Captured
Regulation, entrepreneurship, and firm size
Dustin Chambers, Patrick McLaughlin & Tyler Richards
Journal of Regulatory Economics, April 2022, Pages 108–134
Abstract:
We empirically investigate the theory that regulatory growth within an industry disproportionately burdens small businesses relative to their larger competitors. Using RegData 3.0, we find that a 10% increase in industry-specific regulatory restrictions is associated with a 0.5% reduction in the number of firms regardless of firm size, but a 0.6% reduction in employment only among small firms. We also find that consecutive years of high regulatory growth amplify the associated negative effects of future regulations on the number and employment of small firms, but we find no amplifying effects for large firms. Finally, we find that higher regulatory growth rates are associated with lower job destruction rates among establishments owned by large firms. These findings are consistent with the Public Choice theory of regulation and imply that regulatory growth leads to fewer small businesses and reduced small business employment, with minimal negative impacts on large businesses.
GDPR and the Lost Generation of Innovative Apps
Rebecca Janßen et al.
NBER Working Paper, May 2022
Abstract:
Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half. We estimate a structural model of demand and entry in the app market. Comparing long-run equilibria with and without GDPR, we find that GDPR reduces consumer surplus and aggregate app usage by about a third. Whatever the privacy benefits of GDPR, they come at substantial costs in foregone innovation.
Productivity, Prices, and Concentration in Manufacturing: A Demsetzian Perspective
Sam Peltzman
Journal of Law and Economics, February 2022, Pages S121–S153
Abstract:
Concentration and price-cost margins have increased since the 1980s in many industries. These developments have raised concern about weakened competition and resulting harm to consumers and the need for tougher antitrust enforcement. In 1973 Harold Demsetz cautioned against inferring weakened competition from high or rising margins and concentration. He argued that this correlation between margins and concentration could arise from productivity differences across competitive firms. This paper studies the interplay between concentration, prices, and productivity across US manufacturing industries over two 15-year periods from 1982 to 2012. The consistent pattern is that high and rising concentration has been associated with better productivity growth. I show that widening margins, whether related to concentration or not, are mainly driven by productivity gains rather than prices, as in the competitive process outlined by Demsetz. Skepticism about tougher antitrust policy may be warranted: this would risk harm to productivity without benefiting consumers.
Right to Repair: Pricing, Welfare, and Environmental Implications
Chen Jin, Luyi Yang & Cungen Zhu
Management Science, forthcoming
Abstract:
The “right-to-repair” (RTR) movement calls for government legislation that requires manufacturers to provide repair information, tools, and parts so that consumers can independently repair their own products with more ease. The initiative has gained global traction in recent years. Repair advocates argue that such legislation would break manufacturers’ monopoly on the repair market and benefit consumers. They further contend that it would reduce the environmental impact by reducing e-waste and new production. Yet the RTR legislation may also trigger a price response in the product market as manufacturers try to mitigate the profit loss. This paper employs an analytical model to study the pricing, welfare, and environmental implications of RTR. We find that, as the RTR legislation continually lowers the independent repair cost, manufacturers may initially cut the new product price and then raise it. This nonmonotone price adjustment may further induce a nonmonotone change in consumer surplus, social welfare, and the environmental impact. Strikingly, the RTR legislation can potentially lead to a lose–lose–lose outcome that compromises manufacturer profit, reduces consumer surplus, and increases the environmental impact despite repair being made easier and more affordable.
The impact of the Massachusetts 2012 right to repair law on small, independent auto repair shops
Leo Kahane
Applied Economics Letters, June 2022, Pages 873-879
Abstract:
In 2012, the State of Massachusetts enacted a law known as the ‘Right to Repair’ requiring automakers to share vital vehicle information and data with consumers and small auto repair shops for maintenance and repair purposes. This paper assesses the impact of this law on the number and percentage of small repair shops in the state. The results of a synthetic control and a difference-in-differences analysis show that the law led to increases in the number and market share of small auto repair shops.
Data and Market Power
Jan Eeckhout & Laura Veldkamp
NBER Working Paper, May 2022
Abstract:
Might firms' use of data create market power? To explore this hypothesis, we craft a model in which economies of scale in data induce a data-rich firm to invest in producing at a lower marginal cost and larger scale. However, the model uncovers much richer interactions between data, welfare and market power. Data affects risk, firm size and the composition of the goods firms produce, all of which affect markups. The tradeoff between these forces depends on the level of aggregation at which markups are measured. Empirical researchers who measure markups at the product level, firm level or industry level come to different conclusions about trends and cyclical fluctuations in markups. Our results reconcile and re-interpret these facts. The divergence between product, firm and industry markups can be a sign that firms are using data to reallocate production to the goods consumers want most.
Impacts of the Sharing Economy Entry and Regulations on Financial Delinquencies
Jinan Lin, Tingting Nian & Vijay Gurbaxani
University of California Working Paper, February 2022
Abstract:
As home-sharing platforms have continued to grow exponentially in the past decade, regulators are facing policy concerns as they address the impacts of these home-sharing platforms. It is essential for policymakers to understand the economic and societal impacts that these platforms pose as well as the effects of regulatory responses that have developed to date. To answer these questions, this study empirically investigates how Airbnb’s entry generates financial liquidity and mitigates financial delinquencies for households affected. On one hand, we show that Airbnb’s entry, as a positive shock to household liquidity, reduces mortgage loan and auto loan delinquencies by 3.99% and 2.68%, respectively. On the other hand, the local regulations of home-sharing economy platforms can offset the delinquency dampening effects brought by Airbnb, especially the most restrictive regulations focusing on restricting hosts’ access to the platform in certain regions. Further, by supplementing a Panel Vector Autoregression (PVAR) Model with impulse-response analysis, we demonstrate that households prioritize repayment to mortgage loans first, and then auto loans as well as bank card loans. This paper is consistent with other studies supporting the welfare brought by the sharing economy and has policy implications especially given the excessive household debts and the heated debates on how to regulate home-sharing platforms in the U.S.
The SEC's September Spike: Regulatory Inconsistency with the Fiscal Year
Dain Donelson, Matthew Kubic & Sara Toynbee
University of Texas Working Paper, February 2022
Abstract:
We examine how Securities and Exchange Commission (SEC) enforcement varies at fiscal year- end. Using a sample of over 12,000 SEC enforcement actions, we find that the number of case filings in September, the final month of the SEC’s fiscal year, is approximately double the average of other months. We find several differences in the characteristics of cases filed in September, which suggest changes in enforcement behavior at fiscal year-end. First, staff use their discretion over the timing and venue of cases by accelerating case filings and filing more cases in the SEC’s administrative court. Second, staff prioritize cases that require fewer resources and involve less severe allegations. Finally, September cases are more likely to be filed as settled charges and have more lenient settlement terms. Overall, our findings suggest regulatory inconsistency within the SEC’s fiscal year.
Urban planning policies and the cost of living in large cities
William Larson, Anthony Yezer & Weihua Zhao
Regional Science and Urban Economics, forthcoming
Abstract:
Using a numerical simulation model to provide a sterile laboratory for studying the long-run effects of both land use and transportation policies, this paper offers two main findings. First, we argue that land use regulations have relatively small effects on the cost of labor in large cities due to location substitution by housing producers and households. Second, we show the compensating differential paid to workers in growing cities is invariant with respect to land use regulation. In the long run, the vast majority of the costs of land use regulations are due to changes to the cost of commuting rather than housing.
The Effect of Payday Loan Restrictions on Suicides and Drug Overdoses
Thanh Lu
Cornell Working Paper, March 2022
Abstract:
In this paper, I study the role of payday loan restrictions on suicide and overdose deaths. Payday lenders offer ``quick cash'' and charge high fees relative to the principle loan amounts. Concerns about payday loans trapping borrowers in debt have led 21 U.S. states and the District of Columbia to prohibit or severely restrict payday lending by the end of 2021. Having access to costly credit could lead poorly informed individuals to a cycle of repeated borrowing and result in negative heath consequences, such as suicides. Moreover, numerous studies have documented the link between disposable income and negative heath events related to substance use, such as hospitalization and mortality, even when the income is anticipated. Given this relationship, state laws that limit access to credit, such as payday loans, may have unintended consequences related to health outcomes. Using the National Center for Health Statistics Multiple Cause of Death Files from 1999-2018 and estimating event-study models using procedures by Sun & Abraham (2021), my estimates show that suicides and overdoses decline post payday lending restriction. I additionally show that payday loan usage and binge drinking decline as access to payday loans is restricted. My findings suggest that restricting access to payday loans can have unintended benefits in reducing suicides and deaths linked to substance misuse.
Self-Service Bans and Gasoline Prices: The Effect of Allowing Consumers to Pump Their Own Gas
Vitor Melo
Clemson University Working Paper, March 2022
Abstract:
Most of the world's population lives in countries that ban the self-service sale of gasoline. Causal effects of this regulation can hardly be assessed in these countries due to a lack of policy changes, but a recent quasi-experiment in the state of Oregon allows us to analyze the impact of the ban. From 1992 to 2017, the state of Oregon was one of two US states that banned self-service at gasoline stations. Oregon adjusted regulations at the start of 2018 to allow self-service at gasoline stations in counties with populations below 40,000 individuals. I examine the repeal of this self-service ban and its effects on gasoline prices. I apply a difference-in-differences design using high frequency data of gasoline prices and find that repealing the self-service ban reduced gasoline prices by 4.4 cents per gallon in affected Oregon counties. This effect represents approximately $90 in expected annual savings for a household with three licensed drivers. The results are statistically significant in all specifications and are essential to the policy debate on whether to keep self-service bans in U.S. states and countries with the same regulation.
Does Information About AI Regulation Change Manager Evaluation of Ethical Concerns and Intent to Adopt AI?
Mariano-Florentino Cuéllar et al.
Journal of Law, Economics, and Organization, forthcoming
Abstract:
We examine the impacts of potential artificial intelligence (AI) regulations on managers’ perceptions on ethical issues related to AI and their intentions to adopt AI technologies. We conduct a randomized online survey experiment on more than a thousand managers in the United States. We randomly present managers with different proposed AI regulations, and ask about ethical issues related to AI and their intentions related to AI adoption. We find that information about AI regulation increases manager perception of the importance of safety, privacy, bias/discrimination, and transparency issues related to AI. However, there is a tradeoff; regulation information reduces manager intent to adopt AI technologies. Moreover, information about regulation increases manager intent to spend on developing AI strategy including ethical issues at the cost of investing in AI adoption, such as providing AI training to current employees or purchasing AI software packages.