Research

In this paper, I extend the seminal commodity-tax competition model of Kanbur and Keen (1993. “Jeux Sans Frontières: Tax Competition and Tax Coordination When Countries Differ in Size.” The American Economic Review 83: 877–92) letting asymmetric producer prices between countries of different sizes. Unlike Kanbur and Keen, I show that there are multiple equilibria, and at some equilibria, small-country consumers cross-shop from the large. Besides, tax harmonization can benefit the small country, and a minimum tax rate can decrease a country’s tax revenue. 

In this paper, we investigate the relationship between the level of democracy and fiscal-policy response to the economic crisis induced by the COVID-19 pandemic. We use a novel cross-country panel dataset of fiscal-policy responses with time variation. Our results suggest that more democratic countries adopted substantially larger fiscal-policy packages (in % GDP), and the gap regarding the size of packages between more democratic and less democratic countries widened over time. Our analysis of the components of fiscal policy shows that democracies, in particular, provide larger packages that benefit the broad public. Furthermore, our system-equations estimations suggest that the relation of democracy level with the fiscal-policy response is established through democracy’s relation with inclusive institutions, represented by the parliamentary system, and corruption. 

Is fiscal federalism associated with economic policy responses and stimulus measures adopted by national and sub-national governments to mitigate the adverse economic effects of the COVID-19 pandemic? In this paper, we provide empirical evidence that it indeed is. Our results indicate that even after controlling for various relevant factors, countries with fiscally federal (decentralised) governments have adopted larger fiscal and macro-financial policy packages (as a percent of GDP). However, there are no significant differences in monetary-policy responses between centralised and decentralised governments. We also show that these results are robust to using different federalism measures, including different sets of control variables and different econometric specifications that include an instrumental variable estimation. 

Is central bank independence (CBI) associated with economic policy responses to mitigate the adverse economic effects of the COVID 19 pandemic? In this paper, we provide cross-country evidence that it does. Our results generally indicate that more independent monetary policy authorities have adopted smaller cuts in the policy rate and reserve requirements. However, fiscal and macro-financial packages are relatively larger in countries with more independent central banks. These results are robust to different sets of control variables and different econometric specifications that include an instrumental variable estimation. 

A growing literature in economics provides a theory of budget negotiations relying on Baron and Ferejohn's legislative-bargaining approach. This literature assumes that legislators decide on all dimensions of government spending once and for all in a period during budget negotiations. However, legislators leave allocation decision of some funds to the executive authority and let it adjust government spending according to changing priorities in a year under certain restrictions. In this paper, the author develops a legislative-bargaining model to investigate the effects of budget flexibility on government spending and welfare. In addition, he analyzes how legislators choose the level of flexibility. He shows that, if legislators decide on all dimensions of government spending, high polarization leads to greater government spending. However, if the executive authority allocates government resources, high polarization leads to lower government spending. Besides, when the executive authority allocates government resources under high polarization, legislators cannot use their political power to induce overprovision of their preferred public good. When legislators can choose the level of budget flexibility, if the probability of polarization is high they prefer to control all dimensions of government spending. The author shows that budget flexibility benefits society only under high probability of polarization. 

Existing models predict that a higher probability of external war increases a state's fiscal-capacity investment. Yet time-series data reveal a pattern this prediction cannot explain. Pre-war fiscal-capacity trends differ across countries, declining in some while rising in others. This paper develops a dynamic model accounting for this pattern. Departing from Besley and Persson (2009, 2011), I let defense activities accumulate over time as a durable public good. This modification generates a non-monotone relationship between war probability and fiscal-capacity investment. An increase in war probability raises fiscal-capacity investment if and only if this probability is already above a threshold. The mechanism is that higher war probability raises the marginal benefit of both fiscal-capacity and defense investment, but at an increasing rate for fiscal capacity and a constant rate for defense. Countries where perceived war probability is below the threshold show declining pre-war fiscal capacity; those above it show a rising trend. I also show that the depreciation rates of defense activities affect fiscal-capacity investment differently in war and peace: the peace-time rate always raises it, while the war-time rate's effect depends on whether the economy is at war or at peace. I present historical cases supporting the model's predictions.

This paper examines how a large refugee inflow reshapes the social identities of host-country natives. While existing research has focused primarily on the economic and political consequences of refugee arrivals, less is known about their effects on identity formation. Using repeated cross-sectional survey data from Turkiye in 2012 and 2015, in which respondents are asked to prioritize among national, ethnic, and religious identities, we estimate the causal effect of local refugee exposure on identity salience. Exploiting variation in refugee settlement instrumented by distance to the Syrian border, we find that greater exposure reduces the likelihood of identifying primarily with religion, with the effect concentrated among women: a one-standard-deviation increase in exposure lowers the probability that a woman ranks religion first by about five percentage points, one fifth of the sample mean. Mechanism evidence from additional survey waves indicates that women report stronger perceived economic and social threats from refugees, while men report more frequent interaction. These patterns are consistent with a social-distancing interpretation: where perceived threat dominates, shared religious identity weakens; where contact is more common, identity responses are muted. The results suggest that refugee shocks may alter not only economic outcomes and political attitudes, but also the identity categories through which social boundaries are defined.

We study the relationship between corporate board characteristics and firm-level artificial intelligence (AI) adoption. Linking BoardEx director data to Compustat for U.S. public firms, we find at the board level that firms whose directors have larger external networks, more qualifications, shorter tenure, and more diverse nationalities adopt substantially more AI than their industry and year peers, and that this relationship is strongest in small, young, high-growth, and AI-intensive firms. The same profile reappears at the CEO level: CEOs with larger networks, more qualifications, and shorter tenure run firms that adopt more AI. We then analyze why some boards adopt AI more. A board-network shift-share design shows that firms adopt more AI when their directors sit on other, more AI-intensive boards, which we read as evidence of a director-borne diffusion channel. Lastly, we use board-member deaths as a quasi-random shock to board composition and instrument the board index with a signed death shock; the component of board AI-orientation moved by these deaths maps into higher AI adoption.