Knowledge that Transforms

This study examines the relation between exposure to social tax discontent—public expressions of frustration about others’ tax avoidance on social media—and individual tax avoidance. Economic and psychological theories predict bidirectional effects: discontent may reduce avoidance by inducing internal sanctions (e.g., shame and guilt) or increase avoidance by normalizing noncompliance through perceived prevalence. Using a novel, large-scale measure of tax discontent derived from geolocated Twitter data and a language classification model, we find that increases in social tax discontent are associated with reductions in estimated tax avoidance. The effect is stronger among high-income groups, in response to tweets targeting wealthy individuals, and in areas with higher political engagement and social media activity. Our results reinforce the importance of taxpayers’ social and behavioral motivations and suggest that jurisdictions’ efforts to manage taxpayer beliefs and leverage social norms can act as a complementary tool to traditional enforcement. Data Availability: The data used in this study are derived from public and third-party sources described in the text: the IRS Statistics of Income, the U.S. Bureau of Labor Statistics (BLS) Quarterly Census of Employment and Wages, the Bureau of Economic Analysis, Google Trends, and the National Neighborhood Data Archive. Twitter/X data were collected via the Twitter Application Programming Interface (API) under its academic-access terms and are subject to Twitter’s/X’s terms of use; they cannot be redistributed by the authors, but the collection and classification procedures are described in Section IV.

Despite persistent academic and regulatory concerns, collateralized loan obligations (CLOs) have consistently demonstrated resiliency over the past two decades. We document that firms whose loans are acquired by CLOs are less likely to experience adverse credit events within 12 months of inclusion in the CLO portfolio, particularly when CLOs maintain institutional-level relationships with originating banks (through repeated transactions) or when individual-level relationships exist (as evidenced by personnel flows between originating banks and CLOs). The effects of these relationships are more pronounced when banks likely possess superior private information about borrowers. Furthermore, conditional upon filing for bankruptcy, borrowers whose loans are held by CLOs with institutional- or individual-level relationships are more likely to successfully reorganize under Chapter 11. Collectively, our findings highlight the dual information channels, both institutional and personnel based, that mitigate information frictions in the leveraged loan market. Data Availability: Data are available from commercial sources cited in the text.

This paper studies the unemployment of physical capital—defined as idle units searching to be traded—and its macroeconomic implications. I provide evidence documenting that capital unemployment is large, volatile, and increases during economic downturns. I construct a capital-accumulation model that explains these patterns, with trading frictions in capital markets, which give rise to equilibrium capital unemployment, and financial shocks, which lead to large fluctuations in trading probabilities and capital unemployment. Using the model, I show that trading frictions and capital unemployment matter for aggregate dynamics. First, unemployed capital affects aggregate investment dynamics: Downturns characterized by large increases in unemployed capital are followed by investment slumps, because the economy tends to recover by absorbing existing unemployed capital rather than by producing new capital goods. Second, capital unemployment constitutes a propagation mechanism from financial shocks to economic activity, which shows up at the aggregate level as measured total factor productivity.

We study monopolistic certification in markets where sellers possess partial private information about product quality. A certifier can provide information through two channels: screening sellers’ private information (soft information) and acquiring new quality data (hard information). We prove that any certification menu achieving less than maximal screening is Pareto dominated by one with full screening. Among Pareto-efficient menus, the certifier’s profit-maximising menu provides maximal soft information while restricting hard information provision. The two channels diverge because screening creates value the certifier can fully capture, whereas hard information amplifies costly information rents. Using power value functions, we derive comparative statics showing that information restrictions target low-quality sellers when information value is moderate, but high-quality sellers receive perfect quality revelation when information value is high.

Increasing personal bankruptcy protection raises consumers’ desire to borrow and lenders’ cost of extending credit; the impact on equilibrium borrowing is ambiguous. Using bankruptcy protection changes between 1999 and 2005 across U.S. states, we find that borrowers respond to greater protection by increasing their unsecured debt. Border county estimates suggest that local economic conditions do not drive these results. Borrowers pay more for protection through higher interest rates, yet delinquency is unaffected. Our results indicate that rising borrower demand outstripped decreasing supply. Increased protections did not reduce the aggregate level of household debt but affected the composition of borrowing.

We study whether exogenous improvements in stock liquidity, unrelated to the information environment, affect managers’ disclosure choices. We exploit the 1997 Nasdaq reforms, which exogenously improved stock liquidity by reducing the non-information asymmetry components of the bid-ask spread, and find that Nasdaq firms reduced voluntary disclosure relative to a control group of unaffected firms. This evidence is consistent with managers substituting between components of the bid-ask spread when forming disclosure choices. Specifically, as the non-information asymmetry components decline, managers respond by decreasing disclosure, which in turn raises the information asymmetry component. Despite the reduction in disclosure and corresponding increase in information asymmetry, total stock liquidity nevertheless improves, suggesting that maintaining prior disclosure levels would have yielded minimal marginal benefits.