FNCE 101 Lecture Notes - Lecture 1: Mortgage Loan, Unemployment Benefits, Wage Regulation
Background
Grant left his analyst position in NY to join his fam's firm as VP of biz
dev
a.
Durabuild - family-held biz in the construction industry
Interests in France as well as in the US
i.
b.
Grant says to his father (Frank jr.) best growth period was in the
middle of the last century after opening operations in France
GOAL: recapture
i.
c.
I.
Durabuild: The Early Years
Frank Jr. tells story -- grandfather frank started Durabuild --
construction industry was a food choice
Mortgage loan guarantees provided by the GI Bill were helping
war vets buy homes which started a housing boom
i.
France was the choice because once the recovery got
underway it would have a greater need to rebuild than the US
POSTWAR Europe
1)
ii.
Grandfather expected the building industry to come roaring
back -- invested Durabuild's capital every ear in factories and
warehouses in France
Demand for new construction was drying up but grandpa
was reluctant to see it
1)
iii.
a.
II.
Lessons from the past
Growth of construction and building materials industry was closely
ted to the overall economy
a.
Grant's report highlighted a number of important macroecon trends
in the US and France
France grew at a faster rate than the US postwar --- GDP per
capita growth in furnace from 1950-1980 was 3.8% compared
to 2.2% in the US
Basically econ activity expanded more rapidly in France
in the early postwar period but slowed down after the
war
Started at a much lower level relative to the US
1950 France's GDP was 54% that of the US
because of destruction from the war and
labor to capital ratio was less than 10% of
the US's
France and the US had similar
investment rates during this period
Bc France started from low
capital base its capital stock
grew very rapidly achieving the
same capital to labor ratio as the
US by 2000
First.
One.
i)
a)
1)
i.
b.
Decades following WWII unemployment in France was so low that US
economists wondered how the US could replicate the labor miracle
of race and the rest of Europe
By the end of the cent]urn it reached 11% more than twice
that of the US
i.
c.
Policy differences btwn US and France
French had less work hours and more vacation timei.
Unemployment insurance --- can discourage ppl from seeking
work
Firms have little incentive to hire new workers given the
high minimum wage regulation as well as the legal
restrictions which make it difficult to fire workers
1)
ii.
d.
III.
Lessons for the future
Grant wonders about china and its long term potential---would its
high growth phase taper off like it did in France
Doing biz in china was difficult given the difference btwn its
regulatory envy and the US's or France's
i.
a.
Things to consider
Ease of application of new tech in chinai.
China's one child policy and its effect on econ growthii.
b.
IV.
The Solow Model Unleashed: Understanding Economic Growth
Tuesday, January 30, 2018
2:16 PM
Document Summary
Grant left his analyst position in ny to join his fam"s firm as vp of biz dev. Durabuild - family-held biz in the construction industry i. Interests in france as well as in the us. Grant says to his father (frank jr. ) best growth period was in the middle of the last century after opening operations in france i. Frank jr. tells story -- grandfather frank started durabuild -- construction industry was a food choice i. ii. iii. Mortgage loan guarantees provided by the gi bill were helping war vets buy homes which started a housing boom. France was the choice because once the recovery got underway it would have a greater need to rebuild than the us. Grandfather expected the building industry to come roaring back -- invested durabuild"s capital every ear in factories and warehouses in france. Demand for new construction was drying up but grandpa was reluctant to see it.
