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Working Paper
Privacy Regulation and Quality Investment
This paper analyzes whether a privacy regulation that restricts a dominant firm?s data disclosure level harms the firm?s incentives to invest in service quality and thereby harms social welfare. We study how the regulation affects the privacy and quality choices of a monopoly service provider, who derives revenues solely from disclosing user data to third parties, as well as how those choices in turn affect consumers? participation and information-sharing decisions. We show that the regulation does not always harm investment incentives; moreover, even when it does, it may still improve social ...
Report
Do long-haul truckers undervalue future fuel savings?
The U.S. federal government enacted fuel efficiency standards for medium and heavy trucks for the first time in September 2011. Rationales for using this policy tool typically depend upon frictions existing in the marketplace or consumers being myopic, such that vehicle purchasers undervalue the future fuel savings from increased fuel efficiency. We measure by how much long-haul truck owners undervalue future fuel savings by employing recent advances to the classic hedonic approach to estimate the distribution of willingness-to-pay for fuel efficiency. We find significant heterogeneity in ...
Working Paper
The Impact of Price Controls in Two-sided Markets : Evidence from US Debit Card Interchange Fee Regulation
We study the pricing of deposit accounts following a regulation that capped debit card interchange fees in the United States and provide the first empirical investigation of the link between interchange fees and granular deposit account prices. This link is broadly predicted by the theoretical literature on two-sided markets, but the nature and magnitude of price changes are key empirical issues. To examine the ways that banks adjusted their account prices in response to the regulatory cap on interchange fees, we exploit the cap's differential applicability across banks and account types, ...
Working Paper
Cross-border banking on the two sides of the Atlantic: does it have an impact on bank crisis management?
In the United States and the European Union (EU), political incentives to oppose cross-border banking have been strong in spite of the measurable benefits to the real economy from breaking down geographic barriers. Even a federal-level supervisor and safety net are not by themselves sufficient to incentivizing cross-border banking although differences in the institutional set-up are reflected in the way the two areas responded to the crisis. The U.S. response was a coordinated response, and the cost of resolving banks was borne at the national level. Moreover, the Federal Deposit Insurance ...
Working Paper
Information Production, Misconduct Effort, and the Duration of Financial Misrepresentation
We examine the link between information produced by auditors and analysts and fraud duration. Using a hazard model, we analyze misstatement periods related to SEC accounting and auditing enforcement releases (AAERs) between 1982 and 2012. Results suggest that misconduct is more likely to end just after firms announce an auditor switch or issue audited financial statements, particularly when the audit report contains explanatory language. Analyst following increases the fraud termination hazard. However, increases (decreases) in analyst coverage have a negative (positive) marginal impact on ...
Report
Nonlinear pricing with competition: the market for settling payments
The multiple payments settlement systems available in the United States differ on several dimensions. The Fedwire Funds Service, a utility that operates a U.S. large-value payments-settlement service, offers the fastest speed of settlement. Recognizing that payments differ in the urgency with which they need to be settled, Fedwire offers banks a decreasing block-price schedule. This approach allows Fedwire to price discriminate, charging high fees for urgent payments and low fees for less urgent ones. We analyze banks? demand for Fedwire Funds given this nonlinear scheme, taking into account ...
Report
Shadow Insurance
Liabilities ceded by life insurers to shadow reinsurers (i.e., affiliated and less regulated off-balance-sheet entities) grew from $11 billion in 2002 to $364 billion in 2012. Life insurers using shadow insurance, which capture half of the market share, ceded 25 cents of every dollar insured to shadow reinsurers in 2012, up from 2 cents in 2002. Our adjustment for shadow insurance reduces risk-based capital by 53 percentage points (or 3 rating notches) and raises default probabilities by a factor of 3.5. We develop a structural model of the life insurance industry and estimate the impact of ...
Working Paper
Data, Privacy Laws and Firm Production: Evidence from the GDPR
By regulating how firms collect, store, and use data, privacy laws may change the role of data in production and alter firm demand for information technology inputs. We study how firms respond to privacy laws in the context of the EU’s General Data Protection Regulation (GDPR) by using seven years of data from a large global cloud-computing provider. Our difference-in-difference estimates indicate that, in response to the GDPR, EU firms decreased data storage by 26% and data processing by 15% relative to comparable U.S. firms, becoming less “data-intensive.” To estimate the costs of the ...
Report
Does Universal Occupational Licensing Recognition Improve Patient Access? Evidence from Healthcare Utilization
Optimizing physician labor supply has been an important policy issue in healthcare in the United States. One of the proposed solutions has been the universal licensing recognition (ULR), which allows out-of-state physicians to provide healthcare services without relicensing and increases the local labor supply of physicians. There has been no empirical analysis of the effect of such regulatory relaxation on the local labor supply and subsequent improvements of consumer welfare. In this study, we use the Behavioral Risk Factor Surveillance System to investigate the effect of universal ...