Abundantly Clear
Growth experiences and trust in government
Timothy Besley, Chris Dann & Sacha Dray
Quarterly Journal of Economics, forthcoming
Abstract:
This paper explores the relationship between economic growth and trust in government using variation in GDP growth experienced over a lifetime since birth. We assemble a newly harmonized global dataset across eleven major opinion surveys, comprising 3.3 million respondents in 166 countries since 1990. Exploiting cohort-level variation, we find that individuals who experience higher GDP growth are more prone to trust their governments, with larger effects found in democracies. Higher growth experiences are also associated with improved perceptions of government performance and living standards. We find no similar channel between growth experience and interpersonal trust. Second, more recent growth experiences appear to matter most for trust in government, with no detectable effect of growth experienced during one's formative years, closer to birth or before birth. Third, we find evidence of a "trust paradox" whereby average trust in government is lower in democracies than in autocracies. Our results are robust to a range of falsification exercises, robustness checks and single-country evidence using the American National Election Studies and the Swiss Household Panel.
The Impact of Regulation on Firm Value: Evidence from Political Connections
Alan Crane & Andrew Koch
Review of Corporate Finance Studies, November 2025, Pages 1058-1082
Abstract:
We examine the relationship between regulatory intensity and firm value. We find that firms facing high regulatory intensity exhibit lower valuations. However, it is the reverse for politically connected firms. Firms with political ties and high regulatory exposure have higher valuation ratios, and their market values increase following new regulations. Additionally, these firms have higher markups and face lower entrance rates by new establishments, consistent with weakened competition. Nonetheless, not all results are robust to the choice of specification. Overall, our findings provide some support for a regulatory capture perspective, suggesting that regulation may enhance value for politically connected firms.
Small Business Favoritism
Brian Feinstein
University of Pennsylvania Working Paper, August 2025
Abstract:
This Article offers the first comprehensive account of how federal law, in ways both conspicuous and obscure, systematically privileges small businesses. Small firms enjoy exclusive access to government grants and loans, preferential treatment in federal contracting, and exemptions from regulations that constrain their larger competitors. Agencies must consider their interests during rulemaking and, in some instances, subsidize their participation in that process. In total, as this Article documents for the first time, more than 1,300 statutory provisions explicitly confer legal advantages on small firms. Despite the pervasiveness of these legal preferences, their scope and implications have largely escaped scholarly attention. Prevailing accounts tend to emphasize the supposed advantages of large firms in terms of political power and regulatory compliance costs. Yet when considered in the aggregate, these provisions constitute a regime of small business favoritism embedded in federal law. This Article argues that the costs of this regime — undermined statutory objectives, misallocated public resources, ossified regulatory processes, and inefficient firm sizes — are both significant and underappreciated. Meanwhile, some of the supposed benefits — creating jobs, promoting innovation, and correcting imbalances in political power — are highly contested. These findings call for a fundamental reassessment of small-business favoritism in federal law. The Article concludes with a range of reform proposals, including the replacement of categorical exemptions with uniform standards, size-based regulatory tiers modeled on progressive taxation, or, for laws targeting negative externalities, production-based taxes calibrated to the size of the harm.
An iridescent sunset: An empirical analysis of sunset legislation
Tanner Jones & Ryan Quandt
Journal of Regulatory Economics, October 2025, Pages 85-123
Abstract:
Sunset provisions gained popularity in the 1970s as a means of ensuring state flexibility and accountability. Inefficiencies due to out-of-date agencies or regulations could be more easily curbed when there is a fixed termination date for a policy, program, or agency, pending review. This view of sunset legislation has come to be known as the Good Government hypothesis. Despite this intent, empirical studies have yet to find that sunset legislation improves efficiency or decreases waste. Rather, agencies seem to be renewed from the political inertia that they were meant to overcome. Similarly, no difference in expenditures has been observed between states with more sunset provisions compared to those with fewer. Still, past research remains correlative. The present study attempts to isolate the effect of agency-based, rule-based, and executive-led sunset provisions on state GDP by Difference-in-Difference (DiD) with staggered timing and synthetic control designs (SCM). Under a conditional parallel trends assumption, we estimate that sunset provisions lead to a $14,000 GDP per capita increase in 2022 real dollars (or a 59.8 % increase). With SCM, the only state for which we observe robust findings is Tennessee, which evinced a $3,000 per capita increase.
Privacy Regulation and Ad-Tech Consolidation
Rozhina Ghanavi, Sepideh Hosseini & Catherine Tucker
MIT Working Paper, July 2025
Abstract:
Privacy regulations place restrictions on firms' use of data from third-party firms. Potentially, this could drive firms to consolidate with firms that they were previously receiving third-party data from. We explore the prevalence and magnitude of this strategic behavior by examining how the California Consumer Privacy Act (CCPA) affected the consolidation strategy of firms in the ad-tech ecosystem. We compare firms' consolidation strategies that are based in California with firms from other states. Our analysis finds a 16.20% overall increase in consolidation within the ad-tech ecosystem after CCPA implementation. We show that vertical acquisitions both up and down the supply chain drive this, as firms within the ad-tech stack consolidate with firms that provide data and analytics infrastructure. However, this increase in consolidation does not lead to new firm formation in place of the newly acquired firm. There is a 21% decrease in the entry of new firms into the advertising ecosystem following the CCPA. Overall, our paper suggests that a potential, but overlooked, effect of privacy regulation is to shape the activities conducted within a firm and outside a firm.
Employment Relationships, Wage Setting, and Labor Market Power
Francesco Agostinelli et al.
NBER Working Paper, October 2025
Abstract:
We ask to what extent the quantification of labor market power depends on the modeling of the long-term worker-firm employment relationship. We develop an oligopsony model with dynamic wage contracts. Workers decide whether and where to work, choosing among firms providing different amenities and solving a dynamic discrete choice labor supply problem with firm-specific human capital. As a result, firms optimally choose wage-tenure contracts to attract and retain workers. We find that such contracts mitigate firms' incentives to impose large instantaneous wage markdowns -- compared to standard static wage-setting models -- thereby reducing the share of socially inefficient worker-firm separations. As a consequence, we show that the empirical approaches based on "sufficient statistics" tend to overestimate the extent of labor market power: low levels of firm-specific labor supply elasticities do not necessarily indicate rent extraction, but instead reflect firms' ability to retain workers by offering long-term value through human capital accumulation.
Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access
Kyle Wilson
American Economic Journal: Microeconomics, November 2025, Pages 399-431
Abstract:
Government infrastructure investment may crowd out investment from private firms or induce them to invest preemptively. The tension between these effects underlies the policy debate over municipal provision of internet access. I estimate demand for broadband and combine these results with a dynamic oligopoly model of private and public firms' entry and investment decisions. I simulate a ban on public entry and find that municipalities crowd out more private fiber-optic investment than they induce through preemption. I estimate that this ban decreases consumer surplus and municipal profits by $27 billion while increasing private profits by $23 billion over ten years.
Stockpiling and Shortages
Tilman Klumpp & Xuejuan Su
International Economic Review, October 2025, Pages 1693-1712
Abstract:
We examine the feedback loop between shortages and consumer stockpiling. The expectation of shortages induces consumers to stockpile, which amplifies the shortages they experience, which further encourages stockpiling. We show that, when aggregate supply is insufficient to meet aggregate demand and prices cannot adjust to clear the market, multiple equilibria exist which feature stockpiling to different degrees. Even when the fundamental supply shortfall is small, significant stockpiling can arise in equilibrium. Stockpiling reduces welfare, and this welfare loss is particularly severe in the transitional phase following the supply shock, during which consumers accumulate inventories.
The value of historic district status
Carlianne Patrick
Regional Science and Urban Economics, November 2025
Abstract:
Comparing properties in districts listed on the National Register of Historic Places and in locally designated historic districts with those in properties proposed, eligible but not designated districts, this paper estimates the differential effect on housing values of National Register and local historic district status while explicitly considering the effects of overlapping designations. Results indicate significant 9-12% increases in property values after the district is listed on the National Register and substantial declines in prices from local district designation after accounting for their overlap with National Register districts. Sales volume increases after both types of designation. National Register listing is associated with more new construction and subdivision as well as an increase in construction financing for existing properties. Local designation is associated with more permitted renovations and less new construction and subdivision.
Asteroid Economics: The Paradox of Acceleration Under Existential Risk
Monika Cooper
RAND Working Paper, September 2025
Abstract:
This working paper introduces Asteroid Economics as a new framework for understanding civilizational-scale responses to existential risk. It defines the Asteroid Effect as a recurring paradox in which, when threats to survival become salient, societies appear to accelerate consumption, prestige projects, ritual displays, or technological surges instead of conserving resources. The objective of this paper is to identify the gap in existing theories, such as temporal discounting and Terror Management Theory (TMT), which explain elements of the paradox but neglect its systematic form. In addition, this paper aims to define Asteroid Economics as a distinct construct and to provide illustrative patterns through historical and contemporary exemplars. In addition, this paper seeks to outline a research agenda that can test the salience, mechanisms, and implications of the Asteroid Effect. As such, the paper does not present final evidence or resolved models. Its purpose is to establish a conceptual foundation, invite critical engagement, and provide a basis for further empirical research on how the communication of existential risks shapes collective behavioral outcomes.