Seowoo Han

Abstract: Using repeated 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 ≈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 ≈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) fulfill their intended role of providing a secure environment for foreign investors and thereby promoting cross-border mergers and acquisitions (M&As)? Using comprehensive M&A transaction data from 1990 to 2019 and a generalized difference-in-differences framework, we find that BITs increase the likelihood of cross-border M&As by 0.9 percentage points. This result is robust across a range of alternative specifications, including estimators designed for staggered treatment timing and an instrumental variable approach. The effect is particularly pronounced when the target firm is located in a civil law country, where property rights are less secure and contract enforcement tends to be weaker. Taken together, our findings indicate that BITs improve the legal protection of foreign investors and, in doing so, effectively strengthen property rights in civil law jurisdictions.