Search Results
Working Paper
Legal Institutions, Credit Markets, and Economic Activity
This paper provides novel evidence on the causal connections between legal institutions, credit markets, and real economic activity. Our analysis exploits an unexplored within-country setting?Native American reservations?together with quasi-experimental variation in legal contract enforcement wherein the US Congress externally assigned state courts to adjudicate contracts on a subset of reservations. According to area-specific data on small business credit, reservations assigned to state courts, which enforce contracts more predictably than tribal courts, have stronger credit markets. ...
Working Paper
Introducing a Framework for Measuring the Quantitative Benefits of Privacy-Enhancing Technologies
This paper reviews privacy-enhancing technologies (PETs) and explores their benefits when used to make traditional payment processes more private. PETs can decrease privacy risk by reducing the amount of sensitive information accessible to payment-processing personnel and systems. This paper proposes a framework for quantifying the risk-reduction benefits of PETs. This method can be used to calculate the amount of privacy-risk exposure that may be created by a set of payment activities, estimate the amount by which PETs can decrease that exposure, and compare that quantified benefit against ...
Working Paper
Financial Liberalizations, Booms, and Crashes
Financial liberalization is often seen as a way to deepen credit markets and stimulate economic growth, but it may also fuel credit booms that end in crisis. We construct a new cross-country database of banking regulation policies covering 21 regulatory indicators for 18 advanced economies since World War II. We distinguish liberalizations that directly relax constraints on credit supply from broader financial reforms. Liberalizations that directly affect credit supply lead to substantial expansions in private credit. Credit expansion is concentrated in non-tradable sectors and is not ...
Journal Article
Institutional Barriers and World Income Disparities
Why have the income disparities between fast-growing economies and development laggards widened over the past five decades? How important is the role played by institutional barriers with relation to technology adoption? Using cross-country analysis, we find that more-severe institutional barriers in several representative lag-behind countries actually hinder the process of structural transformation and economic development, causing these countries to fall below a representative group of fast-growing economies despite having similar or even better initial states five decades ago. We also find ...
Working Paper
Entrepreneurship through Employee Mobility, Innovation, and Growth
Firm-level productivity differences are big and largely ascribed to ex-ante heterogeneity in the entrepreneurs’ growth potential at birth. Where do these ex-ante differences come from, and what can the policy do to encourage the entry of high-growth entrepreneurs? I study empirically and by means of a quantitative growth model the spinout firms: the firms founded by former employees of the incumbent firms. By focusing on innovating spinouts identified through the inventor mobility in the patent data, I document that spinout entrants significantly outperform regular entrants throughout their ...
Working Paper
Credit Enforcement Cycles
Empirical evidence suggests that widespread financial distress, by disrupting enforcement of credit contracts, can be self-propagatory and adversely affect the supply of credit. We propose a unifying theory that models the interplay between enforcement, borrower default decisions, and the provision of credit. The central tenets of our framework are the presence of capacity constrained enforcement and borrower heterogeneity. We show that, despite heterogeneity, borrowers tend to coordinate their default choices, leading to fragility and to credit rationing. Our model provides a rationale for ...
Working Paper
Efficient Public Good Provision in Networks : Revisiting the Lindahl Solution
The provision of public goods in developing countries is a central challenge. This paper studies a model where each agent?s effort provides heterogeneous benefits to the others, inducing a network of opportunities for favor-trading. We focus on a classical efficient benchmark ? the Lindahl solution ? that can be derived from a bargaining game. Does the optimistic assumption that agents use an efficient mechanism (rather than succumbing to the tragedy of the commons) imply incentives for efficient investment in the technology that is used to produce the public goods? To show that the answer is ...
Working Paper
Multinationals, Monopsony, and Local Development: Evidence from the United Fruit Company
This paper studies the short- and long-run effects of large firms on economic development. We use evidence from one of the largest multinationals of the 20th century: the United Fruit Company (UFCo). The firm was given a large land concession in Costa Rica—one of the so-called "Banana Republics"—from 1899 to 1984. Using administrative census data with census-block geo-references from 1973 to 2011, we implement a geographic regression discontinuity design that exploits a quasi-random assignment of land. We find that the firm had a positive and persistent effect on living standards. Company ...
Working Paper
The quantitative role of capital-goods imports in U.S. growth
Over the last 40 years, an increasing share of U.S. aggregate E&S investment expenditure has been allocated to capital-goods imports. While capital-goods imports were only 3.5 percent of E&S investment in 1967, by 2008 their share had risen tenfold to 36 percent. The goal of this paper is to measure the contribution of capital-goods imports to growth in U.S. output per hour using a simple growth accounting exercise. We find that capital-goods imports have contributed 20 to 30 percent to growth in U.S. output per hour between 1967 and 2008. More importantly, we find that capital-goods imports ...
Working Paper
Firm Dynamics and SOE Transformation During China's Economic Reform
We study China’s state-owned enterprises (SOE) reform with a focus on the corporatization of SOEs. We first empirically document that small SOEs are more likely to exit or become privatized, whereas big SOEs are more likely to be corporatized while remaining under state ownership. We then build a heterogeneous-firm model featuring financial frictions, endogenous entry and exit, and optimal firm-type choices. Our calibrated model suggests that in the long run, the SOE reform increases the aggregate output by facilitating resource reallocation to the private sector. Along the transition, the ...