Seowoo Han

Abstract: Using surveys of households across thirteen countries, we study how much individuals would be willing to pay to eliminate business cycles. These direct estimates are much higher than traditional measures following Lucas (2003): on average, households would be prepared to sacrifice around 5-6% of their lifetime consumption to eliminate business cycle fluctuations. A similar result holds for inflation: to bring inflation to their desired rate, individuals would be willing to sacrifice around 5% of their consumption. Willingness to pay to eliminate business cycles and inflation is generally higher for those whose consumption is more pro-cyclical, those who are more uncertain about the economic outlook, and those who live in countries with greater historical volatility.

Abstract: Do bilateral investment treaties (BITs) play a role as intended in providing a secure environment for foreign investors and thereby promoting cross-border mergers and acquisitions (M&As)? To answer this question, we develop a two-country model with heterogeneous firms, incomplete contracts, and a court system. The model predicts that BIT fosters cross-border M&As by resolving contractual problems inherent in investment across borders. Such effects are most pronounced when a target firm belongs to a civil law system, where property rights are less secure and contracts are weakly enforced. By leveraging comprehensive M&A transaction deals between 1990 and 2019, combined with a generalized difference-in-difference strategy, we find supporting evidence of the model predictions. The results are robust to difference-in-differences estimators with multiple time periods and an instrumental variable strategy.