Research

Washington's "revolving door"—the movement from government service into the lobbying industry—is regarded as a major concern for policy-making. We study how ex-government staffers benefit from the personal connections acquired during their public service. Lobbyists with experience in the office of a US Senator suffer a 24 percent drop in generated revenue when that Senator leaves office. The effect is immediate, discontinuous around the exit period, and long-lasting. Consistent with the notion that lobbyists sell access to powerful politicians, the drop in revenue is increasing in the seniority of and committee assignments power held by the exiting politician.

We present a model of international portfolio choice based on cross-country differences in relative factor abundance. Countries have varying degrees of similarity in their factor endowment ratios, and are subject to aggregate productivity shocks. Risk-averse consumers can insure against these shocks by investing their wealth at home and abroad. In a many-good setup, the change in factor prices after a positive shock in a particular country provides insurance to countries that have dissimilar factor endowment ratios, but is bad news for countries with similar factor endowment ratios, since their incomes will worsen. Therefore countries with similar relative factor endowments have a stronger incentive to invest in one another for insurance purposes than countries with dissimilar endowments. The importance of this effect depends on the size of countries. Empirical evidence linking bilateral international equity investment positions to a proxy for relative factor endowments supports our theory: the similarity of host and source countries in their relative capital–labor ratios has a positive effect on the source country’s investment position in the host country. The effect of similarity is enhanced by the size of host countries. 

Using French manufacturing firm-level data for the years 1996-2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms (”non-importers”) obtain most of their inputs domestically. (ii) Medium-productivity firms offshore skill-intensive inputs to skill-abundant countries and are more labor intensive in their domestic production than non-importers. (iii) Higher-productivity firms additionally offshore labor-intensive inputs to labor-abundant countries and are more skill intensive than non-importers. We develop a model in which heterogeneous firms, subject to fixed costs, can offshore intermediate inputs of different skill intensities to countries with different skill abundance. This leads to endogenous within-industry variation in domestic skill intensities. We provide econometric evidence supporting the factor-proportions channel through which reductions in offshoring costs to labor-abundant countries have significantly increased firm-level skill intensities of French manufacturers.

We examine how the premature death of eminent life scientists alters the vitality of their fields. While the flow of articles by collaborators into affected fields decreases after the death of a star scientist, the flow of articles by non-collaborators increases markedly. This surge in contributions from outsiders draws upon a different scientific corpus and is disproportionately likely to be highly cited. While outsiders appear reluctant to challenge leadership within a field when the star is alive, the loss of a luminary provides an opportunity for fields to evolve in new directions that advance the frontier of knowledge. 

We develop a simple theoretical framework for thinking about how geographic frictions, and in particular travel costs, shape scientists’ collaboration decisions and the types of projects that are developed locally versus over distance. We then take advantage of a quasi-experiment—the introduction of new routes by a low-cost airline—to test the predictions of the theory. Results show that travel costs constitute an important friction to collaboration: after a low-cost airline enters, the number of collaborations increases between 0.3 and 1.1 times, a result that is robust to multiple falsification tests and causal in nature. The reduction in geographic frictions is particularly beneficial for high-quality scientists that are otherwise embedded in worse local environments. Consistent with the theory, lower travel costs also endogenously change the types of projects scientists engage in at different levels of distance. After the shock, we observe an increase in higher-quality and novel projects, as well as projects that take advantage of complementary knowledge and skills between subfields, and that rely on specialized equipment. We test the generalizability of our findings from chemistry to a broader data set of scientific publications and to a different field where specialized equipment is less likely to be relevant, mathematics. Last, we discuss implications for the formation of collaborative research and development teams over distance. 

We study insider trading behavior surrounding the largest bank bailout in history: Troubled Asset Relief Program (TARP). In politically connected banks, insider buying during the pre-TARP period is associated with increases in abnormal returns around bank-specific TARP announcement; for unconnected banks, trading and returns are uncorrelated. Results hold across insiders within the same bank and are stronger for finance-related government connections. Through a Freedom of Information Act request, we obtained the previously undisclosed TARP funds requested; the ratio of received to requested funds correlates both with abnormal returns and insider buying behavior in connected banks. 

We revisit the relationship between foreign investment and productivity of acquired firms. First, we construct a panel firm-level dataset for eight advanced European countries covering domestic and foreign acquisitions together with detailed balance sheet information for the years 1999–2012. Second, we address the challenge of identifying a causal relation. To that end, we compare foreign to domestic acquisitions in addition to accounting for the impact of majority versus minority acquisitions after controlling for country and sector trends. The productivity of foreign acquired affiliates increases modestly after four years, but only when majority stakes are acquired by foreigners. Our results are driven by foreign acquisitions and not by foreign divestment. 

This paper investigates the way different sides of grit influence behavior. In addition to grit’s upside in achieving economic success associated with not giving up, it might also have a downside associated with not letting go. We split grit into two new categories, tenacity and diligence, and hypothesize that tenacity can lead individuals to go beyond their own intended plan of action when making a loss. We test the predictions with an experiment that elicits each individual’s plan of action which we compare to actual choice in a game of luck. Consistent with our priors, grittier individuals have a higher tendency to overplay, and tenacity alone captures the difficulty in respecting ex-ante preferences when this means accepting defeat. We then discuss the external validity of our findings.

We combine a model of symmetric information with selfish and office-motivated politicians and a Regression Discontinuity Design analysis based on close municipal elections to study partisan bias in the allocation of drought aid relief in Brazil. We identify a novel pattern of distributive politics whereby partisan bias materialises only before municipal elections, while it disappears before presidential elections. Furthermore, before mayoral elections, it fades for extreme (high or low) aridity levels while persisting for moderate levels. Our empirical results show that in this case alignment increases the probability of receiving aid relief by a factor of two (equivalent to 18.1 percentage points).