How a Marshall Plan Program Boosted the Performance of Italian Firms for Decades

During the 1950s, as part of the Marshall Plan, the US subsidized loans to help European firms purchase technology and sponsored training trips for managers from abroad to US firms. Here, Michela Giorcelli of UCLA uncovers the significant long-term effects of this so-called Productivity Program for the Italian firms that participated in it—and in doing so illuminates larger questions about the drivers of firm performance.  

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Is China’s International Joint Venture Policy Effective in Diffusing Technology?

The US administration launched a trade war against China in response to what it sees as unfair trade practices—especially the requirement that foreign firms entering “restricted” sectors partner with a Chinese firm. New research from an international team of economists gauges whether the requirement has the intended effect of diffusing technology transfer in these sectors, and finds the answer is a resounding yes.  

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Credit Ratings: What Are They Good For?

The financial crisis of 2008–10 revealed that ratings are imperfect and potentially biased measures of credit risk. Analyzing a large number of mutual fund prospectuses, new research reveals there has been no decrease in the use of credit ratings in investment mandates. The findings point to a lack of better alternatives and suggest that regulation seeking to curb their usage may not be optimal.  

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How the Triple Tax Exemption on Puerto Rico’s Bonds Financed Its Territorial Status—and Helped Spark Its Debt Crisis

How did Puerto Rico manage to incur a monumental debt of $72 billion without raising red flags among the sophisticated investors who continuously bought its bonds? Here associate professor of business Evaluz Cotto–Quijano points to the role of a tax exemption designed by the US Congress over 100 years ago to finance Puerto Rico’s territorial government by inflating its bond debt instead of appropriating federal funds.  

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Loose Policies Around Close Elections Highlight the Political Limits of Macroprudential Regulation

What can policymakers do to prevent future financial crises? An emerging consensus holds that so-called macroprudential regulation is key: policies that aim to mitigate risks to the financial system as a whole. In a recent paper, Karsten Müller of Princeton shows that such policies were systematically loosened in the run-up to two-hundred seventeen elections across 58 countries. This raises the question of whether regulators can, in practice, withstand political pressures.

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Editors’ Briefing: This Week in Political Economy (August 25–September 1)

As Trump ramps up his attacks on Google, Sen. Orrin Hatch asks the FTC to revisit its investigation of the company; as Facebook finally takes action on Myanmar, US campaign strategists reportedly gear up to flood the social network with inflammatory ads; and why are doctors and hospital groups organizing to oppose single-payer health care in California?  

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