By exploiting variation in state capital gains taxation as an instrument, we analyze the economic consequences of housing speculation during the U.S. housing boom in the 2000s. We find that housing ...speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price appreciation, economic expansions, and housing construction during the boom in 2004–2006 but also to more severe economic downturns during the subsequent bust in 2007–2009. Our analysis supports supply overhang and local household demand as two key channels for transmitting these adverse effects.
This paper investigates consumer inertia in health insurance markets, where adverse selection is a potential concern. We leverage a major change to insurance provision that occurred at a large firm ...to identify substantial inertia, and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk. We use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia. When aggregated, these improved individual-level choices substantially exacerbate adverse selection in our setting, leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection.
I examine whether corporate tax avoidance is associated with internal control weaknesses (ICWs) disclosed under the Sarbanes‐Oxley Act (SOX). ICWs disclosed under SOX are frequently related to a ...firm's tax function. When pervasive ICWs exist, the likelihood increases that these frequent tax‐related ICWs spill over from financial reporting issues to tax avoidance objectives. Thus, my research helps corporate stakeholders understand the implications of internal controls beyond simply financial reporting objectives. Results indicate that, on average, firms with a tax‐related ICW have a 4 percent higher three‐year cash effective tax rate relative to firms without any such weaknesses. Further estimates reveal that this negative relation stems from pervasive, company‐level tax ICWs. Analysis of remediation suggests a causal link. I find that after remediating tax‐related ICWs, firms report higher levels of tax avoidance in the future. Broadly, these findings support that internal control quality represents a proxy for internal governance, and thus the strength of alignment between managers and shareholders. Furthermore, tax‐related internal controls represent an important underlying determinant of tax avoidance with significant cash flow effects, and implications beyond financial reporting.
This study investigates whether auditor quality and audit committee expertise are associated with improved financial reporting timeliness as measured by the duration of a financial statement ...restatement's “dark period.” The restatement dark period represents the length of time between a company's discovery that it will need to restate financial data and the subsequent disclosure of the restatement's effect on earnings. For a sample of dark restatements disclosed between 2004 and 2009, we find that companies that engage Big 4 auditors have shorter dark periods than companies that do not engage Big 4 auditors. We also find that companies with more financial experts on the audit committee have shorter dark periods, but only when such financial expertise relates specifically to accounting. Finally, companies with audit committee chairs that have accounting financial expertise provide the most timely disclosures, as the dark periods for these firms are reduced by approximately 38 percent. Our results suggest that both auditor and audit committee expertise are associated with the timely disclosure of restatement details. Data Availability: All data are publicly available from sources identified in the paper.
This paper examines the impact of Stand Your Ground laws on firearm homicides and injuries. Using state-level monthly data and a difference-in-difference identification strategy, we find that these ...laws result in an increase in homicides. According to our estimates, at least 30 individuals are killed each month as a result of Stand Your Ground laws. Furthermore, we document evidence to suggest that these laws also are associated with an increase in hospitalizations related to firearm-inflicted injuries. Taken together, the findings in this paper raise serious doubts against the argument that Stand Your Ground laws make the public safer.
Panel data for 93 countries shows that most countries experienced a sharp drop in new firm registration during the financial crisis. The decline was more pronounced in countries with higher levels of ...financial development that were more affected by the crisis.
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► Business registration dropped in nearly all countries during the 2008 global financial crisis. ► New firm registrations dropped more sharply in countries more affected by the crisis. ► The crisis had a more negative impact on new business registration in countries with higher levels of financial development.
► US and Thai monthly export data used to re-examine causes of global food crisis. ► Export restrictions and demand surges explain nearly all of surge in rice prices. ► Droughts, export restrictions ...and demand surges a major factor in wheat markets. ► Trade shocks even a major factor for maize, and soybean prices followed maize prices in the future more emphasis should be placed on trade-based policy solutions.
Although fundamental factors were clearly responsible for shifting the world to a higher food price equilibrium in the years leading up the 2008 food crisis, there is little doubt that when food prices peaked in June of 2008, they soared well above the new equilibrium price. Numerous arguments have been proposed to explain overshooting, including financial speculation, depreciation of the United States (US) dollar, low interest rates, and reductions in grain stocks. However, observations that international rice prices surged in response to export restrictions by India and Vietnam suggested that trade-related factors could be an important basis for overshooting, especially given the very tangible link between export volumes and export prices. In this paper, we revisit the trade story by closely examining monthly data from Thailand (the largest exporter of rice), and the United States (the largest exporter of wheat and maize and the third largest exporter of soybeans). In all cases except soybeans, we find that large surges in export volumes preceded the price surges. The presence of these large demand surges, together with back-of-the-envelope estimates of their price impacts, suggests that trade events played a much larger and more pervasive role than previously thought.
Do signals of high aptitude shape the course of collegiate study? We apply a regression discontinuity design to understand how college major choice is impacted by receiving a higher Advanced ...Placement (AP) integer score, despite similar exam performance, compared to students who received a lower integer score. Attaining higher scores increases the probability that a student majors in that exam subject by approximately 5 percent (0.64 percentage points), with some individual exams demonstrating increases as high as 30 percent. A substantial portion of the overall effect is driven by behavioral responses to the positive signal of receiving a higher score.
We study the evolution of people's trust in banks during the global financial crisis, and the factors that determine its level. Austrian survey data show that trust in banks declined sizeably during ...the financial crisis, but the lowest observed trust level (60%) is still higher than that of many other institutions. We establish that a trust decline is related to agents' subjective view of the economic situation and the direct experience of bank failures. Deposit insurance stabilizes banking trust. Both the lack of bank collapses and the extension of deposit insurance coverage had a cushioning effect on trust in banks.
This paper studies how households choose organic products on a given store visit. We develop a three-stage purchase incidence/brand choice/purchase quantity model for organic products. Shared random ...effects parameters link the three stages of the model. We empirically quantify the effects of category variables, marketing mix, and demographic variables on the purchase of organic products using a unique household panel dataset that includes actual organic purchase data from two markets, by over 4,500 households in 25 stores for the period between January 2004 and June 2009. First, we find that the purchase of organic products is greater among the high income, college educated, and older families as well as among consumers holding high-level occupations. Second, households tend not to purchase organic products when buying in concentrated categories. Third, on average, households tend to buy organic store brands more than the organic national brands. Promotions of organic brands (feature ad and display) are less likely to drive households to buy organic brands and so does the organic brand's distribution breadth. Finally, price has an inverted U-shaped effect. We discuss the implications of these results for retailers, manufacturers and researchers.
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