Testing Markets
Objecting to experiments even while approving of the policies or treatments they compare
Patrick Heck et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
We resolve a controversy over two competing hypotheses about why people object to randomized experiments: 1) People unsurprisingly object to experiments only when they object to a policy or treatment the experiment contains, or 2) people can paradoxically object to experiments even when they approve of implementing either condition for everyone. Using multiple measures of preference and test criteria in five preregistered within-subjects studies with 1,955 participants, we find that people often disapprove of experiments involving randomization despite approving of the policies or treatments to be tested.
Economic Freedom and the Economic Consequences of the 1918 Pandemic
Jamie Bologna Pavlik & Vincent Geloso
Texas Tech University Working Paper, May 2020
Abstract:
The Spanish flu pandemic of 1918 constituted a strong exogenous shock on economic activity that compounded that of the First World War. In this paper, we condition the economic importance of these shocks on the level of economic freedom measured by the HIEL project (Prados de la Escosura 2016) to test whether freer economies fared better. Our argument is that higher levels of economic freedom meant a greater ability to adjust to the shocks by reducing frictions in the reallocation of resources and the reorganization of economic activity. We find that countries with higher levels of economic freedom suffered less from the pandemic. We link this finding with the literature on economic freedom and crises.
Regulating short‐term rental housing: Evidence from New Orleans
Maxence Valentin
Real Estate Economics, forthcoming
Abstract:
This study examines the effects of regulations targeting Airbnb and other short‐term rental (STR) suppliers in the urban center of New Orleans. I show that although the new ordinances reduced participation in the STR market as intended, STR usage actually increased in the neighborhoods adjacent to areas the most affected by the regulations. I subsequently show that the new regulations depressed property values in the neighborhoods facing the tightest regulations by approximately 30%, implying that homeowners factor into their housing purchasing decisions the option to participate in the STR market.
The Effects of Federal Regulations on Corruption in U.S. States
Oguzhan Dincer & Burak Gunalp
European Journal of Political Economy, forthcoming
Abstract:
Using the newly constructed Federal Regulation and State Enterprise Index (FRASE Index) to measure the federal regulations and the existing Corruption Convictions Index (CCI), we investigate the effects of federal regulations on corruption in U.S. states. Controlling for several demographic and economic variables including the Fraser Institute's Economic Freedom Index (EFI), which measures the size and scope of government in U.S. states, we find a positive and statistically significant relationship between federal regulations and corruption. Our findings have important policy implications. A 1 standard deviation increase in FRASE Index causes CCI to increase by approximately 0.5 standard deviations. Standardized coefficient of EFI is also approximately equal to 0.5. In other words, it is possible to mitigate the effects of regulations at the federal level by reducing the size and the scope of the government at the state level.
Doubting Driverless Dilemmas
Julian De Freitas et al.
Perspectives on Psychological Science, forthcoming
Abstract:
The alarm has been raised on so-called driverless dilemmas, in which autonomous vehicles will need to make high-stakes ethical decisions on the road. We argue that these arguments are too contrived to be of practical use, are an inappropriate method for making decisions on issues of safety, and should not be used to inform engineering or policy.
Workplace Safety and Worker Productivity: Evidence from the MINER Act
Ling Li
ILR Review, forthcoming
Abstract:
This study examines the effect of safety enforcement on workplace injuries and worker productivity in coal mines. The author exploits the introduction of a “flagrant” violation standard - with penalties of up to 0.22 million dollars per violation - established by the Mine Improvement and New Emergency Response (MINER) Act of 2006. Using an event-study model, the author finds that after the issuance of a flagrant violation, the workplace injuries decreased significantly by 20% and miner productivity decreased by 6%. The results suggest that the monetary value of the productivity loss is 1.3 times the costs saved from fewer injuries, which highlights the costs of workplace safety regulations.
The Evolution of Merger Enforcement Intensity: What Do the Data Show?
John Mayo & Jeffrey Macher
Georgetown University Working Paper, July 2020
Abstract:
A growing narrative in the popular press and among some academics has been that antitrust regulators have systematically relaxed existing antitrust law enforcement. This narrative has led to calls for reinvigorated enforcement and even the passage of new tougher antitrust legislation. The merits of this narrative and the corollary calls for antitrust reforms depend in part on whether the claim that antitrust regulators have become more relaxed in their enforcement efforts over time is correct. In this paper, we employ data from the United States antitrust agencies to examine one element of this claim. Specifically, we investigate whether antitrust regulators have become less likely to challenge proposed mergers over time. Our results indicate that, contrary to the popular narrative, the Agencies have become more likely to challenge proposed mergers over 1979-2017. Controlling for the number of merger proposals submitted to the antitrust agencies, we find that the likelihood of a merger challenge has more than doubled over this period. We explore reasons behind this increase, and find that increases in antitrust agencies’ budgets have led to enhanced merger enforcement intensity.
The Social Construction of the Regulatory Burden: Methodological and Substantive Considerations
Marcus Kurtz & Andrew Schrank
Social Forces, forthcoming
Abstract:
What drives the private sector’s attitude toward the public sector? We address the question by regressing survey data on the perceived burden of government regulation on objective data on the nature, cost, and administration of the regulation of entry in different political and economic contexts. The results suggest that businesspeople perceive democratic, regulatory, and left-of-center governments to be inefficient, net of objective conditions, and tax havens to be well-governed despite - or perhaps due to - their lack of transparency. Our findings contribute to both the sociology of knowledge and political sociology by demonstrating that indicators of public sector performance that are derived from surveys of businesspeople and used by donors and investors are not only biased against liberal democracies that try to regulate and/or tax the private sector but - insofar as they influence the flow of public and private resources - a threat to regulation and redistribution in the twenty-first century.
Does the Political Ideology of Patent Examiners Matter? An Empirical Investigation
Joseph Raffiee & Florenta Teodoridis
University of Southern California Working Paper, June 2020
Abstract:
This study draws attention to the importance of exploring the relationship between the political ideology of patent examiners and their propensity to grant patents. To do so, we construct and analyze a database which pairs political ideology estimates derived from campaign contributions with individual patent examiners and their patent granting behavior. Our empirical analysis suggests that software patent applications assigned to liberal-leaning examiners are 39 percent less likely to be granted when compared to applications assigned to conservative-leaning examiners. We also explore changes in claim length, time to patent issuance, and the number of internal appeals, finding evidence suggesting that the observed differences in patent granting behavior are likely a result of liberal-leaning examiners being more stringent, rather than conservative-leaning examiners being more lenient. However, given the relatively small number of donating patent examiners, we stress that our study should not be viewed as providing a definitive answer on the role of political ideology in the issuance of patents. Rather, we prefer to interpret our results as evidence that we cannot robustly reject the possibility that the political ideology of patent examiners influences patent granting behavior. Overall, our study suggests more research on this topic is needed and underscores the need for broader data collection efforts, an expensive endeavor, which we argue is warranted given the central role of the patenting institution in the economy.
Heterogeneous Effects of State Enterprise Zone Programs in the Shorter Run and Longer Run
David Neumark & Timothy Young
NBER Working Paper, July 2020
Abstract:
We take up two questions that have not been explored in research on enterprise zones. First, does a considerably longer-run perspective on the effects of state enterprise zones lead to different answers? And second, are there heterogeneous effects of enterprise zones that depend on the set of incentives these programs offer, which can vary widely? Our results indicate that whether we look at state enterprise zone programs through a longer-term lens, or through the lens of program heterogeneity, we generally do not find any consistent indication of beneficial effects of state enterprise zone programs, and if anything the longer-run effects are negative. The lack of positive effects is consistent with most of the prior evidence that focuses on effects that are short-term and homogeneous.
Common Ownership and Competition in Product Markets
Andrew Koch, Marios Panayides & Shawn Thomas
Journal of Financial Economics, forthcoming
Abstract:
We investigate the relation between common institutional ownership of the firms in an industry and product market competition. We find that common ownership is neither robustly positively related with industry profitability or output prices nor it is robustly negatively related with measures of nonprice competition, as would be expected if common ownership reduces competition. This conclusion holds regardless of industry classification choice, common ownership measure, profitability measure, nonprice competition proxy, or model specification. Our point estimates are close to zero with tight bounds, rejecting even modestly sized economic effects. We conclude that antitrust restrictions seeking to limit intra-industry common ownership are not currently warranted.
Testing the Theory of Common Stock Ownership
Lysle Boller & Fiona Scott Morton
NBER Working Paper, July 2020
Abstract:
We test if an increase in common ownership changes future expected profits with an event study method. We collect instances of a stock entering the S&P 500 index and identify its product market competitors. We measure the change in institutional and common ownership (with product market rivals) and find that entering stocks experience a significant increase in both. We measure the stock returns of the entrant's product market rivals upon the entry news. We find that increases in common ownership (driven by the whole vector of ownership similarity) cause increases in stock returns, consistent with a hypothesis that common ownership raises profits.
Entry Threats From Municipal Broadband Internet and Impacts on Private Provider Quality
Steven Landgraf
Information Economics and Policy, forthcoming
Abstract:
Deploying municipally-run broadband Internet to deliver high-speed access is an increasingly popular idea among local communities. These public networks often operate alongside private incumbent networks and may have substantial effects on the competitive landscape. This research design exploits variation in cities that have a municipal electric utility (MEU), which reduces barriers to entry for municipal providers, and state-level regulation, which restricts public entry into broadband markets. Using these market differences, I investigate whether incumbents offer higher speeds to deter public entry or underinvest in speed due to crowding out. Estimates indicate that the presence of an MEU is associated with lower maximum upload and download speeds offered by private cable and DSL providers. In states where municipal entry is made more difficult by regulation, these effects disappear. Therefore, restrictive regulation of municipal broadband has a non-trivial effect on competition. Negative effects are reduced in communities with lower or less dense populations.
Competition and mergers in the retail market for toys
Dae-Yong Ahn
Applied Economics, forthcoming
Abstract:
I study competition between big box retailers, K-Mart and Wal-Mart, and toy retailers, KB Toys and Toys R Us with the aim of estimating Wal-Mart’s effect on the profits of toy retailers. Using recent techniques for the moment inequality models, I estimate chains’ exit decisions in each market as arising from a Nash equilibrium of a static game of entry and exit. My results show that Wal-Mart has a significantly negative effect on the profits of KB Toys and Toys R Us, while the effects of KB Toys and Toys R Us are mostly positive on each other’s profits. I run a series of counterfactual simulations to study the effect of a merger between KB Toys and Toys R Us on post-merger market shares and concentration. Upon merging, the rate of exit drops from 52.3% to 48.6% for KB Toys and from 32.1% to 11.7% for Toys R Us. If the merging parties share distribution centres, the rate of exit drops even further to 31.1% for KB Toys or remains about the same at 12.2% for Toys R Us. Surprisingly, the merger lowers market concentration, as measured by the Herfindal-Hirschman Index.
Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations
Mathias Kronlund et al.
NBER Working Paper, July 2020
Abstract:
We examine the effects of a 2012 regulatory reform that mandated fee and performance disclosures for the investment options in 401(k) plans. We show that participants became significantly more attentive to expense ratios and short-term performance after the reform. The disclosure effects are stronger among plans with large average contributions per participant and weaker for plans with many investment options. Additionally, these results are not driven by secular changes in investor behavior or sponsor-initiated changes to the investment menus. Our findings suggest that providing salient fee and performance information can mitigate participants' inertia in retirement plans.