This paper examines the effects on social welfare of changes in coverage levels within deposit insurance schemes. It utilizes a solid theoretical framework and takes advantage of a quasi-natural experiment and bank-level data to measure the impact of an increase in Colombia’s deposit insurance coverage level. For the case studied, the benefits outweigh the costs, resulting in a positive net impact on welfare. However, some banks concentrate most of the gains. The size of a bank, its probability of default, and the change in the percentage of insured deposits that occurred due to the increase in the coverage level are critical. Two extensions of the main model are also analyzed. The first allows banks to be bailed out because of “too-big-to-fail” considerations, and the second incorporates banks’ reaction to the increase in the coverage level. The benefits of increasing the coverage level remain positive in both cases but are lower than using the main model.

Social interactions determine many economic behaviours, but information on social ties does not exist in most publicly available and widely used datasets. We present results on the identification of social networks from observational panel data that contains no information on social ties between agents. In the context of a canonical social interactions model, we provide sufficient conditions under which the social interactions matrix, endogenous and exogenous social effect parameters are globally identified if networks are constant over time. We also provide an extension of the method for time-varying networks. We then describe how high-dimensional estimation techniques can be used to estimate the interactions model based on the adaptive elastic net Generalized Method of Moments. We employ the method to study tax competition across U.S. states. The identified social interactions matrix implies that tax competition differs markedly from the common assumption of competition between geographically neighbouring states, providing further insights into the long-standing debate on the relative roles of factor mobility and yardstick competition in driving tax setting behaviour across states. Most broadly, our identification and application show that the analysis of social interactions can be extended to economic realms where no network data exist.

We use a nonlinear reduction in a bank’s check-cashing fees and variation in regulated check-clearing times to identify the elasticity of demand for cashing checks rather than depositing them. We find that an extra day of check-clearing time makes account holders 65.5% more likely to cash a check than deposit it, which implies they are willing to pay $11.17 per day for faster access to their funds—an effective annualized discount rate of 11,054% for the average check. We use this elasticity to evaluate recent proposals that mandate faster check-clearing times.

We examine how progressive individual tax rates affect risk‐taking by pass‐through businesses (PTBs). PTBs generate over 60% of US business income and make up roughly 95% of business tax returns, yet there is limited research on how progressive tax rates affect project selection. We study PTBs using the setting of thoroughbred racing and examine how progressive tax rates affect the decision to enter a risky stakes race or a less risky allowance race. This setting provides a unique opportunity to observe the choice between two mutually exclusive projects that differ only in expected payoffs and risk. Using a difference‐in‐differences design surrounding the reduction in progressivity under the Tax Cuts and Jobs Act, we find that investment in stakes races increases in the United States relative to Canada. We find further evidence of a negative relation between progressive tax rates and risk‐taking using a plausibly exogenous shock in progressivity in California and exploiting cross‐sectional variation in the progressivity of state tax rates. Overall, our findings should be of interest to policy‐makers considering changes to progressive rates. Results indicate that increases to progressive tax rates may discourage risk‐taking by the small businesses that drive economic growth.

Customer orientation reflects the organizational culture and climate that promote behaviors enabling the firm to create superior value for its customers. Using a textual measure of customer orientation (Custor) constructed from 10-K filings, we document a positive and economically significant relation between Custor and stock returns in the financial crisis of 2008–2009 and the COVID-19 pandemic. High-Custor firms outperform low-Custor firms by 1.5% per month during the financial crisis and by 4.7% per month during the COVID-19 crisis. This positive Custor-returns relation is robust to different treatments and persists after accounting for factors that contribute to corporate resilience, such as CSR activities. Our findings lend credence to the notion that customer orientation enhances a firm’s social capital, leading to improved operational performance during adverse periods, whilst our empirical evidence further supports that Custor and CSR represent distinct pathways for building trust. Consequently, firms that prioritize customer orientation experience greater resilience to negative shocks, especially during periods of low market confidence.

Using a regime change in the commercialization of university innovation in 1980 that strongly increased university incentives to patent and license discoveries, we document that an increase in the supply of commercializable innovation attracts venture capital investment to the region. The Bayh-Dole Act shifted ownership of intellectual property stemming from federally-funded research from the federal government to universities, spurring technology transfer into the local area. Because universities have different technological strengths, each local area surrounding a university experienced an increase after 1980 in commercializable innovation relevant to particular sets of industries which differed widely across university counties. Comparing industries within a county that were more versus less related to the local university's innovative strengths, we show that venture capital dollars after 1980 flowed systematically towards geographic areas and industries affected most by the sudden influx of commercializable innovation from universities. These results persist even when controlling for ex ante geographic and industry distributions of corporate patenting and prior venture financing. The findings support the notion that increased supply of commercializable innovation serves to draw private capital investment to a region.

We investigate how a state's political corruption affects a resident firm's debt contracting and how a change in anti-corruption regulation alters the relation between corruption and loan contracting. Firms in more corrupt states are associated with significantly higher loan spreads and tighter loan covenants than firms in less corrupt states. Furthermore, the passage of the Dodd–Frank whistleblowing provision amplifies the conhcerns of banks about the detrimental impact of corruption due to the increased exposure of firms to whistleblowing threats. The detrimental impact of corruption is further amplified when a state has a higher level of whistleblowing involvement, when firms are located in more corrupt states or closer to the SEC office, and when the bank's state is less corrupt than the firm's state. In general, we document the externality of corruption in the debt financing of firms and the response of banks to changes in regulation.

ABSTRACT We study supply‐and‐demand effects in the U.S. Treasury bill market by comparing the returns on T‐bills to the policy rate on the Federal Reserve's reverse repurchase (RRP) facility. We develop and test a simple model where the RRP‐bill spread is policed both by heterogeneously elastic money funds and by corporate treasurers who derive collateral benefits from holding T‐bills. In response to shifts in T‐bill supply, money funds act as front‐line arbitrageurs. However, when T‐bills become extremely scarce, less elastic corporate treasurers become the marginal investors and supply shifts have a larger effect on T‐bill rates.

We estimate a matching model of teachers and elementary schools with rich data on teachers' applications and principals' ratings from a large, urban district in North Carolina. Both teachers’ and principals’ preferences deviate from those that would maximize the achievement of economically disadvantaged students: teachers prefer schools with fewer disadvantaged students, and principals' ratings are weakly related to teacher effectiveness. In equilibrium, these two deviations combine to produce a surprisingly equitable current allocation, where teacher quality is balanced across advantaged and disadvantaged students. To close achievement gaps, policies that address deviations on one side alone are ineffective or harmful, while policies that address both could substantially increase the achievement of disadvantaged students.

We estimate impacts of male job loss, female job loss, and male unemployment benefits on domestic violence (DV) in Brazil. We merge individual-level employment and welfare registers with different measures of DV: judicial cases brought to criminal courts, the use of public shelters by victims, and mandatory DV notifications by health providers. Leveraging mass layoffs for identification, we first show that both male and female job loss, independently, lead to large, and pervasive increases in DV. Using a regression discontinuity design, we then show that access to unemployment benefits does not reduce DV while benefits are being paid, and it leads to higher DV risk once benefits expire. Our findings can be explained by the negative income shock brought by job loss and by increased exposure of victims to perpetrators, as partners tend to spend more time together after displacement. Although unemployment benefits partially offset the income drop following job loss, they reinforce the exposure shock as they increase unemployment duration. Since our results cannot be explained by prominent DV theories, we propose a simple model formalizing these mechanisms.