Anand V. Swamy of Williams College reviews “India Is Broken: A People Betrayed, Independence to Today” by Ashoka Mody. The Econlit abstract of this book begins: “Presents a narrative of the modern history of India from the perspectives of successive Indian leaders, chronicling the erosion of social norms and decay of political accountability from 1947 to 2021 that have detrimentally affected the country's economy and political system.”

Limited coverage is a standard feature in deposit insurance schemes. It is used to limit moral hazard, and achieves this objective by reinforcing market discipline: depositors have more incentives to monitor banks’ risk-taking if they have skin in the game. In this paper, I study market discipline and coverage levels by analyzing the relationship of funding costs and deposit growth with banks’ risk. I use a database of Colombian banks’ balance sheets and take advantage of a sudden, significant, and exogenous increase in the coverage level that occurred in April 2017. I find evidence of market discipline throughout the period of analysis and most results are consistent with it not being reduced by the change in the coverage level. The results are nuanced, however. Two variables are impacted: one in the quantity and the other in the price dimension. Furthermore, results also vary when I look at specific groups of banks separately. Market discipline is not present in big banks. Too big-to-fail perceptions seem to limit it. This is also the case for banks concentrated in fully insured deposits, where limited coverage has a less prevalent role.

Through textual analyses of 7.7 million patents, we develop a novel intercompany innovation similarity measure which enables us to find that technologically connected firms cross-predict one another’s returns. Investors impound information about firms’ technological connectedness, although not immediately and fully. Buying (shorting) shares of technological peers earning high (low) returns during the previous month yields a 1.29% monthly return. Firms’ return predictability increases with patent complexity or limited technological disclosures but decreases with better information transparency. Results suggest that investor inattention explains technology momentum. Unlike momentum stemming from simpler, class-based technological links, our Big Data text-based return predictability remains active.

The wisdom of crowds suggests that groups with more diversely informed individuals reach more informed decisions because their members are collectively more knowledgeable. I study this idea in the context of the market's response to earnings announcements by examining how information diversity across investors affects the efficiency of the price response to earnings news. I measure investors' information diversity based on their geographic dispersion, which I estimate using the locations of the requests for firms' filings to EDGAR. Greater geographic dispersion is associated with greater trading during the announcement period; this supports the use of geographic dispersion as a measure of information diversity. Consistent with my predictions, the price response to a firm's earnings news is more efficient when the firm's investors have greater information diversity. In further analysis, I find that the initial heightened trading for firms with more diversely informed investors subsides quickly after the announcement period.

This study examines the stock market reaction to the unprecedented leaks of confidential advance tax rulings between Luxembourg and multinational corporations—also known as the “LuxLeaks.” Contrary to the negative market reaction to tax shelter news documented in prior research, we find that investors responded positively to these leaks. This reaction is concentrated among U.S. firms. Furthermore, we document a positive association between abnormal returns and the reduction in firms' tax uncertainty, consistent with a downward revision in investors' perception of the tax uncertainty associated with the firms' Luxembourg operations. We also investigate other firm characteristics and find that, among U.S. firms, investors' reaction is weaker for those over-invested in tax avoidance. Among non-U.S. firms, the market response is muted by concerns about the quality of governance. In summary, our results suggest that investors' reaction to tax shelter news is conditional on their reassessment of the firms' tax uncertainty.

We study whether long-term cumulative exposure to airborne small particulate matter (PM2.5) affects the probability that an individual receives a new diagnosis of Alzheimer's disease or related dementias. We track the health, residential location, and PM2.5 exposures of Americans aged sixty-five and above from 2001 through 2013. The expansion of Clean Air Act regulations led to quasi-random variation in individuals’ subsequent exposures to PM2.5. We leverage these regulations to construct instrumental variables for individual-level decadal PM2.5 that we use within flexible probit models that also account for any potential sample selection based on survival. We find that a 1 µg/m3 increase in decadal PM2.5 increases the probability of a new dementia diagnosis by an average of 2.15 percentage points (pp). All else equal, we find larger effects for women, older people, and people with more clinical risk factors for dementia. These effects persist below current regulatory thresholds.

How should countries cooperate in setting fiscal and trade policies when government expenditures must be financed with distorting taxes? We show that even if countries cannot make explicit transfers to each other, every point on the Pareto frontier is production efficient, so that international trade and capital flows should be effectively free. Trade agreements must be supplemented with fiscal policy agreements. Residence-based income tax systems have advantages over source-based systems. Taxing all household asset income at a country-specific uniform rate and setting the corporate income tax to zero yield efficient outcomes. Value-added taxes should be adjusted at the border.

This research examines the relation between shareholder litigation and corporate social responsibility (CSR). Exploiting exogenous changes in shareholder litigation rights following the staggered adoption of universal demand laws by U.S. states and the Ninth Circuit Court of Appeals’ ruling on securities class action lawsuits, we show that weaker shareholder litigation rights lead to lower CSR scores. Moreover, the relation is stronger for firms facing higher litigation risk, and a decreased CSR score enhances firm value. Our evidence suggests that firms engage in CSR activities partly to reduce shareholder litigation risk ex ante and mitigate its consequences ex post.