Marianne Bertrand

REVISION: Measuring the Labor Market at the Onset of the COVID-19 Crisis
Date Posted:Wed, 26 Aug 2020 03:52:00 -0500
We use traditional and non-traditional data to measure the collapse and partial recovery of the U.S. labor market from March to early July, contrast this downturn to previous recessions, and provide preliminary evidence on the effects of the policy response. For hourly workers at both small and large businesses, nearly all of the decline in employment occurred between March 14 and 28. It was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job losses in small businesses reflected firms that closed entirely, though many subsequently reopened. Firms that were already unhealthy were more likely to close and less likely to reopen, and disadvantaged workers were more likely to be laid off and less likely to return. Most laid off workers expected to be recalled, and this was predictive of rehiring. Shelter-in-place orders drove only a small share of job losses. Last, states that received more small business loans from the ...

REVISION: Measuring the Labor Market at the Onset of the COVID-19 Crisis
Date Posted:Mon, 29 Jun 2020 12:17:39 -0500
We use traditional and non-traditional data sources to measure the collapse and subsequent partial recovery of the U.S. labor market in Spring 2020. Using daily data on hourly workers in small businesses, we show that the collapse was extremely sudden - nearly all of the decline in hours of work occurred between March 14 and March 28. Both traditional and non-traditional data show that, in contrast to past recessions, this recession was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job loss in small businesses reflected firms that closed entirely. Nevertheless, the vast majority of laid off workers expected, at least early in the crisis, to be recalled, and indeed many of the businesses have reopened and rehired their former employees. There was a reallocation component to the firm closures, with elevated risk of closure at firms that were already unhealthy, and more reopening of the healthier firms. At the ...

REVISION: How are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey
Date Posted:Wed, 10 Jun 2020 07:27:29 -0500
In addition to its impact on public health, COVID-19 has had a major impact on the economy. To shed light on how COVID-19 is affecting small businesses – and on the likely impact of the recent stimulus bill, we conducted a survey of more than 5,800 small businesses. Several main themes emerge from the results. First, mass layoffs and closures have already occurred. In our sample, 43 percent of businesses are temporarily closed, and businesses have – on average – reduced their employee counts by 40 percent relative to January. Second, consistent with previous literature, we find that many small businesses are financially fragile. For example, the median business has more than $10,000 in monthly expenses and less than one month of cash on hand. Third, businesses have widely varying beliefs about the likely duration of COVID related disruptions. Fourth, the majority of businesses planned to seek funding through the CARES act. However, many anticipated problems with accessing the aid, ...

REVISION: The Impact of COVID-19 on Small Business Outcomes and Expectations
Date Posted:Fri, 29 May 2020 03:49:36 -0500
To explore the impact of COVID on small businesses, we conducted a survey of more than 5,800 small businesses between March 28 and April 4, 2020. Several themes emerged. First, mass layoffs and closures had already occurred – just a few weeks into the crisis. Second, the risk of closure was negatively associated with the expected length of the crisis. Moreover, businesses had widely varying beliefs about the likely duration of COVID-related disruptions. Third, many small businesses are financially fragile: the median business with more than $10,000 in monthly expenses had only about two weeks of cash on hand at the time of the survey. Fourth, the majority of businesses planned to seek funding through the CARES act. However, many anticipated problems with accessing the program, such as bureaucratic hassles and difficulties establishing eligibility. Using experimental variation, we also assess take-up rates and business resilience effects for loans relative to grants-based programs.

REVISION: How are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey
Date Posted:Tue, 19 May 2020 10:54:16 -0500
In addition to its impact on public health, COVID-19 has had a major impact on the economy. To shed light on how COVID-19 is affecting small businesses – and on the likely impact of the recent stimulus bill, we conducted a survey of more than 5,800 small businesses. Several main themes emerge from the results. First, mass layoffs and closures have already occurred. In our sample, 43 percent of businesses are temporarily closed, and businesses have – on average – reduced their employee counts by 40 percent relative to January. Second, consistent with previous literature, we find that many small businesses are financially fragile. For example, the median business has more than $10,000 in monthly expenses and less than one month of cash on hand. Third, businesses have widely varying beliefs about the likely duration of COVID related disruptions. Fourth, the majority of businesses planned to seek funding through the CARES act. However, many anticipated problems with accessing the aid, ...

REVISION: How are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey
Date Posted:Wed, 15 Apr 2020 04:59:36 -0500
In addition to its impact on public health, COVID-19 has had a major impact on the economy. To shed light on how COVID-19 is affecting small businesses – and on the likely impact of the recent stimulus bill, we conducted a survey of more than 5,800 small businesses. Several main themes emerge from the results. First, mass layoffs and closures have already occurred. In our sample, 43 percent of businesses are temporarily closed, and businesses have – on average – reduced their employee counts by 40 percent relative to January. Second, consistent with previous literature, we find that many small businesses are financially fragile. For example, the median business has more than $10,000 in monthly expenses and less than one month of cash on hand. Third, businesses have widely varying beliefs about the likely duration of COVID related disruptions. Fourth, the majority of businesses planned to seek funding through the CARES act. However, many anticipated problems with accessing the aid, ...

REVISION: How Are Small Businesses Adjusting to COVID-19? Early Evidence From a Survey
Date Posted:Fri, 10 Apr 2020 06:19:09 -0500
In addition to its impact on public health, COVID-19 has had a major impact on the economy. To shed light on how COVID-19 is affecting small businesses – and on the likely impact of the recent stimulus bill, we conducted a survey of more than 5,800 small businesses. Several main themes emerge from the results. First, mass layoffs and closures have already occurred. In our sample, 43 percent of businesses are temporarily closed, and businesses have – on average – reduced their employee counts by 40 percent relative to January. Second, consistent with previous literature, we find that many small businesses are financially fragile. For example, the median business has more than $10,000 in monthly expenses and less than one month of cash on hand. Third, businesses have widely varying beliefs about the likely duration of COVID related disruptions. Fourth, the majority of businesses planned to seek funding through the CARES act. However, many anticipated problems with accessing the aid, ...

REVISION: Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence
Date Posted:Thu, 18 Apr 2019 17:19:46 -0500
We explore the role of charitable giving as a means of political influence. For philanthropic foundations associated with large U.S. corporations, we present three different identification strategies that consistently point to the use of corporate social responsibility in ways that parallel the strategic use of Political Action Committee (PAC) spending. Our estimates imply that 16.1% of corporate charitable giving may be politically motivated, an amount 6.2 times larger than annual PAC contributions and 90% of federal lobbying. Absent of disclosure requirements, charitable giving may be a form of corporate political influence undetected by voters and directly subsidized by taxpayers.

New: Coming Apart? Cultural Distances in the United States Over Time
Date Posted:Thu, 05 Jul 2018 13:27:02 -0500
We analyze temporal trends in cultural distance between groups in the US defined by income, education, gender, race, and political ideology. We measure cultural distance between two groups as the ability to infer an individual's group based on his or her (i) media consumption, (ii) consumer behavior, (iii) time use, or (iv) social attitudes. Gender difference in time use decreased between 1965 and 1995 and has remained constant since. Differences in social attitudes by political ideology and income have increased over the last four decades. Whites and non-whites have converged somewhat on attitudes but have diverged in consumer behavior. For all other demographic divisions and cultural dimensions, cultural distance has been broadly constant over time.

New: The Glass Ceiling
Date Posted:Tue, 05 Jun 2018 10:25:30 -0500
Despite decades of progress, women remain underrepresented in the upper part of the earnings distribution, a phenomenon often referred to as the “glass ceiling.” We review the recent research trying to explain this phenomenon. After briefly revisiting gender differences in education, we turn our attention to a body of work that has argued that gender differences in psychological attributes are holding back women’s earnings; we pay particular attention to the research that has aimed to test the relevance of these gender differences in psychological attributes in the field. We then review another active area of research that has returned to a more classical explanation focused on the challenges women may face when trying to juggle competing demands on their time in the workplace and in the home, particularly when the home includes children. We discuss recent work documenting women’s greater demand for flexibility in the workplace, as well work measuring the labor market penalties ...

REVISION: Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence
Date Posted:Tue, 20 Mar 2018 00:10:44 -0500
We explore the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For philanthropic foundations associated with Fortune 500 and S&P500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats on committees that are of policy relevance to the firm associated with the foundation. This pattern parallels that of publicly disclosed Political Action Committee (PAC) spending. As further evidence on firms’ political motivations for charitable giving, we show that a member of Congress’s departure leads to a short-term decline in charitable giving to his district, and we again observe similar patterns in PAC spending. Charities directly linked to politicians through personal financial disclosure forms filed in accordance to Ethics in Government Act requirements exhibit similar patterns of political dependence. ...

REVISION: Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence
Date Posted:Fri, 19 Jan 2018 20:46:08 -0600
We explore the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For foundations associated with Fortune 500 and S&P 500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats in committees that are of policy relevance to the firm associated with the foundation, a pattern which parallels that of Political Action Committee (PAC) spending. We additionally show that charities directly linked to politicians in personal financial disclosure forms exhibit similar patterns of political dependence. Our analysis suggests that firms deploy their charitable foundations as a form of tax exempt influence-seeking. Based on a simple model of political influence, our empirical results imply that 8.8 percent of corporate charitable giving is politically motivated, which would imply that this channel of influence ...

REVISION: Tax-Exempt Lobbying
Date Posted:Wed, 03 Jan 2018 11:45:25 -0600
We explore the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For foundations associated with Fortune 500 and S&P500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats in committees that are of policy relevance to the firm associated with the foundation, a pattern which parallels that of Political Action Committee (PAC) spending. We additionally show that charities directly linked to politicians in personal financial disclosure forms exhibit similar patterns of political dependence. Our analysis suggests that firms deploy their charitable foundations as a form of tax exempt influence-seeking. The scale of charitable giving by large U.S. corporations is such that this channel of influence is economically substantial: our estimates suggest it may be larger than PAC contributions and federal ...

REVISION: Social Norms, Labor Market Opportunities, and the Marriage Gap for Skilled Women
Date Posted:Tue, 09 Feb 2016 12:05:42 -0600
In most of the developed world, skilled women marry at a lower rate than unskilled women. We document heterogeneity across countries in how the marriage gap for skilled women has evolved over time. As labor market opportunities for women have improved, the marriage gap has been growing in some countries but shrinking in others. We discuss a theoretical model in which the (negative) social attitudes towards working women might contribute towards the lower marriage rate of skilled women, and might also induce a non-linear relationship between their labor market prospects and their marriage outcomes. The model is suited to understand the dynamics of the marriage gap for skilled women over time within a country with set social attitudes towards working women. The model also delivers predictions about how the marriage gap for skilled women should react to changes in their labor market opportunities across countries with more or less conservative attitudes towards working women. We test ...

REVISION: Social Norms, Labor Market Opportunities, and the Marriage Gap for Skilled Women
Date Posted:Sun, 07 Feb 2016 04:55:39 -0600
In most of the developed world, skilled women marry at a lower rate than unskilled women. We document heterogeneity across countries in how the marriage gap for skilled women has evolved over time. As labor market opportunities for women have improved, the marriage gap has been growing in some countries but shrinking in others. We discuss a theoretical model in which the (negative) social attitudes towards working women might contribute towards the lower marriage rate of skilled women, and might also induce a non-linear relationship between their labor market prospects and their marriage outcomes. The model is suited to understand the dynamics of the marriage gap for skilled women over time within a country with set social attitudes towards working women. The model also delivers predictions about how the marriage gap for skilled women should react to changes in their labor market opportunities across countries with more or less conservative attitudes towards working women. We test ...

New: Breaking the Glass Ceiling? The Effect of Board Quotas on Female Labor Market Outcomes in Norway.
Date Posted:Sat, 30 Aug 2014 05:47:01 -0500
In late 2003, Norway passed a law mandating 40 percent representation of each gender on the board of publicly limited liability companies. The primary objective of this reform was to increase the representation of women in top positions in the corporate sector and decrease gender disparity in earnings within that sector. We document that the newly (post-reform) appointed female board members were observably more qualified than their female predecessors, and that the gender gap in earnings within boards fell substantially. While the reform may have improved the representation of female employees at the very top of the earnings distribution (top 5 highest earners) within firms that were mandated to increase female participation on their board, there is no evidence that these gains at the very top trickled-down. Moreover the reform had no obvious impact on highly qualified women whose qualifications mirror those of board members but who were not appointed to boards. We observe no ...

REVISION: Do Judges Vary in Their Treatment of Race?
Date Posted:Sat, 28 Sep 2013 12:41:48 -0500
Are minorities treated differently by the legal system? Systematic racial differences in case characteristics, many unobservable, make this a difficult question to answer directly. In this paper, we estimate whether judges differ from each other in how they sentence minorities, avoiding potential bias from unobservable case characteristics by exploiting the random assignment of cases to judges. We measure the between-judge variation in the difference in incarceration rates and sentence lengths between African-American and White defendants. We perform a Monte Carlo simulation in order to explicitly construct the appropriate counterfactual, where race does not influence judicial sentencing. In our data set, which includes felony cases from Cook County, Illinois, we find statistically significant between-judge variation in incarceration rates, although not in sentence lengths.

REVISION: Gender Identity and Relative Income within Households
Date Posted:Tue, 16 Apr 2013 10:28:28 -0500
We examine causes and consequences of relative income within households. We establish that gender identity – in particular, an aversion to the wife earning more than the husband – impacts marriage formation, the wife’s labor force participation, the wife’s income conditional on working, satisfaction with the marriage, divorce, and the division of home production. The distribution of the share of household income earned by the wife exhibits a sharp cliff at 0.5, which suggests that a ...

New: Trickle-Down Consumption
Date Posted:Sat, 23 Mar 2013 06:05:44 -0500
Have rising income and consumption at the top of income distribution since the early 1980s induced households in the lower tiers of the distribution to consume a larger share of their income? Using state-year variation in income level and consumption in the top first quintile or decile of the income distribution, we find evidence for such “trickle-down consumption.” The magnitude of effect suggests that middle income households would have saved between 2.6 and 3.2 percent more by the ...

REVISION: Gender Identity and Relative Income within Households
Date Posted:Wed, 13 Feb 2013 14:26:11 -0600
We examine causes and consequences of relative income within households. We establish that gender identity – in particular, an aversion to the wife earning more than the husband – impacts marriage formation, the wife’s labor force participation, the wife’s income conditional on working, satisfaction with the marriage, divorce, and the division of home production. The distribution of the share of household income earned by the wife exhibits a sharp cliff at 0.5, which suggests that a ...

New: CEOS
Date Posted:Wed, 31 Aug 2011 05:57:18 -0500
This article starts with an overview of the characteristics of chief executive officers (CEOs). I discuss the rising importance of general skills over firm-specific skills and the growing share of externally recruited CEOs. I also discuss possible reasons for the underrepresentation of women and the overrepresentation of family members in the corporate suite. I then review the three main explanations that have been put forward to explain the surge in CEO compensation over the past 30 years: ...

REVISION: Do Judges Vary in Their Treatment of Race?
Date Posted:Sat, 02 Apr 2011 17:39:54 -0500
Are minorities treated differently by the legal system? Systematic racial differences in case characteristics, many unobservable, make this a difficult question to answer directly. In this paper, we estimate whether judges differ from each other in how they sentence minorities, avoiding potential bias from unobservable case characteristics by exploiting the random assignment of cases to judges. We measure the between-judge variation in the difference in incarceration rates and sentence ...

REVISION: Is it Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process
Date Posted:Tue, 22 Mar 2011 18:33:26 -0500
What do lobbyists do? Some believe that lobbyists’ main role is to provide issue-specific information and expertise to congressmen to help guide the law-making process. Others believe that lobbyists mainly provide the firms and other special interests they represent with access to politicians in their “circle of influence” and that this access is the be-all and end-all of how lobbyists affect the lawmaking process. This paper combines a descriptive analysis with more targeted testing to get ...

REVISION: Is it Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process
Date Posted:Tue, 25 Jan 2011 20:22:00 -0600
What do lobbyists do? Some believe that lobbyists’ main role is to provide issue-specific information and expertise to congressmen to help guide the law-making process. Others believe that lobbyists mainly provide the firms and other special interests they represent with access to politicians in their “circle of influence” and that this access is the be-all and end-all of how lobbyists affect the lawmaking process. This paper combines a descriptive analysis with more targeted testing to get ...

REVISION: Information Disclosure, Cognitive Biases and Payday Borrowing
Date Posted:Wed, 13 Jan 2010 18:25:18 -0600
If people face cognitive limitations or biases that lead to financial mistakes, what are possible ways lawmakers can help? One approach is to remove the option of the bad decision; another approach is to increase financial education such that individuals can reason through choices when they arise. A third, less discussed, approach is to mandate disclosure of information in a form that enables people to overcome limitations or biases at the point of the decision. This third approach is the ...

REVISION: Information Disclosure, Cognitive Biases and Payday Borrowing
Date Posted:Fri, 08 Jan 2010 12:17:25 -0600
If people face cognitive limitations or biases that lead to financial mistakes, what are possible ways lawmakers can help? One approach is to remove the option of the bad decision; another approach is to increase financial education such that individuals can reason through choices when they arise. A third, less discussed, approach is to mandate disclosure of information in a form that enables people to overcome limitations or biases at the point of the decision. This third approach is the ...

New: Information Disclosure, Cognitive Biases and Payday Borrowing
Date Posted:Thu, 07 Jan 2010 05:26:14 -0600
If people face cognitive limitations or biases that lead to financial mistakes, what are possible ways lawmakers can help? One approach is to remove the option of the bad decision; another approach is to increase financial education such that individuals can reason through choices when they arise. A third, less discussed, approach is to mandate disclosure of information in a form that enables people to overcome limitations or biases at the point of the decision. This third approach is the ...

New: Dynamics of the Gender Gap for Young Professionals in the Corporate and Financial Sectors
Date Posted:Fri, 25 Sep 2009 17:00:30 -0500
This paper assesses the relative importance of various explanations for the gender gap in career outcomes for highly-educated workers in the U.S. corporate and financial sectors. The careers of MBAs, who graduated between 1990 and 2006 from a top U.S. business school, are studied to understand how career dynamics differ by gender. Although male and female MBAs have nearly identical (labor) incomes at the outset of their careers, their earnings soon diverge, with the male annual earnings ...

New: What Do High-Interest Borrowers Do with Their Tax Rebate?
Date Posted:Thu, 19 Feb 2009 13:02:53 -0600
Building on prior literature that constrained individuals consume the most out of a tax rebate, we study the tradeoffs high interest borrowers face when they received their 2008 tax stimulus checks. We find a persistent decline in payday borrowing in the pay cycles that follow the receipt of the tax rebate. The reduction in borrowing is a significant fraction of the mean outstanding loan (12%) and appears fairly persistent over the time, but is moderate in dollar magnitude (about $35) relative ...

Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985
Date Posted:Thu, 19 Feb 2009 11:27:00 -0600
This Paper empirically investigates the impact of distortions in the banking sector on the structure and dynamics of product markets, as well as on firm level outcomes. Our analysis suggests that an increase in the efficiency of the banking industry can have first-order effects not only on the lending relationship between banks and firms, but also on the structure and dynamics of product markets overall. The particular reform we consider is the deregulation of the French banking industry in ...

New: Mixing Family with Business: A Study of Thai Business Groups and the Families Behind Them
Date Posted:Thu, 19 Feb 2009 11:23:32 -0600
Families run a large fraction of business groups around the world. In this paper, we analyze how the structure of the families behind these business groups affects the groups' organization, governance and performance. To address this question, we constructed a unique data set of family trees and business groups for nearly 100 of the largest business families in Thailand. We find a strong positive association between family size and family involvement in the ownership and control of the family ...

Managing With Style: The Effect of Managers on Firm Policies
Date Posted:Thu, 19 Feb 2009 11:18:58 -0600
This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-firm matched panel data set which enables us to track the top managers across different firms over time. We find that manager fixed effects matter for a wide range of corporate decisions. A significant extent of the heterogeneity in investment, financial and organizational practices of firms can be explained by the presence of manager fixed effects. We identify specific ...

New: What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment
Date Posted:Sat, 24 Jan 2009 04:43:01 -0600
Firms spend billions of dollars each year advertising consumer products in order to influence demand. Much of these outlays are on the creative design of advertising content. Creative content often uses nuances of presentation and framing that have large effects on consumer decision making in laboratory studies. But there is little field evidence on the effect of advertising content as it compares in magnitude to the effect of price. We analyze a direct mail field experiment in South Africa ...

New: Conditional Cash Transfers in Education: Design Features, Peer and Sibling Effects Evidence from a R...
Date Posted:Wed, 12 Nov 2008 18:25:55 -0600
This paper presents an evaluation of multiple variants of a commonly used intervention to boost education in developing countries - the conditional cash transfer - with a student level randomization that allows the authors to generate intra-family and peer-network variation. The analysis tests three treatments: a basic conditional cash transfer treatment based on school attendance, a savings treatment that postpones a bulk of the cash transfer due to good attendance to just before children ...

Are Emily and Greg More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discri...
Date Posted:Thu, 06 Nov 2008 00:42:15 -0600
We perform a field experiment to measure racial discrimination in the labor market. We respond with fictitious resumes to help-wanted ads in Boston and Chicago newspapers. To manipulate perception of race, each resume is randomly assigned either a very African American sounding name or a very White sounding name. The results show significant discrimination against African-American names: White names receive 50 percent more callbacks for interviews. We also find that race affects the benefits ...

Ferreting Out Tunneling: An Application to Indian Business Groups
Date Posted:Fri, 17 Oct 2008 02:56:04 -0500
In many countries, controlling shareholders are accused of tunneling, transferring resources from companies where they have few cash flow rights to ones where they have more cash flow rights. Quantifying the extent of such tunneling, however, has proven difficult because of its illicit nature. This paper develops a general empirical technique for quantifying tunneling. We use the responses of different firms to performance shocks to map out the flow of resources within a group of firms and ...

New: Conditional Cash Transfers in Education: Design Features, Peer and Sibling Effects - Evidence from a...
Date Posted:Tue, 29 Apr 2008 01:40:26 -0500
We evaluate multiple variants of a commonly used intervention to boost education in developing countries - the conditional cash transfer (CCT) - with a student level randomization that allows us to generate intra-family and peer-network variation. We test three treatments: a basic CCT treatment based on school attendance, a savings treatment that postpones a bulk of the cash transfer due to good attendance to just before children have to reenroll, and a tertiary treatment where some of the ...

New: Affirmative Action in Education: Evidence from Engineering College Admissions in India
Date Posted:Tue, 29 Apr 2008 01:01:46 -0500
Many countries mandate affirmative action in university admissions for traditionally disadvantaged groups. Little is known about either the efficacy or costs of these programs. This paper examines affirmative action in engineering colleges in India for lower-caste groups. We find that it successfully targets the financially disadvantaged: the marginal upper-caste applicant comes from a more advantaged background than the marginal lower-caste applicant who displaces him. Despite much lower ...

New: Does Corruption Produce Unsafe Drivers?
Date Posted:Thu, 08 Jun 2006 10:20:57 -0500
We follow 822 applicants through the process of obtaining a driver's license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise ...

Do CEOs Set Their Own Pay? The Ones Without Principals Do
Date Posted:Thu, 25 May 2006 04:12:18 -0500
We empirically examine two competing views of CEO pay. In the contracting view, pay is used to solve an agency problem: the compensation committee optimally chooses pay contracts which give the CEO incentives to maximize shareholder wealth. In the skimming view, pay is the result of an agency problem: CEOs have managed to capture the pay process so that they set their own pay, constrained somewhat by the availability of cash or by a fear of drawing shareholders` attention. To distinguish ...

New: Does Corruption Produce Unsafe Drivers?
Date Posted:Tue, 16 May 2006 04:39:31 -0500
We follow 822 applicants through the process of obtaining a driver's license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise ...

What's Psychology Worth? A Field Experiment in the Consumer Credit Market
Date Posted:Wed, 18 Jan 2006 18:52:00 -0600
Numerous laboratory studies find that minor nuances of presentation and description change behavior in ways that are inconsistent with standard economic models. How much do these context effect matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experience? We report on a field experiment designed to address this question. A South African lender sent letters offering incumbent clients large, short-term loans at randomly chosen interest ...

What's Psychology Worth? A Field Experiment in the Consumer Credit Market
Date Posted:Thu, 28 Jul 2005 08:43:24 -0500
Numerous laboratory studies report on behaviors inconsistent with rational economic models. How much do these inconsistencies matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experiences? We report on a field experiment designed to address this question. Incumbent clients of a lender in South Africa were sent letters offering them large, short-term loans at randomly chosen interest rates. Psychological features on the letter, which ...

Mixing Family with Business: A Study of Thai Business Groups and the Families behind Them
Date Posted:Mon, 21 Mar 2005 07:23:22 -0600
A large fraction of business groups around the world are run by families. In this paper, we analyze how the structure of the families behind these business groups affects the groups' organization, governance and performance. To address this question, we constructed a unique data set of the family trees and the business groups they run for 70 of the largest business families in Thailand. We show that the group head and his brothers hold the majority of family positions within each group ...

Profitable Investments or Dissipated Cash? Evidence on the Investment-Cash Flow Relationship From Oi...
Date Posted:Thu, 10 Mar 2005 00:28:49 -0600
The strong positive relationship between corporate cash flow and investment has been interpreted through the lens of both agency- and non-agency-based models. In this paper, we distinguish between these two interpretations using project-level data in the oil and gas industry. The specific projects we consider are auctioned-off leases that give mineral exploration rights to tracts of federal land. We find the standard positive relationship between investment and cash flow in this data, in that ...

Profitable Investments or Dissipated Cash?: Evidence on the Investment-Cash Flow Relationship From O
Date Posted:Tue, 22 Feb 2005 17:59:28 -0600
Both agency- and non-agency-based interpretations have been proposed to explain the strong positive empirical relationship between corporate cash flow and corporate investment. In this paper, we attempt to distinguish between these different interpretations using project-level data in the oil and gas industry. The specific projects we consider are mineral exploration leases on tracts of land. The standard positive relationship between investment and cash flow holds for these projects, in that ...

Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry
Date Posted:Sun, 24 Oct 2004 07:05:34 -0500
Are product market and entry regulation key sources of low employment growth in many European countries? We investigate this question in the context of the French retail trade industry. Since 1974, approval by regional zoning boards has been required for the creation or extension of any large retail store in France. We exploit a unique database that provides time and region specific variation in boards' approval decisions. We show that stronger deterrence of entry by the boards, and the ...

Pyramids
Date Posted:Wed, 26 Nov 2003 06:42:44 -0600
Most corporate finance models of firm behavior study the typical US corporation: one firm with a large set of dispersed shareholders. In contrast, in many countries around the world, firms are often held in groups with complicated ownership structures. These groups, often referred to as pyramids, raise very distinct questions about firm behavior; these questions that are especially relevant for developing countries where these groups are most prevalent. In this paper, we first describe some ...

How Much Should We Trust Differences-in-Differences Estimates?
Date Posted:Wed, 26 Nov 2003 06:25:56 -0600
Most Difference-in-Difference (DD) papers rely on many years of data and focus on serially correlated outcomes. Yet almost all these papers ignore the bias in the estimated standard errors that serial correlation introduces. This is especially troubling because the independent variable of interest in DD estimation (e.g., the passage of law) is itself very serially correlated, which will exacerbate the bias in standard errors. To illustrate the severity of this issue, we randomly generate ...

Public Policy and Extended Families: Evidence from South Africa
Date Posted:Wed, 26 Nov 2003 06:22:35 -0600
How are resources allocated within extended families in developing countries? To investigate this question, we use a unique social experiment: the South African pension program. Under that program, the elderly receive a cash transfer that represents roughly twice the per capita African income. We ask how this transfer affects the labor supply of working-age individuals living with these elderly. We find a sharp drop in the working hours of the prime-age individuals in these households ...

Do People Mean What They Say? Implications For Subjective Survey Data
Date Posted:Wed, 26 Nov 2003 06:11:34 -0600
Many surveys contain a wealth of subjective questions that are at first glance rather exciting. Examples include "How important is leisure time to you?" "How satisfied are you with yourself?"; or "How satisfied are you with your work?" Yet despite easy availability, this is one data source that economists rarely use. In fact, the unwillingness to rely on such questions marks an important divide between economists and other social scientists. This neglect does not come from disinterest. Most ...

Agents With and Without Principals
Date Posted:Wed, 26 Nov 2003 06:08:16 -0600
Who sets CEO pay? Our standard answer to this question has been shaped by principal agent theory: shareholders set CEO pay. They use pay to limit the moral hazard problem caused by the low ownership stakes of CEOs. Through bonuses, options, or long term contracts, shareholders can motivate the CEO to maximize firm wealth. In other words, shareholders use pay to provide incentives, a view we refer to as the contracting view. An alternative view, championed by practitioners such as ...

Do CEOS Set Their Own Pay? The Ones Without Principals Do
Date Posted:Wed, 26 Nov 2003 05:48:26 -0600
We empirically examine two competing views of CEO pay. In the contracting view, pay is used to solve an agency problem: the compensation committee optimally chooses pay contracts that give the CEO incentives to maximize shareholder wealth. In the skimming view, pay is the result of an agency problem: CEOs have managed to capture the pay process so that they set their own pay, constrained somewhat by the availability of cash or by a fear of drawing shareholders' attention. To distinguish ...

Network Effects and Welfare Cultures
Date Posted:Wed, 26 Nov 2003 05:35:47 -0600
This paper empirically examines the role of social networks in welfare participation. Social theorists from across the political spectrum have argued that network effects have given rise to a culture of poverty. Empirical work, however, has found it difficult to distinguish the effect of networks from unobservable characteristics of individuals and areas. We use data on language spoken to better infer an individual?s network within an area. Individuals who are surrounded by others speaking ...

Executive Compensation and Incentives: The Impact of Takeover Legislation
Date Posted:Wed, 26 Nov 2003 05:35:30 -0600
We investigate the impact of changes in states' anti-takeover legislation on executive compensation. We find that both pay for performance sensitivities and mean pay increase for the firms affected by the legislation (relative to a control group). These findings are partially consistent with an optimal contracting allow CEOs to skim more. We compute lower bounds on the relative risk aversion coefficients implied by our findings. These lower bounds are relatively high, indicating that the ...

Is There Discretion in Wage Setting? A Test Using Takeover Legislation
Date Posted:Wed, 26 Nov 2003 05:20:14 -0600
Anecdotal evidence suggests that uncontrolled managers let wages rise above competitive levels. Testing this popular perception has proven difficult; however, because independent variation in the extent of managerial discretion is needed. In this paper, we use states? passage of anti-takeover legislation as a source of such independent variation. Passed in the 1980s, these laws seriously limited takeovers of firms incorporated in legislating states. Since many view hostile takeovers as an ...

Enjoying the Quiet Life? Corporate Governance and Managerial Preferences
Date Posted:Tue, 07 Oct 2003 03:56:43 -0500
Much of our understanding of corporations builds on the idea that managers, when they are not closely monitored, will pursue goals that are not in shareholders' interests. But what goals would managers pursue? This paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences. We use plant-level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing ...

Are Emily and Greg More Employable than Lakisha and Jamal? A Field Experiment on Labor Market Discri...
Date Posted:Tue, 29 Jul 2003 01:32:47 -0500
We perform a field experiment to measure racial discrimination in the labor market. We respond with fictitious resumes to help-wanted ads in Boston and Chicago newspapers. To manipulate perception of race, each resume is assigned either a very African American sounding name or a very White sounding name. The results show significant discrimination against African-American names: White names receive 50 percent more callbacks for interviews. We also find that race affects the benefits of a ...

How Much Should We Trust Differences-in-Differences Estimates?
Date Posted:Sat, 23 Mar 2002 06:11:53 -0600
Most Difference-in-Difference (DD) papers rely on many years of data and focus on serially correlated outcomes. Yet almost all these papers ignore the bias in the estimated standard errors that serial correlation introduces. This is especially troubling because the independent variable of interest in DD estimation (e.g., the passage of law) is itself very serially correlated, which will exacerbate the bias in standard errors. To illustrate the severity of this issue, we randomly generate ...

Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry
Date Posted:Sat, 24 Nov 2001 23:49:17 -0600
Are product market and entry regulation key sources of low employment growth in many European countries? We investigate this question in the context of the French retail industry. Since 1974, approval by regional zoning boards has been required for the creation or extension of any large retail store in France. We exploit a unique database that provides time and region specific variation in boards' approval decisions. We show that stronger deterrence of entry by the boards, and the increase in ...

Ferreting Out Tunneling: An Application to Indian Business Groups
Date Posted:Fri, 14 Sep 2001 12:09:45 -0500
In many countries, controlling shareholders are accused of tunneling, transferring resources from companies where they have few cash flow rights to ones where they have more cash flow rights. Quantifying the extent of such tunneling, however, has proven difficult because of its illicit nature. This paper develops a general empirical technique for quantifying tunneling. We use the responses of different firms to performance shocks to map out the flow of resources within a group of firms and to ...

The Gender Gap in Top Corporate Jobs
Date Posted:Fri, 14 Sep 2001 12:04:39 -0500
This paper studies the gender compensation gap among high-level executives in US corporations. We use the ExecuComp data set that contains information on total compensation for the top five highest paid executives of a large group of US firms over the period 1992-1997. About 2.5% of the executives in the sample are women. These women earn about 45% less than their male counterparts. As much as 75% of this gap can be accounted for by the fact that women manage smaller companies and are less ...

Public Policy and Extended Families: Evidence from South Africa
Date Posted:Sun, 01 Apr 2001 17:27:00 -0500
Tightly knit extended families, in which people often give money to and get money from relatives, characterize many developing countries. These intra-family flows mean that public policies may affect a very different group of people than the one they target. To assess the empirical importance of these effects, we study a cash pension program in South Africa that targets the elderly. Focusing on three-generation households , we use the variation in pension receipt that comes from differences ...

Does Managed Care Change the Mission of Nonprofit Hospitals? Evidence From the Managerial Labor Mark...
Date Posted:Sun, 01 Apr 2001 15:24:00 -0500
This paper examines how the managerial labor market in nonprofit hospitals has adjusted to the negative income pressures created by HMO penetration. Using a panel of about 1500 nonprofit hospitals over the period 1992 to 1996, we find that top executive turnover increases following an increase in HMO penetration. Moreover, the increase in turnover is concentrated among the hospitals that have low levels of economic profitability and are more financially leveraged. While the link between top ...

Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry
Date Posted:Sat, 31 Mar 2001 03:52:32 -0600
Does entry regulation hinder job creation? We investigate this question in the context of the French retail industry, a sector that has experienced especially low rates of job creation over the last 25 years. Since the early 70s, the French government has required regional zoning board approval for the creation or extension of any large retail store. Using a unique database that provides time and regional variation in boards' approval decisions, we show that this requirement created ...

Agents With and Without Principals
Date Posted:Mon, 11 Sep 2000 07:14:09 -0500
Who sets CEO pay? Our standard answer to this question has been shaped by principal agent theory: shareholders set CEO pay. They use pay to limit the moral hazard problem caused by the low ownership stakes of CEOs. Through bonuses, options, or long term contracts, shareholders can motivate the CEO to maximize firm wealth. In other words, shareholders use pay to provide incentives, a view we refer to as the contracting view. An alternative view, championed by practitioners such as Crystal ...

Network Effects and Welfare Cultures
Date Posted:Thu, 20 Jul 2000 08:55:46 -0500
This paper empirically examines the role of social networks in welfare participation. Social theorists from across the political spectrum have argued that network effects have given rise to a culture of poverty. Empirical work, however, has found it difficult to distinguish the effect of networks from unobservable characteristics of individuals and areas. We use data on language spoken to better infer an individual's network within an area. Individuals who are surrounded by others speaking ...

From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Re...
Date Posted:Sat, 13 May 2000 02:05:50 -0500
There is a popular perception that increased competitive pressures in U.S. product markets are turning the employment relationship from one governed by implicit agreements into one governed by the market. In this paper, I examine whether changes in import competition indeed affect the use of implicit agreements between employers and workers in a key aspect of their relationship, wage setting. I focus on the extent to which employers, after negotiating workers' wages upon hire, subsequently ...

Executive Compensation and Incentives: The Impact of Takeover Legislation
Date Posted:Sun, 07 May 2000 09:17:31 -0500
We investigate the impact of changes in states' anti-takeover legislation on executive compensation. We find both pay for performance sensitivities and mean pay increase for the firms affected by the legislation (relative to a control group). These findings are partially consistent with an optimal contracting model of CEO pay as well as with a skimming model in which reduced takeover fears allow CEO's to skim more. We compute lower bounds on the relative risk aversion coefficients implied ...

Is There a Discretion in Wage Setting? A Test Using Takeover Legislation
Date Posted:Tue, 26 Oct 1999 07:15:09 -0500
Anecdotal evidence suggests that uncontrolled managers let wages rise above competitive levels. To test this belief, we examine the wage impact of antitakeover legislation passed throughout the 1980s in many states. Since many view hostile takeovers as an important disciplining device, these laws, by reducing takeover threats, potentially raised managerial discretion. If uncontrolled managers pay higher wages, we expect wages to rise following these laws. Using firm-level data, we find that ...