Knowledge that Transforms

Based on a narrative classification of all significant postwar changes in R&D appropriations for five major federal agencies, we find that an increase in nondefense R&D appropriations leads to increases in various measures of innovative activity and higher business-sector productivity in the long run. We structurally estimate the production function elasticity of nondefense government R&D capital using the SP-IV methodology of Lewis and Mertens (2024) and obtain implied returns of 140 to 210 percent over the postwar period. The estimates indicate that government-funded R&D accounts for one-fifth of business-sector TFP growth since WWII and imply substantial underfunding of nondefense R&D.

Statistical inference is often simplified by sample splitting. This simplification comes at the cost of the introduction of randomness not native to the data. We propose a simple procedure for sequentially aggregating statistics constructed with multiple splits of the same sample. The user specifies a bound and a nominal error rate. If the procedure is implemented twice on the same data, the nominal error rate approximates the chance that the results differ by more than the bound. We illustrate the application of the procedure to several widely applied econometric methods.

This paper studies the economic impacts of carbon pricing. Exploiting institutional features of the European carbon market and high-frequency data, I identify carbon policy shocks and trace their dynamic effects. A restrictive carbon policy shock raises energy prices, reduces emissions, spurs green innovation, but decreases economic activity—disproportionately burdening poorer households. Not only are the poor more affected because of their higher energy spending, but they also experience larger income losses. These indirect, general equilibrium effects via income and employment play an important role in the transmission of carbon pricing policies, accounting for about two-thirds of the aggregate consumption response.

Schools across the U.S. have sharply restricted student use of phones during the school day. We evaluate one type of restriction—lockable phone pouches—using nationwide data combining a large-scale teacher survey, GPS pings, standardized test scores, and school administrative records, along with sales records from the largest pouch provider. Using a staggered difference-in-differences design, we find that pouch adoption substantially reduces phone use as measured by GPS pings and teacher reports. In the first year after adoption, disciplinary incidents increase, and we find suggestive evidence that student subjective well-being falls, consistent with short-term disruption. However, disciplinary effects fade, while the estimated effects on well-being appear to recover and become positive in later years. For academic achievement, average effects on test scores are consistently close to zero. High schools see modest positive effects, particularly in math, while middle schools see small negative effects. We find little evidence of effects on school attendance and no clear evidence of improvements in self-reported classroom attention or perceived online bullying.

Theory posits that mandatory disclosure influences peer firms' learning from stock prices in two non‐mutually exclusive ways: intra‐industry information transfers and the reallocation of information acquisition efforts. Using mandatory segment disclosure as our setting, we document a decrease in investment‐ q sensitivity for peers of disclosing firms. This effect is stronger among peers with greater economic links to disclosing firms and peers with the greatest incentives to glean information from prices. Our findings provide novel evidence that mandatory disclosure can have significant negative externalities on peer firms' investment efficiency via a managerial learning from the stock price channel. These insights inform regulators assessing the economic consequences of mandatory disclosure, while also assisting managers who rely on information from stock prices to guide investment decisions.

Companies have widely adopted a system of work‐product reviews whereby the work of one individual is subsequently reviewed by another to ensure its quality. We examine how managers can effectively implement a review of employee work to improve performance. Organizations review employees' work to identify mistakes and improve work quality. However, reviews may also reduce employees' effort and initiative if they expect reviewers to identify and correct their errors for them. We use an experiment to examine how employee performance depends on who conducts the review and how feedback is provided. Specifically, participants' work was reviewed by either a superior or a peer, and the reviewer provided either general, high‐level guidance (autonomy‐oriented) or specific corrective information about errors (dependency‐oriented). Employees performed best when superiors provided high‐level guidance or when peers provided specific corrective feedback, with these benefits emerging over time. Guidance from a superior increased employees' sense of responsibility, whereas corrective help from a peer strengthened feelings of teamwork and cohesion. Review approaches that did not fit these combinations offered no clear performance benefit relative to having no review. The findings show that review effectiveness depends on matching the feedback approach to the reviewer's organizational rank. These results have important implications for managers, accountants responsible for internal controls, and audit professionals involved in designing and implementing the review process.

This paper highlights racial and ethnic preferences in corporate director elections. Using a comprehensive dataset of mutual fund voting records, we discover that mutual fund managers are more likely to vote for director nominees who share their racial or ethnic identity. Funds managed by White-dominated teams exhibit the strongest same-race preferences, particularly those in fund families with scarce minority representation. Same-race voting preferences have detrimental implications for the career outcomes of minority director candidates, and are associated with worse fund performance primarily when fund managers operate under weaker accountability. We investigate various potential mechanisms—including statistical discrimination, value maximization, conflicts of interest, social networks, and taste-based biases—and find that the evidence aligns most closely with a taste-based explanation for same-race preferential voting.

We show that a structural model incorporating firms’ real options and financial leverage decisions can generate forward-looking equity distributions of various shapes, resulting in highly flexible implied volatility surfaces. In contrast, exogenously specified models with stochastic volatility and jumps can only generate smiles and downward-sloping curves. We explain the observed negative relationship between downward sloping implied volatility surfaces and the value of real options: real options contribute positively to equity skewness, and more so the more convex their payoff, which is the case when the real option is “at-the-money” and has the lowest value.

Experimental asset markets provide a controlled approach to studying financial markets. We attempt to replicate 17 key results from four prominent studies, collecting new data from 166 markets with 1,544 participants. Only three of the 14 original results reported as statistically significant were successfully replicated. We fail to replicate findings on emotions, self‐control, and gender differences in bubble formation but confirm that experience reduces bubbles and cognitive skills explain trading success. Our study demonstrates the importance of replications in enhancing the credibility of scientific results in this field.