Abstract This article shows that when a compensation peer firm experiences a significant failure in its say-on-pay (SOP) voting, the focal firm’s stock price is adversely affected, resulting in reduced CEO pay in the subsequent period. This pay-reduction effect is amplified when the board is more powerful, when proxy advisors express concerns about CEO pay, and when the compensation consultant lacks quality. Directors who react to the price drop and cut the CEO’s pay receive higher votes in future director elections, implying a market feedback effect for directors of the focal firm triggered by their peers’ SOP voting failure.

The previous literature finds a positive effect of institutional (relative to other investors’) ownership on firms’ innovation output . We study the impact of increases in the concentration of institutional investors’ ownership on firms’ decisions to invest in innovation and their innovation output. By reducing short-term earnings pressure, concentrated institutional investors’ ownership increases managers’ incentives to invest in R&D. However, it decreases firms’ acquisitions of external innovation due to empire-building and dilution concerns. Overall, firms’ future patents and citations decrease. Our results indicate that the previously found positive effect of institutional investors on innovation declines as the ownership of these investors becomes more concentrated. Despite that, we find that blockholder institutional ownership increases firm value. Hence, large institutional investors take measures to preserve the value of their ownership interests, even if they result in reduced innovation.

Abstract We examine the role of insurance companies in supporting resiliency in the corporate bond market. We show that during the COVID-19 liquidity crisis, insurers increased their corporate bond positions, particularly in bonds facing fire sales by mutual funds. Insurers with more stable funding were more likely to buy, and they bought more from dealers with whom they had prior trading relationships. Dealers improved their bond liquidity provision when they had trading relationships with insurers with more stable funding. Our work demonstrates that insurers can play an important role in supporting bond market resiliency during times of stress.

Abstract How do global value chain (GVC) linkages modify countries’ incentives to impose import protection? Are these linkages important determinants of trade policy in practice? We develop a new approach to modelling tariff setting with GVCs, in which optimal policy depends on the nationality of value-added content embedded in home and foreign final goods. Theory predicts that discretionary tariffs will be decreasing in the domestic content of foreign-produced final goods and the foreign content of domestically produced final goods. Using data for 14 countries between 1995 and 2015, we show that governments set lower tariffs and curb their use of temporary trade barriers where GVC linkages are strongest, consistent with theory. Turning to quantitative model counterfactuals, we find that severing GVC linkages would lead to the disappearance of tariff preferences. Further, targeted policies to decouple China from GVCs would increase the optimal tariff set by G7 countries on Chinese exports.

Abstract Global phenomena, such as climate change, often have local impacts that are spatially correlated. We show that greater spatial correlation of productivities can increase international inequality by increasing the correlation between a country's productivity and its gains from trade. We confirm this prediction using a half-century of exogenous variation in the spatial correlation of agricultural productivities induced by a global climatic phenomenon. We introduce this general-equilibrium effect into projections of climate-change impacts that typically omit spatial linkages and therefore do not account for the global scope of climate change. We project greater international inequality, with higher welfare losses across Africa.

Abstract We construct the first annual market rent and home sales price series for American cities over the twentieth century using 2.7 million newspaper real estate listings. Our findings revise several stylized facts about U.S. housing markets. Real market rents did not fall during the postwar period in most cities and rose nationally by 60% from 1890 to 2006. We also document higher sales price growth between 1953 and 1987 relative to previous series. Real prices reached almost four times their 1890 level by 2006. Prices grew most in metros with high demand and low levels of construction. We find that the rent-to-price ratio fell from about 8% in the early twentieth century to 3% by 2006, consistent with declines in the cost of owning housing relative to renting. For the typical year in our period, the annual return to owning housing was 9%, driven mostly by rental returns of 7.7%, with capital gains contributing only 1.3%. While capital gains were close to zero from 1890 to 1940, they grew to nearly a third of total returns from 1970 to 2006.

Abstract Stablecoins are a new form of private money. They are fragile but largely trade at par. How? We present a model and empirical work to examine a novel source of demand for stablecoins. Stablecoin owners are indirectly compensated for run risk by lending their coins to crypto speculators. The stablecoin can then support its $1 peg, but this arrangement links crypto speculation to traditional financial markets where stablecoins invest their reserves.

Abstract We provide the first estimates of intergenerational income mobility using tax data for a large developing country, namely Brazil. We measure formal income from tax and payroll data, and we train machine learning models on census and survey data to predict informal income. We quantify the estimation bias resulting from income imputation and other sources of measurement error, and show that such bias remains negligible in our context. A 10 percentile increase in parental income rank is associated on average with a 5.5 percentile increase in child income rank, with considerable variation across sociodemographic groups and geographical areas.