Knowledge that Transforms

Nearly one billion people worldwide live in rural areas without access to national paved road networks. We estimate the impacts of India’s $40 billion national rural road construction program using a fuzzy regression discontinuity design and comprehensive household and firm census microdata. Four years after road construction, the main effect of new feeder roads is to facilitate the movement of workers out of agriculture. However, there are no major changes in agricultural outcomes, income, or assets. Employment in village firms expands only slightly. Even with better market connections, remote areas may continue to lack economic opportunities. (JEL J43, O13, O18, R23, R42)

Social norms, usually persistent, can change quickly when new public information arrives, such as a surprising election outcome. People may become more inclined to express views or take actions previously perceived as stigmatized and may judge others less negatively for doing so. We examine this possibility using two experiments. We first show via revealed preference experiments that Donald Trump’s rise in popularity and eventual victory increased individuals’ willingness to publicly express xenophobic views. We then show that individuals are sanctioned less negatively if they publicly expressed a xenophobic view in an environment where that view is more popular. (JEL D72, D85, Z13)

The homes of firm owners are an important source of finance for ongoing businesses. We use UK microdata to show that a £1 increase in the value of the homes of a firm’s directors increases the firm’s investment by £0.03. This effect is concentrated among firms whose directors’ homes are valuable relative to the firm’s assets, that are financially constrained, and that have directors who are personally highly levered. An aggregation exercise shows that directors’ homes are as important as corporate property for collateral driven fluctuations in aggregate investment demand. (JEL D22, D25, E22, G31, G34, R31)

We study multi-district legislative elections between two office-seeking parties when one party has an initial valence advantage that may shift and even reverse during the campaign; and, each party cares not only about winning a majority, but also about its share of seats. When the initial imbalance favoring one party is small, each party targets the median voter. For moderate imbalances, the advantaged party maintains the centre-ground, but the disadvantaged party retreats to target its core supporters; and for large imbalances, the advantaged party advances toward its opponent, raiding its moderate supporters in pursuit of an outsized majority. (JEL D72)