Prescribing and Proscribing
Do News Media Kill? How a Biased News Reality can Overshadow Real Societal Risks, The Case of Aviation and Road Traffic Accidents
Toni van der Meer, Anne Kroon & Rens Vliegenthart
Social Forces, forthcoming
Abstract:
Is irrational risk-avoiding behavior related to news media’s heightened attention for the negative and exceptional? Based on the theoretical approaches of mediatization and cultivation, it is hypothesized how news media can present an overly negative and biased reality that can have a severe impact on society. Focusing on the case of travel accidents, we argue that a disproportional increase in news attention for low-probability high-consequence aviation accidents can distort audiences’ risk perceptions such that driving is inaccurately perceived as a safer transportation alternative to flying, with potentially harmful consequences. This study accordingly documents results from time-series analyses (1996–2017) on US media attention for aviation and road accidents related to real-world data on travel behavior and fatal accidents. The over-time patterns expose how news media follow their own mediatized logic and reality: Negative incidents -- i.e., both aviation and road accidents -- become more prominent in the news over time, rather than accurately reflecting real-world trends. Next, since air travel is statistically the safest transportation mode, disproportionate attention for aviation accidents is argued to especially create a problematic distorted worldview among audiences. Accordingly, findings show how more media attention for aviation accidents is related to relatively more road traffic and more fatal road accidents in the subsequent months. We conclude that the media’s systematic overrepresentation of rare aviation accidents can overshadow the more substantial risk of (long-distance) driving. This paper illustrates how a distorted media reality can potentially result in severe consequences in light of audiences’ ill-informed fear perceptions and irrational risk-avoiding behavior.
Sentiment and uncertainty about regulation
Tara Sinclair & Zhoudan Xie
George Washington University Working Paper, July 2021
Abstract:
Regulatory policy can create economic and social benefits, but poorly designed or excessive regulation may generate substantial adverse effects on the economy. In this paper, we present measures of sentiment and uncertainty about regulation in the U.S. over time and examine their relationships with macroeconomic performance. We construct the measures using lexicon-based sentiment analysis of an original news corpus, which covers 493,418 news articles related to regulation from seven leading U.S. newspapers. As a result, we build monthly indexes of sentiment and uncertainty about regulation and categorical indexes for 14 regulatory policy areas from January 1985 to August 2020. Impulse response functions indicate that a negative shock to sentiment about regulation is associated with large, persistent drops in future output and employment, while increased regulatory uncertainty overall reduces output and employment temporarily. These results suggest that sentiment about regulation plays a more important economic role than uncertainty about regulation. Furthermore, economic outcomes are particularly sensitive to sentiment around transportation regulation and to uncertainty around labor regulation.
The NIMBY problem
David Foster & Joseph Warren
Journal of Theoretical Politics, forthcoming
Abstract:
Nimbyism is widely thought to arise from an inherent tradeoff between localism and efficiency in government: because many development projects have spatially concentrated costs and diffuse benefits, local residents naturally oppose proposed projects. But why cannot project developers (with large potential profits) compensate local residents? We argue that local regulatory institutions effectively require developers to expend resources that cannot be used to compensate residents. Not being compensated for local costs, residents therefore oppose development. Using a formal model, we show that when these transaction costs are high, voters consistently oppose development regardless of compensation from developers. But when transaction costs are low, developers provide compensation to residents and local support for development increases. We conclude that nimbyism arises from a bargaining problem between developers and local residents, not the relationship between local decision-making and the spatial structure of costs and benefits. We suggest policy reforms implied by this theory.
Entry Costs and Aggregate Dynamics
Germán Gutiérrez, Callum Jones & Thomas Philippon
Journal of Monetary Economics, forthcoming
Abstract:
We use a structural model to study the interaction between barriers-to-entry, investment, and monetary policy. We first show that entry cost shocks have distinct macroeconomic implications: they raise markups but reduce aggregate demand and investment in such a way that inflation barely changes. Entry costs can thus rationalize the coexistence of increasing markups and low inflation. We then estimate the model on U.S. data. We find that entry costs have risen in the U.S. over the past 20 years and have depressed capital and consumption by about 4%. Absent entry cost shocks, the real interest rate would have been between 0.5 to 1 percentage point higher over the lower bound period.
Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule
John Barrios
NBER Working Paper, October 2021
Abstract:
I examine the effects of occupational licensing on the quality of Certified Public Accountants (CPAs). I exploit the staggered adoption of the 150-hour rule, which increases the educational requirements for a CPA license. The analysis shows that the rule decreases the number of entrants into the profession, reducing both low- and high-quality candidates. Labor market proxies for quality find no difference between 150-hour rule CPAs and the rest. Moreover, rule CPAs exit public accounting at similar rates and have comparable writing quality to their non-rule counterparts. Overall, these findings are consistent with the theoretical argument that increases in licensing requirements restrict the supply of entrants and do little to improve quality in the labor market.
Rising Markups and the Role of Consumer Preferences
Hendrik Döpper et al.
Harvard Working Paper, September 2021
Abstract:
We characterize the evolution of markups for consumer products in the United States from 2006 to 2019. We use detailed data on prices and quantities for products in more than 100 distinct product categories to estimate demand systems with flexible consumer preferences. We recover markups under an assumption that firms set prices to maximize profit. Within each product category, we recover separate yearly estimates for consumer preferences and marginal costs. We find that markups increase by about 25 percent on average over the sample period. The change is attributable to decreases in marginal costs that are not passed through to consumers in the form of lower prices. Our estimates indicate that consumers have become less price sensitive over time.
The Unequal Employment Effects of Regulatory Uncertainty
Zhoudan Xie
George Washington University Working Paper, September 2021
Abstract:
This paper examines how increases in regulatory uncertainty may affect employment and presents empirical evidence that the employment effects of regulatory uncertainty are unequal for workers with different levels of educational attainment. VAR estimations suggest that a regulatory uncertainty shock leads to a more persistent and larger drop in employment at lower education levels. This finding is consistent with the expectation of unequal real-options effects of uncertainty due to heterogeneous adjustment costs.
Does policy uncertainty predict the death of M&A deals?
Man Dang et al.
Finance Research Letters, forthcoming
Abstract:
Using a comprehensive sample of U.S. M&A deals from 2000 through 2020, we examine whether the magnitude of policy uncertainty can explain the likelihood of deal cancellation. Consistent with our conjecture, we find that policy uncertainty is a significant predictor of the death of deals. Moreover, we find evidence of a negative association between policy uncertainty and the target firm stock price levels, implying that the market also incorporates the consequences of policy uncertainty into target valuation and bid likelihood outcomes. Altogether, our findings add to the understanding of the interplay between policy uncertainty and external investments through M&A.
Flowers of Invention: Patent Protection and Productivity Growth in US Agriculture
Jacob Moscona
Harvard Working Paper, September 2021
Abstract:
Patent protection was introduced for plant biotechnology in the United States in 1985, and it affected crops differentially depending on their reproductive structures. Exploiting this unique feature of plant physiology and a new dataset of crop-specific technology development, I find that the introduction of patent rights increased the development of novel plant varieties in affected crops. Technology development was driven by a rapid increase in private sector investment, was accompanied by positive spillover effects on innovation in certain non-biological agricultural technologies, and led to an increase in crop yields. Patent rights, however, could come with potentially significant costs to the consumers of technology and distortions to downstream production. Nevertheless, I document that in US counties that were more exposed to the change in patent law because of their crop composition, land values and profits increased. Taken together, the results suggest that the prospect of patent protection spurred technological progress and increased downstream productivity and profits.
Young Firms, Old Capital
Song Ma, Justin Murfin & Ryan Pratt
Journal of Financial Economics, forthcoming
Abstract:
Across a broad range of equipment types and industries, we document a pattern of local capital reallocation from older firms to younger firms. Start-ups purchase a disproportionate share of old physical capital previously owned by more mature firms. The evidence is consistent with financial constraints driving differential demand for vintage capital. The local supply of used capital influences start-up entry, job creation, investment choices, and growth, particularly when capital is immobile. Meanwhile, as suppliers of used capital, incumbents accelerate capital replacement in the presence of younger firms. The evidence suggests previously undocumented benefits to co-location between old and young firms.
The long-run effects of minimum lot size zoning on housing redevelopment
Weihua Zhao
Journal of Housing Economics, forthcoming
Abstract:
Housing developers in growing cities increase housing supply by either building new units on vacant land or demolishing existing units and replacing them with higher-density housing. However, land-use restrictions such as minimum lot size zoning may distort the pattern of redevelopment and life cycle of housing. Previous research has examined the effects of zoning regulations on housing supply and vacant land development decisions, but the implications of minimum lot size zoning for housing redevelopment have not been examined. This paper builds a discrete-time dynamic programming model to examine whether minimum lot size zoning distorts the long-run pattern of housing redevelopment. The model accounts for other previously unexplored features of redevelopment, such as endogenous maintenance decisions. Numerical simulation results show that minimum lot size zoning delays the conversion of vacant land and slows demolition. Additionally, this type of zoning stabilizes housing redevelopment because developers have a greater incentive to maintain buildings under zoning.
Does Airbnb Reduce Matching Frictions in the Housing Market?
Abdollah Farhoodi, Nazanin Khazra & Peter Christensen
University of Toronto Working Paper, September 2021
Abstract:
There is growing concern about the impact of the home-sharing markets on housing affordability, yet the underlying mechanisms are not well-studied. We use a theoretical model to provide key results on the mechanisms through which home-sharing can improve the quality of matches between buyers and sellers in the housing market. We then test these predictions empirically using daily Airbnb data for the entire U.S. and a novel shift-share approach. We find that an increase in Airbnb increases house prices, reduces total sales, increases for-sales inventory, increases sellers' time on the market, and reduces the probability of selling a house. The empirical evidence supports the hypothesis that Airbnb has reduced matching frictions in the housing market. We then examine heterogeneous responses to Airbnb using Generalized Random Forest (GRF). Consistent with our theoretical model, results from the GRF model indicate that locations with a less elastic housing supply respond more to the Airbnb growth.
Inferring Tax Compliance from Pass-Through: Evidence from Airbnb Tax Enforcement Agreements
Andrew Bibler, Keith Teltser & Mark Tremblay
Review of Economics and Statistics, October 2021, Pages 636–651
Abstract:
Tax enforcement is especially costly when market participants are difficult to observe. The benefits of enforcement depend crucially on pre-enforcement compliance. We derive an upper bound on pre-enforcement compliance from the pass-through of newly enforced taxes. Using data on Airbnb listings and the platform's voluntary collection agreements, we find that taxes are paid on, at most, 24% of Airbnb transactions prior to enforcement. We also find that demand for Airbnb listings is inelastic, driving three key insights: the tax burden falls disproportionately on renters, the excess burden is small, and tax enforcement is relatively ineffective at reducing local Airbnb activity.