Publications

I examine the relation between firms’ financial conduct and wage theft. Wage theft represents the single largest form of theft committed in the United States and primarily affects firms’ most vulnerable employees. I show that wage theft is more prevalent (i) when firms just meet or beat earnings targets and (ii) when executives’ personal liability for wage theft decreases. Wage theft precedes financial misconduct while the theft is undetected, but once firms are caught engaging in wage theft they are more likely to shift to engaging in financial misconduct. My findings highlight an economically meaningful yet previously undocumented way in which firms’ financial incentives relate to employee treatment.

The theory of regulatory capture has long been used to make the case for deregu- lation by questioning the legitimacy of government’s regulatory function. How do government officials, who are tasked with regulating, embrace deregulation? This article explores that question in the context of Boston’s debate over regulating transportation network companies (TNCs). Analyzing media coverage, I identify two types of frames that emerged as stakeholders attempted to influence TNC regulation: issue frames aimed to shape the interpretation of the ride-for-hire industry, while meta-frames shifted the focus of debate from TNCs to regulation itself. Specifically, a meta-frame invoking the theory of regulatory capture became central. Supplementing media coverage with in-depth interviews, I show that government officials did not refute the capture frame but rather used this frame to draw a distinction between legitimate and illegitimate regulation. I propose that these distinctions are central to legitimizing a deregulatory agenda, as officials condemn specific types of regulation in order to shore up the broader category of regulation. The case sheds light on how the idea of government as an impediment to innovation is embraced by government officials themselves, paving the way for new market configurations.

The economic effects from labor market integration are crucially affected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equilibrium model to study and quantify the economic effects of trade and labor market integration of the 2004 European Union enlargement. In our model, trade is costly and households of different skills and nationalities face costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct annual migration flows by employment status, skill, and nationality across EU countries for the period 2002-2014. We exploit the timing of the changes in policies due to the EU enlargement to identify the changes in migration costs. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the enlargement. We find that new member state countries are the largest winners, with heterogenous effects across skill groups. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies, the importance of the timing of migration policy, and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration. We also use our framework to quantify the general equilibrium effects of imposing migration and trade restrictions due to Brexit.

Evaluating how factor premia vary over time and across asset classes is challenging due to limited time series data, especially outside of U.S. equities. We examine four prominent factors across six asset classes over a century. We find little evidence for arbitrage activity influencing returns, though some novel evidence of overfitting biases. We identify meaningful time variation in factor risk-adjusted returns that appears unrelated to macroeconomic risks, supporting other theories of dynamic return premia. Attempting to capture this variation, we evaluate various factor timing strategies, but find relatively modest predictability that likely fails to overcome implementation frictions.

Theories of authenticity usually try to explain what leads consumers to see something as authentic. Here, we address the inverse question instead: What makes a brand, individual, or product seem inauthentic? This shift in focus reveals a distinct psychology that is more than just the absence or inverse of responses to authenticity. Whereas authenticity typically confers meaning and value, invoking inauthenticity typically implies the detection of a moral violation. Specifically, consumers judge an entity to be inauthentic if they perceive a mismatch between what that entity claims to be (e.g., a socially responsible apparel brand, 100% orange juice) and what it really is upon closer scrutiny. Such judgments give rise to a powerful, non-compensatory reactance we term inauthenticity aversion. We segment inauthenticity violations into three principle types: deceptions, ulterior motives, and adulterations. This conceptualization allows us to capture a wide variety of inauthenticity cases and outline psychological commonalities across them. It also helps to explain the powerful outrage consumers display at perceived inauthenticity and illuminates potential hazards in common marketing approaches.

In this paper, we study a model of information consumption in which consumers sequentially interact with a platform that offers a menu of signals (posts) about an underlying state of the world (fact). At each time, incapable of consuming all posts, consumers screen the posts and only select (and consume) one from the offered menu. We show that, in the presence of uncertainty about the accuracy of these posts and as the number of posts increases, adverse effects, such as slow learning and polarization, arise. Specifically, we establish that, in this setting, bias emerges as a consequence of the consumer’s screening process. Namely, consumers, in their quest to choose the post that reduces their uncertainty about the state of the world, choose to consume the post that is closest to their own beliefs. We study the evolution of beliefs, and we show that such a screening bias slows down the learning process and that the speed of learning decreases with the menu size. Further, we show that the society becomes polarized during the prolonged learning process even in situations in which the society’s belief distribution was not a priori polarized.

In this article we argue addressing entry barriers created by network effects is critical to remedying a monopolization violation in a social network market (e.g. Facebook). For a social network, interoperability is likely a necessary, but not necessarily a sufficient, condition for an effective remedy. Mandatory interoperability based on robust and effective rules could overcome the network effects that protect the incumbent from entry, maximizing the potential for new entrants to enter at minimal cost, compete in the market, and take share from the incumbent. This remedy could be ordered in addition to other relief such as a divestiture, and indeed could be complementary to it, or stand on its own. In today’s internet-based network markets, interoperability carries no incremental costs such as dedicated wires and machines that were true of the telecom interoperability of past decades. Its main cost is the establishment of an open standard to exchange commonly used functionalities (e.g. text, images) of social networks. If this remedy were ordered by a court after a finding of antitrust liability, the standard should be overseen by an agency to ensure it serves to protect competition, lower entry barriers, and erode market power. Entrants who wish to interoperate with the incumbent could demonstrate adherence to privacy and security standards and receive royalty-free licenses.

This paper argues incumbent firms may acquire innovative targets solely to discontinue the target's innovation projects and preempt future competition. We call such acquisitions "killer acquisitions." We develop a model illustrating this phenomenon. Using pharmaceutical industry data, we show that acquired drug projects are less likely to be developed when they overlap with the acquirer's existing product portfolio, especially when the acquirer's market power is large due to weak competition or distant patent expiration. Conservative estimates indicate 5.3 percent to 7.4 percent of acquisitions in our sample are killer acquisitions. These acquisitions disproportionately occur just below thresholds for antitrust scrutiny.