The Equitable Economy

In a new paper, Bing Guo, Dennis C. Hutschenreiter, David Pérez-Castrillo, and Anna Toldrà-Simats study how large institutional investors impact firm innovation. The authors find that large institutional investors encourage internal research and development but discourage firm acquisitions that would add patents and knowledge to their firms’ portfolios, hampering overall innovation.

Antitrust debates have largely ignored questions about the relationship between market power and productivity, and scholars have provided little guidance on the issue due to data limitations. However, data is plentiful on the hospital industry for both market power and operating costs and productivity, and researchers need to take advantage, writes David Ennis.

In new research, Francesco Barilari and Diego Zambiasi study how President Ronald Reagan and George H.W. Bush’s rhetoric on the War on Drugs while on the campaign trail, particularly targeting crack cocaine abuse, was enough to alter policing policy. Specifically, the authors find that increased rhetoric led to an increase in arrests of Black Americans. Their study contributes to a literature on the material impact that political rhetoric can have on policing and public policy.

In new research, Sabien Dobbelaere, Grace McCormack, Daniel Prinz, and Sándor Sóvágó find that mergers negatively impact labor market outcomes. Mergers result in job losses, and the earnings of workers who lose their jobs don’t recover for several years on average. The authors find these negative consequences are more likely attributable to the restructuring of labor forces than subsequent firm market power.

Do labor markets in Europe or the United States and Canada experience more monopsony power? In a new paper published in the University of Chicago Law Review, Satoshi Araki, Andrea Bassanini, Andrew Green, Luca Marcolin, and Cristina Volpin provide comparisons of monopsony power between the two regions, documenting similar levels of concentration across labor markets despite generally stronger protections in Europe. They also discuss the effects of such concentration on employment and wages, ending with potential regulatory reforms to address these issues.

In new research, Markus Eberhardt, Giovanni Facchini, and Valeria Rueda delve into a unique database comprising 12,000 reference letters, which were written in support of more than 3,700 applicants applying for academic job positions in economics in the United Kingdom. Their analysis uncovers a pervasive disparity in the way male and female candidates are recommended. Specifically, the authors observe that women are frequently lauded for their hard work and determination, and at times less likely to be praised for their natural talent. They also show that such gender-based stereotyping hinders the progress of women economists.

The Stigler Center for the Study of the Economy and the State hosted with the Rustandy Center for Social Sector Innovation, in partnership with the Financial Times, a virtual event discussing whether corporate ESG policies puts politics before shareholder and stakeholders' best interests or looks out for their long term best interests, with Marianne Bertrand, Jay Clayton and Damien Dwin. The following is a transcript of the event.

American antitrust regulators have recently taken aim at noncompete clauses. They argue that noncompetes suppress labor bargaining power and thus wages. The Italian labor market differs from its American counterpart in its rigid protections for labor, but the use of noncompetes in Italy occur at about the same rate as in the United States and shows a correlation with lower wages for workers whose noncompete clauses are unjustified because their jobs require little training and do not grant access to trade secrets. The evidence from Italy suggests that better regulation of noncompetes and informing workers of their rights is justified on the whole.

The Stigler Center for the Study of the Economy and the State hosted with the Rustandy Center for Social Sector Innovation, in partnership with the Financial Times, a virtual event discussing shareholder democracy with Lisa Fairfax, Alex Thaler and Luigi Zingales. The following is a transcript of the event.

Anti-ESG rhetoric from conservative states conflates valid financial evaluations of company and industry prospects with the ideological values of political opponents. Politicians that pass legislation preventing businesses and state agencies from working with financial services with ESG standards will only harm their constituents. Instead, states should encourage competition and variety in financial services, writes Jennifer J. Schulp.