Lending cuts by banks directly affect the firms borrowing from them, but also indirectly depress economic activity in the regions in which they operate. This paper moves beyond firm-level studies by ...estimating the effects of an exogenous lending cut by a large German bank on firms and counties. I construct an instrument for regional exposure to the lending cut based on a historic, postwar breakup of the bank. I present evidence that the lending cut affected firms independently of their banking relationships, through lower aggregate demand and agglomeration spillovers in counties exposed to the lending cut. Output and employment remained persistently low even after bank lending had normalized. Innovation and productivity fell, consistent with the persistent effects.
We study the market for ratings agencies in the commercial mortgage backed securities sector leading up to and including the financial crisis of 2007–2008. Using a structural model adapted from the ...auctions literature, we characterize the incentives of ratings agencies to distort ratings in favor of issuers. We find an important equilibrium distortion, which decreased after the crisis. We study several counterfactual experiments motivated by recent policymaking in this industry.
Abstract
The strength of contract enforcement determines how firms source inputs and organize production. Using microdata on Indian manufacturing plants, we show that production and sourcing ...decisions appear systematically distorted in states with weaker enforcement. Specifically, we document that in industries that tend to rely more heavily on relationship-specific intermediate inputs, plants in states with more-congested courts shift their expenditures away from intermediate inputs and have a greater vertical span of production. To quantify the effect of these distortions on aggregate productivity, we construct a model in which plants have several ways of producing, each with different bundles of inputs. Weak enforcement exacerbates a holdup problem that arises when using inputs that require customization, distorting both the intensive and extensive margins of input use. The equilibrium organization of production and the network structure of input-output linkages arise endogenously from the producers’ simultaneous cost-minimization decisions. We identify the structural parameters that govern enforcement frictions from cross-state variation in the first moments of producers’ cost shares. A set of counterfactuals show that enforcement frictions lower aggregate productivity to an extent that is relevant on the macro scale.
We provide a comprehensive account of the dynamics of eurozone countries from 2000 to 2012. We analyze private leverage, fiscal policy, labor costs, and spreads, and we propose a model and an ...identification strategy to separate the impact of credit cycles, excessive government spending, and sudden stops. We then ask how periphery countries would have fared with different policies. We find that countries could have stabilized their employment if they had followed more conservative fiscal policies during the boom. Macroprudential policies and an early intervention by the central bank to prevent market segmentation and reduce fiscal austerity would also have significantly reduced the recession.
Wall Street and the Housing Bubble Cheng, Ing-Haw; Raina, Sahil; Xiong, Wei
The American economic review,
09/2014, Letnik:
104, Številka:
9
Journal Article
Recenzirano
Odprti dostop
We analyze whether midlevel managers in securitized finance were aware of a large-scale housing bubble and a looming crisis in 2004–2006 using their personal home transaction data. We find that the ...average person in our sample neither timed the market nor were cautious in their home transactions, and did not exhibit awareness of problems in overall housing markets. Certain groups of securitization agents were particularly aggressive in increasing their exposure to housing during this period, suggesting the need to expand the incentives-based view of the crisis to incorporate a role for beliefs.
This literature review analyzes leading international business and management journals from 2000 to 2012 in order to explore the role of national culture in international business research. Through ...the analysis of the 265 selected articles, the study thematically maps the field and identifies research challenges and opportunities. It reflects on avenues for future research related to both thematic and methodological issues, among them: research focused on the impact of the home/host national culture on internationalization processes (as existing literature mainly focuses on cultural distance); the role to be played by new theoretical frameworks; and the need to consider cultural positions and cultural friction rather than traditional cultural distance when analyzing internationalization decisions.
Abstract
Using household-level debt data over 2000–2012 and local variation in inequality, we show that low-income households in high-inequality regions (zip codes, counties, states) accumulated less ...debt relative to their income than low-income households in lower inequality regions. We also find evidence that low-income households face higher credit prices and reduced access to credit as inequality increases. We argue that these patterns are consistent with inequality tilting credit supply away from low-income households and toward high-income households, which may have long-run implications for outcomes like homeownership or entrepreneurship.
This paper exploits county-level variation in exposure to news about labor markets impacted by fracking to show that access to information about employment opportunities affects migration. Exposure ...to newspaper articles about fracking increased migration to areas mentioned in the news by 2.4% on average, concentrated among young, unmarried, less educated men. Commuting also increased, sentiment of the news matters, and TV news has an impact. Google searches for “fracking” and names of states specifically mentioned spike after news broadcasts about fracking. Counties experiencing weak labor markets are the most responsive, suggesting that these areas see large benefits to information provision.
Abstract
We show theoretically and empirically that the managerial organization of multiestablishment firms is interdependent across establishments. To derive our result, we study the effect of ...geographic frictions on firm organization. In our model, we assume that a CEO’s time is a resource in limited supply, shared across headquarters and establishments. Geographic frictions increase the costs of accessing the CEO. Hiring middle managers at one establishment substitutes for CEO time, which is reallocated across all establishments. Consequently, geographic frictions between the headquarters and one establishment affect the organization of all establishments of a firm. Our model is consistent with novel facts about multiestablishment firm organization that we document using administrative data from Germany. We exploit the opening of high-speed railway routes to show that not only the establishments directly affected by faster travel times but also the other establishments of the firm adjust their organization. Our findings imply that local conditions propagate across space through firm organization.
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