Domestic Intervention
Reexamining Lackluster Productivity Growth in Construction
Daniel Garcia & Raven Molloy
Regional Science and Urban Economics, June 2025
Abstract:
Of all major industries, construction is the only one to have registered negative average productivity growth since 1987. Mechanically, this lackluster performance owes to the fact that indexes measuring the cost of building a constant-quality structure have risen much faster than those measuring the cost of producing other goods. We assess the extent to which growth in construction costs could be biased upward by improvements in unobserved structure quality. Even under generous assumptions, our estimates of the magnitude of this bias are not large enough to alter the view that construction-sector productivity growth has been weak. Next, we calculate new estimates of single-family residential construction productivity growth by state and metropolitan area from 1980 to 2019. These estimates reveal that productivity has declined the most in areas with a larger fraction of construction in the urban core and with tighter housing supply constraints, especially in locations with long permitting times.
Reporting Regulation and Corporate Innovation
Matthias Breuer, Christian Leuz & Steven Vanhaverbeke
Journal of Accounting and Economics, forthcoming
Abstract:
We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe's regulation, we find that forcing firms to disclose financial statements reduces the number of innovating firms and the average firm's innovation spending, but it does not reduce industry-wide total innovation spending. Our results suggest that the regulation imposes proprietary costs on firms, which discourages innovation activity, especially by smaller firms. We also show that the regulation provides positive information spillovers to other firms (e.g., competitors, suppliers, and customers), especially larger ones. We complement our analysis with alternative innovation measures, including patents, and corroborate the results with an analysis of reporting changes due to an enforcement reform in Germany. In sum, the European reporting regulation has aggregate and distributional effects on corporate innovation. Importantly, it appears to concentrate innovative activities among fewer, mostly larger firms, which could reflect institutional features of our setting or more general economic forces.
Tenant rights, eviction, and rent affordability
Edward Coulson et al.
Journal of Urban Economics, May 2025
Abstract:
We use state-level differences in landlord-tenant laws to estimate their impact on rental housing affordability. We construct a Tenant Rights Index (TRI) spanning 1997 to 2016 to assess its effects on eviction rates and rental market outcomes. Increased TRI correlates with higher median rent, higher rent-value ratio, and increased homelessness. To rationalize our findings, we develop a search and matching model of the rental market with free entry of both landlords and tenants, and an endogenous eviction mechanism. In our environment, more stringent eviction regulations reduce evictions and raise the relative demand for housing. However, stricter regulations also lead to higher rents and lower vacancy rates. We calibrate the model to the US rental market to quantitatively assess the mechanism in our model. An increase in eviction costs has a larger impact on the eviction rate and market tightness, with a relatively smaller effect on rents and vacancy rates. Our findings suggest that while stringent regulations may reduce evictions, they could lead to unintended consequences such as inflated house prices and heightened homelessness. Policymakers must carefully balance these potential drawbacks against the goal of tenant protection to avoid exacerbating existing housing affordability challenges.
Analyzing the Effects of Occupational Licensing on Earnings Inequality in the United States
Kihwan Bae et al.
NBER Working Paper, May 2025
Abstract:
There is a consensus that there is an earnings premium for licensed workers relative to unlicensed workers. However, little is known about how occupational licensing affects earnings inequality. In this paper, we study dynamic, heterogeneous earnings effects of occupational licensing and draw implications for earnings inequality in the United States. First, we find that the earnings gap between workers in licensed occupations and those in unlicensed occupations with similar characteristics ("licensing premium") increased slightly during the 1983-2019 period. Second, we find that the licensing premium for workers in high paying occupations significantly increased, which is not the case for workers in lower paying occupations. The finding is consistent with growing demands for skills over the past decades, given the more rigorous licensing requirements for high-skilled occupations. As a result, earnings inequality among workers in licensed occupations increased. Third, we document that the licensing premium for female workers and workers without a college education declined relative to male workers and college graduates. Taken together, our findings suggest that occupational licensing is associated with widening earnings inequality in the United States during the 1983-2019 period.
Growth is Getting Harder to Find, Not Ideas
Teresa Fort et al.
U.S. Census Bureau Working Paper, April 2025
Abstract:
Relatively flat US output growth versus rising numbers of US researchers is often interpreted as evidence that "ideas are getting harder to find." We build a new 46-year panel tracking the universe of U.S. firms' patenting to investigate the micro underpinnings of this claim, separately examining the relationships between research inputs and ideas (patents) versus ideas and growth. Over our sample period, we find that researchers' patenting productivity is increasing, there is little evidence of any secular decline in high-quality patenting common to all firms, and the link between patents and growth is present, differs by type of idea, and is fairly stable. On the other hand, we find strong evidence of secular decreases in output unrelated to patenting, suggesting an important role for other factors. Together, these results invite renewed empirical and theoretical attention to the impact of ideas on growth. To that end, our patent-firm bridge, which will be available to researchers with approved access, is used to produce new, public-use statistics on the Business Dynamics of Patenting Firms (BDS-PF).
The Cost of Banning TikTok: Implications for Digital Advertising
Dante Donati & Hortense Fong
Columbia University Working Paper, May 2025
Abstract:
This paper investigates the short-run effects of platform market concentration on advertising prices, leveraging the temporary outage of TikTok in the U.S. in January 2025 as a quasi-exogenous shock to advertising demand and supply on competing social media platforms. While increased advertiser demand on other platforms would raise prices, more impression opportunities from users substituting to those platforms would lower prices, creating opposing forces on ad prices. We rely on publicly available data from the Meta Ad Library for ads in the "Social Issues, Elections, or Politics" category and construct a time series of ad spend and impressions across 30,000 advertisers. Using difference-in-differences to compare ads in the US and other markets, we find that the average cost per thousand impressions (CPM) increased by 10% on Meta platforms as a result of the outage. This price increase was driven by intensified competition on the demand side, with higher spend and more ads -- especially among larger advertisers -- that were not compensated by a proportional rise in impressions. The greater shift by relatively larger advertisers suggests that Meta platforms are a better substitute for them than for smaller ones. This implies that a TikTok ban would impose a disproportionate burden on small businesses.
The Political-Economic Risks of AI
Jean-Paul Carvalho
University of Oxford Working Paper, March 2025
Abstract:
The political and economic risks of artificial intelligence have been overshadowed by fears of malicious superintelligence and killer robots. Due to AI's distinctive features -- automation of cognitive tasks, global scalability, general-purpose technology, and importance to national security -- its impact could be unlike earlier rounds of automation. It is possible that AI creates a superabundant world with unprecedented human freedom. In this essay, however, I will explore a tail risk in which human-level artificial general intelligence (AGI) radically concentrates the global economy, breaks democratic and egalitarian institutions, and tears the social fabric, collapsing human productivity. The closest precedent would be the cultural devastation of indigenous societies under colonialism. I will describe how this process might unfold and propose measures to ensure AI has widespread benefits. Competition policy emerges as a critical tool, as do adaptive changes to political institutions. Without appropriate measures, there may be no AI-driven growth takeoff and the inequality that emerges would dwarf anything experienced to date.
Why Nationalize the Production of Public Goods?
Vincent Geloso
George Mason University Working Paper, February 2025
Abstract:
If private provision of public goods is both feasible and optimal, why do states intervene and assume their provision? This question parallels the broader inquiry of whether state provision can be explained without resorting to public interest justifications or suboptimal private provision. We answer that states take over the provision of public goods from the private sector depending on the political rents that can be secured in other markets (i.e., those that are not that of the public goods) -- even if they potentially reduce economic activity. We call this the "redistributive engine" motivation, and it allows us to be agnostic about both the quality of private provision and the net outcome of public takeover. It is a price-theoretic justification only. Using the case of American lighthouses in the Early Republic (1789 to 1815) as illustration, we demonstrate that federal control of lighthouses was part of a rent-seeking arrangement that introduced subtle but significant protectionist measures for the domestic shipping industry and a broader hidden tariff (which is often unmeasured by economic historians). In the process, federal oversight of lighthouses provided a mechanism for patronage distribution, facilitating coalition-building and political consolidation. Ergo, a redistributive engine whose net effect is unclear.
Understanding housing market responses to stringent energy codes
Maria Jimena Muzio et al.
Real Estate Economics, forthcoming
Abstract:
Increased energy efficiency in buildings is essential to reducing carbon emissions and addressing climate change. Massachusetts' Green Communities Act of 2008, aiming for a 50% reduction in carbon emissions by 2030 and net-zero by 2050, mandates the Stretch Energy Code for eligibility for state funding. This code requires new residential constructions to meet stringent Home Energy Rating System (HERS) Index scores. While these requirements benefit the environment, they may increase construction costs, affecting housing production and affordability. Using the staggered municipal adoption of the Stretch Energy Code to tease out causal relationships, we analyze the effects of the Stretch Energy Code on housing quantity and price across municipalities in Massachusetts. The results indicate that more energy-efficient single-family properties command a sales price premium of 4.0%, and the Stretch Energy Code adoption is associated with a decrease in the quantity of new single-family housing starts. Approximately 45.5% of the price increase is due to higher willingness to pay for energy-efficient homes, with the remainder attributed to reduced housing supply. Our article is particularly relevant as policymakers seek to balance the objectives and address the tensions between "E" and "S" in their "ESG" policy packages.
Creative Destruction and the Autonomous Life
Brian Kogelmann
Journal of Business Ethics, April 2025, Pages 659-671
Abstract:
This paper examines the tension between creative destruction -- an inherent feature of capitalist economies -- and the ideal of autonomy. Creative destruction is vital for economic growth, but it undermines the conditions necessary for autonomy by disrupting individuals' ability to plan their lives. This creates a dilemma: we must either abandon the ideal of autonomy or economic growth. The paper explores potential regulatory strategies to mitigate the impact of disruptive innovation on life plans, but argues these ultimately fail. It then proposes a novel conception of autonomy consistent with capitalist creative destruction. With artificial intelligence poised to initiate unparalleled creative destruction, understanding this dilemma and potential solutions is crucial from an ethical perspective. The paper contends its revised conception of autonomy offers a path forward amidst transformative technological change.
Perverse incentives created by tree protection ordinances
Alecia Cassidy & David Bernstein
University of Alabama Working Paper, April 2025
Abstract:
Urban tree protection policies aim to preserve city trees and their associated benefits. Yet, little is known about the efficacy of these policies. Tree protection policies often utilize diameter-based thresholds to preserve larger trees. These thresholds could perversely incentivize preemptive cutting if landowners wish to avoid future regulatory hurdles for removing larger trees, maintaining the option value associated with future development. Focusing on one such ordinance in Austin, TX, our study is the first to document bunching in the distribution of tree removal permits of protected heritage tree species just below cutoff trunk diameters, indicating preemptive cutting. We estimate that 5.03% of permits just under the 24" trunk diameter threshold and 6.36% of permits just under the 30" threshold are due to preemptive cutting. We do not find evidence of tree preservation or dishonest claims of dead, hazardous, or encroaching trees. Overall, our findings imply that municipal policymakers should consider how threshold-based policies might skew residents' incentives.
Cloze Encounters: The Impact of Pirated Data Access on LLM Performance
Stella Jia & Abhishek Nagaraj
NBER Working Paper, March 2025
Abstract:
Large Language Models (LLMs) have demonstrated remarkable capabilities in text generation, but their performance may be influenced by the datasets on which they are trained, including potentially unauthorized or pirated content. We investigate the extent to which data access through pirated books influences LLM responses. We test the performance of leading foundation models (GPT, Claude, Llama, and Gemini) on a set of books that were and were not included in the Books3 dataset, which contains full-text pirated books and could be used for LLM training. We assess book-level performance using the "name cloze" word-prediction task. To examine the causal effect of Books3 inclusion we employ an instrumental variables strategy that exploits the pattern of book publication years in the Books3 dataset. In our sample of 12,916 books, we find significant improvements in LLM name cloze accuracy on books available within the Books3 dataset compared to those not present in these data. These effects are more pronounced for less popular books as compared to more popular books and vary across leading models. These findings have crucial implications for the economics of digitization, copyright policy, and the design and training of AI systems.