and his coauthor, Jason A. Snyder of the University of Utah, outline their conclusions in “Historical Origins of Firm Ownership Structure: The Persistent Effects of the African Slave Trade,” forthcoming in the Academy of Management Journal.

The work builds on the pair’s August 2017 research in The Review of Financial Studies, which showed that firms in countries heavily affected by the slave trade now have more limited access to forms of financing such as bank loans or lines of credit.

That research, in turn, builds on work from other researchers who created a database linking nearly 81,000 enslaved people to 52 modern African countries. Pierce and Snyder cross-referenced that data with extensive data on firms from the World Bank Enterprise Survey.

‘Business scholars aren’t studying Africa’

Pierce said he and Snyder could not definitively say the slave trade caused the later concentration of corporate ownership. But no other variable they investigated could explain the relationship, including weather, colonialism, natural resources such as gold or oil, access to coastlines or the distance to demand markets.

And there is some evidence that the relationship is indeed causal.

“One thing that raises our confidence is that a whole bunch of historians have studied this,” Pierce said. The researchers’ model suggests that 67% of firms in countries with above-median slave exports would have sole proprietorship. In contrast, countries below the median for slave exports have 46% sole ownership.

Furthermore, it implies that the difference in the percentage of sole proprietorships between the lowest and the highest slave trade countries is 43 percentage points.

Pierce’s and Snyder’s work is early in a burgeoning area of business research focused on the African continent.

“Business scholars aren’t studying Africa. They just aren’t,” Pierce said. “It’s an incredibly rapidly growing continent economically. Exploding literacy rates, dramatically improving political institutions.”

Although some question whether this research can be generalized beyond Africa, he wonders whether it needs to be, given that the continent represents one-sixth of the world’s population.

“I never hear that question when I do research on US firms. It’s a valuable question to ask, but not when it comes to questioning the validity of the research,” he said. “Understanding the role of firms is important in and of itself.”

‘Traumatic shock’

In this and their previous research, Pierce and Snyder set out to understand the lingering effects of a massive “traumatic shock” that reduced the continent’s population by half between the 15th and 19th centuries, when 12 million to 18 million Africans were seized into slavery.

Their 2017 paper provided “the first evidence that the slave trade shaped modern markets by restricting financial contracting between firms,” Pierce and Snyder wrote. “More specifically, they show that firms cannot access credit or banking services.”

This new paper suggests that African nations historically affected by the slave trade tend to have weak institutions that are unable to enforce the existence of contracts. Because they also have weaker and more concentrated social networks and trust, “ownership must remain concentrated even when not beneficial.”

Pierce and Snyder wanted to build on a call within the research community to advance research on African business and “to bring history back into the fields of management and strategy.”

“If you eyeball the variation in economic development as a function of the slave trade and you look at the low-slave-trade countries,” Pierce said, “you can see a huge difference in them.”

Some economic observers continue to warn about signs of a potential U.S. recession. Glenn MacDonald, John M. Olin Distinguished Professor of Economics and Strategy at the Olin Business School at Washington University in St. Louis, says many signs aren’t particularly reliable — but do keep an eye on housing starts.

MacDonald sat down to discuss signs of a recession and whether he foresees one anytime soon. He doesn’t, but he cautions that history shows it’s not a question of if but when.

Where do recessions come from?

Much like earthquakes, we know a great deal about business cycles, but we don’t really know how to predict their arrival. Sometimes we can tell ourselves a story after the fact. But we don’t know whether those stories are correct.

People might blame the previous recession on the financial crisis?

The weakening housing market in 2006 precipitated the financial crisis; GDP growth was already shrinking when the housing market weakened. It’s not that the financial crisis caused the weakening housing market. It’s the other way around.


There are plenty of candidates for the cause of the most recent recession, including the high and rising level of government debt. But economics isn’t like physics, where there are certain rules that apply because, for example, the speed of light is a certain number. However, empirically, around the world, when government debt reaches something like a whole year’s GDP — that’s a noteworthy point. And the U.S. was getting there at that time, which many saw as a great cause for concern. The debt-GDP ratio has remained high, and, so far, the more frightening scenarios have not transpired.

One thing thought to predict recessions is an inverted yield curve, like occurred earlier this year, right?

Statistically there is a correlation between yield curve inversions and eventual onset of recessions. However, the connection between them is quite loose and difficult to employ to predict recessions confidently. For example, the yield curve was inverted for much of 2019 — suggesting a recession might be coming. But it is no longer inverted — suggesting the opposite.

When you see housing starts tailing off, that does tend to be a sign of trouble. And the reason for that is simply that the trouble has already started, as in 2006. So you are not really predicting a recession as much as noticing it early.

How are housing starts doing?

They were really, really strong in September. They’re not going as fast as they were going. But they’re still going.

We’re experiencing a long expansion. Should we be worried?

In a business cycle, proceeding from a trough to a peak is an “expansion.” On average in the postwar, US expansions been about five years long. So when people look at this 10-year expansion that we’ve just completed, they think it’s really long. But there is a lot of variability in expansion length. For example, the expansion that started right around 1990 also lasted 10 years.

Recognizing this variability in expansion length, the data suggest that the bulk of expansions would be less than 10 years in duration. So if you said, “It’s kind of like we’re almost overdue for a recession,” that would be consistent with the facts. But that idea is based on just 11 recessions and an economy that has changed drastically since the post war, so making confident predictions about such a rare event is impossible.

If Philadelphia’s soda tax is any indication, local soda taxes don’t work as well as policymakers intend.

Olin’s Song Yao, associate professor of marketing, and two other researchers studied the effects of Philadelphia’s soda tax, which took effect in January 2017.

Several US cities have enacted soda taxes to raise revenue and fight obesity among their citizens. Berkeley, California, was the first, but Philly was the first big city to adopt one. It uses the revenue to fund schools and improve parks, recreation centers and libraries.

The city’s 1.5-cents-an-ounce tax led to a 34% price increase for soda. And soda sales in Philadelphia dropped sharply—by 46%, according to the working paper “The Impact of Soda Taxes: Pass-through, Tax Avoidance, and Nutritional Effects.”

Song Yao

But here’s the catch: Soda sales at stores just outside the city increased dramatically. Apparently, a lot of people leave Philly to buy their soda elsewhere.

“The cross-shopping outside the city offset more than half of the reduction” of soda sales in the city, Yao said. So the net reduction in sugary drinks consumption is only 22%, he pointed out.

The reduction in calories and sugar people consumed because of the tax is even smaller; 16% and 15%, respectively. “The health impact is mediocre at best,” Yao said.  

The tax also imposes a disproportionate burden on low-income people, he said. “Access to transportation is more difficult for low-income households, so they engage in less cross-shopping and end up paying more inside the city.”

So far, NPRMarketWatchNational Review and The Washington Post have reported on the findings.

Policy lessons

The findings in Philadelphia provide policy lessons on how to design soda taxes or other types of “sin” taxes, according to the paper by Yao, Stephan Seiler of the University of California in Los Angeles, and Anna Tuchman of Northwestern University.

“If taxes are localized (as is the case for all current soda taxes), high tax rates will be sub-optimal for generating revenue because they lead to cross-shopping, which reduces the tax base,” they write.

“A larger geographic coverage will make cross-shopping more difficult and therefore generate greater tax revenue.”

Dean Mark Taylor is definitely doing his part to contribute to Olin’s strategic priority to build a stronger and broader reputation for research with impact.

According to the latest from Research Papers in Economics (RePEc), Taylor is the third most influential researcher in international finance in the world. In addition, the dean is in the top 10 of international finance researchers globally in terms of research citations, according to Google Scholar.

RePEc is a collaborative effort of hundreds of volunteers in 101 countries to enhance the dissemination of research in economics and related sciences. 

Taylor has long been one of the most highly cited financial economists. His research on exchange rates and international financial markets has been published extensively in many of the world’s leading academic and practitioner journals. He is also the author or co-author of a number of books, including two of the leading European textbooks in economics and macroeconomics.