American Economic Review200595(5), 1731-1737open access
We investigate the occurrence of bubble-crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders. We find that even with a minority of experienced traders, bubbles are substantially abated.
Journal of Banking & Finance201135(5), 1250-1262open access
We investigate the source of information advantage in inter-dealer FX trading using data on trades and counter-party identities. In liquid dollar exchange rates, information is concentrated among dealers that trade most frequently and specialize their activity in a particular rate. In cross-rates, traders that engage in triangular arbitrage are best informed. Better-informed traders are also located on larger trading floors. In cross-rates, the ability to forecast flows explains all of the advantage of the triangular arbitrageurs. In liquid dollar rates, specialist traders can forecast both order-flow and the component of exchange rate changes that is uncorrelated with flow.
Journal of Corporate Finance202484, 102531open access
This paper examines the relationship between capital inflows and import of capital goods to credit-constrained industries in developing countries. Using data of 11 industrial sectors in 57 countries for 2000–2020, we find that financially dependent industries import disproportionately more capital goods if they operate in countries that receive more foreign funds. A host of robustness tests, including instrumental variables estimation, confirm our main finding. We also document that: (i) the established nexus breaks down during the global financial crisis, (ii) the observed relationship is mainly due to the direct investment via equity, and (iii) host countries tend to import relatively more capital goods from G7 economies. Overall, our results suggest that one channel through which capital inflows affect economic growth is by alleviating firms' financial constraints, thereby enabling firms to acquire more advanced capital goods.
Journal of Banking & Finance2023147, 106419open access
This paper examines the resilience of banks as perceived by market participants during the COVID-19 crisis. We analyse how bank stock returns during January-March 2020 relate to the pre-crisis activation of macroprudential policy across 52 countries in a cross-sectional dimension. We find that, overall, a tighter macroprudential policy stance is beneficial for bank systemic risk, as assessed by equity market investors. A robust finding is that a perceived decrease in bank risk stems primarily from the use of credit growth limits, reserve requirements, and dynamic provisioning. By contrast, a pre-crisis build-up of capital surcharges on systemically important financial institutions seems to lower bank stock returns. Alternative bank risk indicators suggest that the latter is likely to be driven by concerns about profits rather than the probability of default.
The Review of Economics and Statistics201698(5), 832-847open access
Abstract We propose the rise of crack cocaine markets as a key explanation for the end to the convergence in black-white educational outcomes in the United States that began in the mid-1980s. After constructing a measure to date the arrival of crack markets in cities and states, we show that the decline in educational outcomes for black males begins with the start of the crack epidemic. We also show that there are higher murder and incarceration rates after the arrival of crack cocaine and that these are predictive of lower black high school completion rates, a result consistent with human capital theory. We estimate that effects related to crack markets can account for approximately 40% to 70% of the fall in black male high school completion rates.
Quarterly Journal of Economics2025140(1), 403-458open access
Abstract While there is a vast (and mixed) literature on gender differences in social preferences, little is known about believed gender differences in social preferences. Using data from 15 studies and 8,979 individuals, we find that women are believed to be more generous and more equality-oriented than men. This believed gender gap is robust across a wide range of contexts that vary in terms of strategic considerations, selfish motives, fairness concepts, and payoffs. Yet this believed gender gap is largely inaccurate. Consistent with models of associative memory, specifically the role of similarity and interference, the believed gender gap is correlated with recalled prior life experiences from similar contexts and significantly affected by an experience that may interfere with the recall process of prior memories, even though this interfering experience should not affect the beliefs of perfect-memory Bayesians. Application studies further reveal that believed gender differences extend to the household (i.e., beliefs about contributions to the home, family, and upbringing of children), the workplace (i.e., beliefs about equal pay), and policy views (i.e., beliefs about redistribution, equal access to education, healthcare, and affordable housing).
American Economic Review2021111(7), 2342-2375open access
Can increasing control over earnings incentivize a woman to work, and thereby influence norms around gender roles? We randomly varied whether rural Indian women received bank accounts, training in account use, and direct deposit of public sector wages into their own (versus husbands') accounts. Relative to the accounts only group, women who also received direct deposit and training worked more in public and private sector jobs. The private sector result suggests gender norms initially constrained female employment. Three years later, direct deposit and training broadly liberalized women's own work-related norms, and shifted perceptions of community norms.
Journal of Political Economy2023131(11), 3156-3185open access
We show that higher payments from US Social Security Disability Insurance (DI) reduce mortality. Using administrative data on new DI beneficiaries, we exploit discontinuities in the benefit formula through a regression kink design. We estimate that $1,000 more in annual DI payments decreases the annual mortality rate of lower-income beneficiaries by approximately 0.18–0.35 percentage points, implying an elasticity of mortality with respect to DI income of around −0.6 to −1.0. We find no robust evidence of an effect of DI income on the mortality of higher-income beneficiaries.
ABSTRACT In statistics, samples are drawn from a population in a data‐generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence‐generating process (EGP). We claim that EGP variation across researchers adds uncertainty—nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer‐review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.