Columbia Business School Research

According to the Lucas-Stokey result, a government can structure its debt maturity to guarantee commitment to optimal fiscal policy by future governments. In this paper, we overturn this conclusion, showing that it does not generally hold in the same model and under the same definition of time-consistency as in Lucas-Stokey. Our argument rests on the existence of an overlooked commitment problem that cannot be remedied with debt maturity: a government in the future will not necessarily tax above the peak of the Laffer curve, even if it is ex-ante optimal to do so.

We investigate underlying sources of the US entrepreneurial ecosystem's advantage compared to other innovative economies by assessing the benefits Israeli startups derive from migrating to the US. Addressing positive sorting into migration, we show that migrants raise larger funding amounts and are more likely to have a US trademark and be acquired than non-migrants. Migrants also achieve a higher acquisition value. However, their patent output is not larger.

The extent to which men and women sort into different jobs and organizations—namely, gender differences in supply-side labor market processes—is a key determinant of workplace gender composition. This study draws on theories of congruence to uncover a unique organization-level driver of gender differences in job seekers’ behavior. We first argue and show that congruence between leadership gender and organizational claims is a key mechanism that drives job seekers’ interest.

This paper examines the impact of mandatory reporting and auditing of firms' financial statements on industry-wide resource allocation. Using threshold-induced variation in the share of mandated firms in a given industry, I document that reporting mandates facilitate ownership dispersion in capital markets and spur competition in product markets. I, however, do not find that reporting mandates unambiguously improve the efficiency of industry-wide resource allocation. With respect to auditing mandates, I find only that they impose a fixed cost on firms, deterring smaller entrants.

We consider the pricing problem faced by a revenue maximizing platform matching price-sensitive customers to flexible supply units within a geographic area. This can be interpreted as the problem faced in the short-term by a ride-hailing platform. We propose a two-dimensional framework in which a platform selects prices for different locations, and drivers respond by choosing where to relocate in equilibrium based on prices, travel costs and driver congestion levels.

Advice to the Biden administration as it seeks to account for mounting losses from storms, wildfires and other climate impacts.

One of the first executive orders US President Joe Biden signed in January began a process to revise the social cost of carbon (SCC). This metric is used in cost–benefit analyses to inform climate policy. It puts a monetary value on the harms of climate change, by tallying all future damages incurred globally from the emission of one tonne of carbon dioxide now.

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Using high-frequency transaction-level income, spending, balances, and credit limits data from an online financial service, we show that many consumers fail to stick to their self-set debt paydown plans and argue that this behavior is best explained by a model of present bias. Theoretically, we show that (i) a present-biased agent's sensitivity of consumption spending to paycheck receipt reflects his or her short-run impatience and that (ii) this sensitivity varies with available resources only for agents who are aware (sophisticated) rather than unaware (naive) of their future impatience.

The use of order flow information by financial firms has come to the forefront of the regulatory debate. A central question is: Should a dealer who acquires information by taking client orders be allowed to use or share that information? We explore how information sharing affects dealers, clients and issuer revenues in U.S. Treasury auctions. Because one cannot observe alternative information regimes, we build a model, calibrate it to auction results data, and use it to quantify counter-factuals. The model's key force is that sharing information reduces uncertainty about future value.

Despite a recent surge in corporate activism, with firm leaders communicating about social-political issues unrelated to their core businesses, we know little about its strategic implications. This paper examines the effect of an employer communicating a stance about a social-political issue on employee motivation, using a two-phase, pre-registered field experiment in an online labor market platform. Results demonstrate an asymmetric treatment effect of taking a stance depending on whether the employee agrees or disagrees with that stance.

Many service systems are staffed by workers who work in shifts. In this work, we study the dynamic assignment of servers to different areas of a service system at the beginning of discrete time-intervals, i.e., shifts. The ability to reassign servers at discrete intervals, rather than continuously, introduces a partial flexibility that provides an opportunity for reducing the expected waiting time of customers.

Patients whose transfer to the Intensive Care Unit (ICU) is unplanned are prone to higher mortality rates and longer length-of-stay than those who were admitted directly to the ICU. Recent advances in machine learning to predict patient deterioration have introduced the possibility of proactive transfer from the ward to the ICU. In this work, we study the problem of finding robust patient transfer policies which account for uncertainty in statistical estimates due to data limitations when optimizing to improve overall patient care.

Deciding between the use of market orders and limit orders is an important question in practical optimal trading problems. A key ingredient in making this decision is understanding the uncertainty of the execution of a limit order, that is, the fill probability or the probability that an order will be executed within a certain time horizon. Equivalently, one can estimate the distribution of the time-to-fill. We propose a data-driven approach based on a recurrent neural network to estimate the distribution of time-to-fill for a limit order conditional on the current market conditions.

The author proposes a topic model tailored to the study of creative documents (e.g., academic papers, movie scripts), which extends Poisson factorization in two ways. First, the creativity literature emphasizes the importance of novelty in creative industries. Accordingly, this article introduces a set of residual topics that represent the portion of each document that is not explained by a combination of common topics. Second, creative documents are typically accompanied by summaries (e.g., abstracts, synopses).

This Better Marketing for a Better World special issue of the Journal of Marketing is motivated by the gap that remains between what is studied in our field and what is possible. We believe that we still know too little about marketing’s role in improving -- or harming -- our world.

Marketing is the functional area primarily responsible for driving the organic growth of a firm. In the age of digital marketing and big data, marketers are inundated with increasingly rich data from an ever-expanding array of sources. Such data may help marketers generate insights about customers and competitors. One fundamental question remains: How can marketers wrestle massive flows of existing and nascent data resources into coherent, effective growth strategies?

We examine how choice bracketing affects expected value maximization in experience-based choice. Experience-based choices are a series of individual choices made sequentially, for which feedback follows each choice, and are thus naturally bracketed narrowly. Previous research broadly bracketed multiple experience-based choices for decision makers by aggregating the choices (such that each choice pertained to multiple individual choices) or by reducing feedback frequency.

Many research papers in household finance utilize annual snapshots of household wealth from administrative data, such as tax registries, to calculate "imputed consumption." However, trading costs, unobserved intra-year trades, or unobserved security characteristics may cause measurement error. We document how such errors vary across groups of individuals by income, portfolio characteristics, and wealth and how they are correlated with individual income and balance sheets, asset prices, and the business cycle using transaction-level retail brokerage account data.

We develop a flexible content-based search model that links the content preferences of search engine users to query search volume and click-through rates, while allowing content preferences to vary systematically based on the context of a search. Content preferences are defined over latent topics that describe the content of search queries and search result descriptions.

We evaluate the impacts of tax policy on asset returns using the U.S. municipal bond market. In theory, tax-induced ownership segmentation limits risk-sharing, creating downward-sloping regions of the aggregate demand curve for the asset. In the data, cross-state variation in tax privilege policies predicts differences in in-state ownership of local municipal bonds; the policies create incentives for concentrated local ownership. High tax privilege states have muni-bond yields that are more sensitive to variations in supply and local idiosyncratic risk.

Narratives, and other forms of discourse, are powerful vehicles for informing, entertaining, and making sense of the world. But while everyday language often describes discourse as moving quickly or slowly, covering a lot of ground, or going in circles, little work has actually quantified such movements or examined whether they are beneficial.

This research provides a first investigation into how interest-free financing promotions influence consumer behavior. Five experiments demonstrate that framing an economically equivalent financing offer in a way that makes salient that it is interest-free increases consumers’ demand for credit to finance experiential, but not material goods.

Is firm behavior mainly driven by its environment or rather by the characteristics of its managers? We develop a cognitive theory of manager fixed effects, where the allocation of managerial attention determines firm behavior. We show that in complex environments, the endogenous allocation of attention exacerbates manager fixed effects. Small differences in managerial expertise then may result in dramatically different firm behavior, as managers devote scarce attention in a way which amplifies initial differences.

This research highlights how gender shapes consumer payments in pay-what-you-want contexts. Four studies involving hypothetical and real payments show that men typically pay less than women in pay-what-you-want settings, due to gender differences in agentic versus communal orientation. Men approach the payment decision with an agentic orientation, and women approach it with a communal orientation. These orientations then shape payment motives and ultimately affect payment behavior.

Loss aversion, the principle that losses impact decision making more than equivalent gains, is a fundamental idea in consumer behavior and decision making, though its existence has recently been called into question. Across five unique samples (N_total = 17,720), we tested several moderators of loss aversion, which supported a preference construction account. Across studies, more domain knowledge and experience were associated with lower loss aversion, though people of all knowledge and experience levels were loss averse.

Utilizing transaction-level financial data, we explore how household consumption responded to the onset of the COVID-19 pandemic. As case numbers grew and cities and states enacted shelter-in-place orders, Americans began to radically alter their typical spending across a number of major categories. In the first half of March 2020, individuals increased total spending by over 40% across a wide range of categories.

We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding: risk-averse lenders and lack of monetary policy commitment. A government without commitment chooses excessively countercyclical inflation ex post, which leads risk-averse lenders to require a risk premium ex ante.

We cast new light on the influence of pensions on labor supply. To do so, we compare the retention patterns of pension-eligible workers to those of pension-ineligible ones, allowing us to non-parametrically identify the counterfactual in large, administrative data. Pensions exert a retentive force as workers approach the eligibility threshold and apply strong expulsive pressure thereafter (since employees lose pension wealth by remaining employed once eligible).

We study games of incomplete information as both the information structure and the extensive-form vary. An analyst may know the payoff-relevant data but not the players' private information, nor the extenstive-form that governs their play. Alternatively, a designer may be able to build a mechanism from these ingredients. We characterize all outcomes that can arise in an equilibrium of some extensive-form with some information structure.

We analyze methods for selecting topics in news articles to explain stock returns. We find, through empirical and theoretical results, that supervised Latent Dirichlet Allocation (sLDA) implemented through Gibbs sampling in a stochastic EM algorithm will often overfit returns to the detriment of the topic model. We obtain better out-of-sample performance through a random search of plain LDA models. A branching procedure that reinforces effective topic assignments often performs best. We test these methods on an archive of over 90,000 news articles about S&P 500 firms.

A principal faces an agent who is better informed but biased toward higher actions. She can verify the agent's information and specify his permissible actions. We show that if the verification cost is small enough, a threshold with an escape clause (TEC) is optimal: the agent either chooses an action below a threshold or requests verification and the efficient action above the threshold. For higher costs, however, the principal may require verification only for intermediate actions, dividing the delegation set.

Auctions are widely used in practice. While also extensively studied in the literature, most of the developments rely on the significant common prior assumption. We study the design of optimal prior-independent selling mechanisms: buyers do not have any information about their competitors and the seller does not know the distribution of values, but only a general class it belongs to.

There has been extensive discussion about gender gaps in representation and career advancement in the sciences. However, psychological science itself has yet to be the focus of discussion or systematic review, despite our field’s investment in questions of equity, status, well-being, gender bias, and gender disparities. In the present article, we consider 10 topics relevant for women’s career advancement in psychological science.

We examine a Query Theory account of risky choice framing effects — when risky choices are framed as a gain, people are generally risky averse but, when an equivalent choice is framed as a loss, people are risk seeking. Consistent with Query Theory, frames affected the structure of participants’ arguments: gain frame participants listed arguments favoring the certain option earlier and more often than loss frame participants. These argumentative shifts mediated framing effects; manipulating participants initial arguments attenuated them.

Current accounting practice expenses many investments in intangible assets to the income statement, confusing earnings from current revenues with investments to gain future revenues. This has led to increasing calls to book those investments to the balance sheet. Drawing on the relevant research, this paper proposes solutions for the accounting for intangible assets that contrast with balance sheet recognition, and compares them to current practice and the IFRS standards that dictate practice.

Common wisdom holds that uncertainty impedes trade—yet we show that uncertainty can fuel more trade in a simple general equilibrium trade model with information frictions. In equilibrium, increases in uncertainty increase both the mean and variance in returns to exporting. This implies that trade can increase or decrease with uncertainty, depending on preferences. Under general conditions on preferences, we characterize the importance of these forces using a sufficient statistics approach.