Breaking the Cycle: How the News and Markets Created a Negative Feedback Loop in COVID-19
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
New research from CBS Professor Harry Mamaysky reveals how negativity in the news and markets can escalate a financial crisis.
Adapted from “Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments,” by Laura Boudreau of Columbia Business School, Julia Cajal Grossi of the Geneva Graduate Institute, and Rocco Macchiavello of the London School of Economics.
Adapted from “Online Advertising as Passive Search,” by Raluca M. Ursu of New York University Stern School of Business, Andrey Simonov of Columbia Business School, and Eunkyung An of New York University Stern School of Business.
This paper from Columbia Business School, “Meaning of Manual Labor Impedes Consumer Adoption of Autonomous Products,” explores marketing solutions to some consumers’ resistance towards autonomous products. The study was co-authored by Emanuel de Bellis of the University of St. Gallen, Gita Johar of Columbia Business School, and Nicola Poletti of Cada.
Co-authored by John B. Donaldson of Columbia Business School, “The Macroeconomics of Stakeholder Equilibria,” proposes a model for a purely private, mutually beneficial financial agreement between worker and firm that keeps decision-making in the hands of stockholders while improving the employment contract for employees.
At Columbia Business School, our faculty members are at the forefront of research in their respective fields, offering innovative ideas that directly impact the practice of business today. A quick glance at our publication on faculty research, CBS Insights, will give you a sense of the breadth and immediacy of the insight our professors provide.
As a student at the School, this will greatly enrich your education. In Columbia classrooms, you are at the cutting-edge of industry, studying the practices that others will later adopt and teach. As any business leader will tell you, in a competitive environment, being first puts you at a distinct advantage over your peers. Learn economic development from Ray Fisman, the Lambert Family Professor of Social Enterprise and a rising star in the field, or real estate from Chris Mayer, the Paul Milstein Professor of Real Estate, a renowned expert and frequent commentator on complex housing issues. This way, when you complete your degree, you'll be set up to succeed.
Columbia Business School in conjunction with the Office of the Dean provides its faculty, PhD students, and other research staff with resources and cutting edge tools and technology to help push the boundaries of business research.
Specifically, our goal is to seamlessly help faculty set up and execute their research programs. This includes, but is not limited to:
All these activities help to facilitate and streamline faculty research, and that of the doctoral students working with them.
We develop a financial-economic model for carbon pricing with an explicit representation of decision making under risk and uncertainty that is consistent with the Intergovernmental Panel on Climate Change’s sixth assessment report. We show that risk associated with high damages in the long term leads to stringent mitigation of carbon dioxide emissions in the near term, and find that this approach provides economic support for stringent warming targets across a variety of specifications.
We consider a New Keynesian model with strategic monetary and fiscal interactions. The fiscal authority maximizes social welfare. Monetary policy is delegated to a central bank with an anti-inflation bias that suffers from a lack of commitment. The impact of central bank hawkishness on debt issuance is non-monotonic because increased
We consider a New Keynesian model with strategic monetary and fiscal interactions. The fiscal authority maximizes social welfare. Monetary policy is delegated to a central bank with an anti-inflation bias that suffers from a lack of commitment. The impact of central bank hawkishness on debt issuance is non-monotonic because increased
The United States recently passed major federal laws supporting the energy transition, and analyses suggest that their successful implementation could reduce US emissions more than 40% below 2005 levels by 2030. However, achieving maximal emissions reductions would require frictionless supply and demand responses to the laws’ incentives and implementation that avoids polarization and efforts to repeal or undercut them. In this Perspective, we discuss some of these supply, demand and polarization challenges.
‘Moral hazard’ links geoengineering to mitigation via the fear that either solar geoengineering (solar radiation management, SRM) or carbon dioxide removal (CDR) might crowd out the desire to cut emissions. Fear of this crowding-out effect ranks among the most frequently cited risks of (solar) geoengineering. We here test moral hazard versus its inverse in a large-scale, revealed-preference experiment (n~340,000) on Facebook and find little to no support for either outcome. For the most part, talking about SRM or CDR does not motivate our study population to support a large U.S.
How much will it cost to meaningfully reduce greenhouse gas (GHG) emissions on a global scale? The answer is critical for assessments of how to address climate change—affecting public support, political will, and policy choices. We find that the “bottom-up” estimation approach emphasized by the United Nations Intergovernmental Panel on Climate Change (IPCC) reports considerably lower costs for emission reductions than leading “top-down” economic models.
Routines shape many aspects of day-to-day consumption. While prior work has established the importance of habits in consumer behavior, little work has been done to understand the implications of routines — which we define as repeated behaviors with recurring, temporal structures — for customer management. One reason for this dearth is the difficulty of measuring routines from transaction data, particularly when routines vary substantially across customers. We propose a new approach for doing so, which we apply in the context of ridesharing.
There is a consensus that global value chains have aided developing countries' growth. This essay highlights the governance complexities arising from participating in such chains, drawing from lessons we have learned conducting research in the coffee and garment supply chains. Market power of international buyers can lead to inefficiently low wages, prices, quality standards, and poor working conditions. At the same time, some degree of market power might be needed to sustain long-term supply relationships that are beneficial in a world with incomplete contracts.
We study a regulation in Chile that mandates warning labels on products whose sugar or caloric concentration exceeds certain thresholds.We show that consumers substitute from labeled to unlabeled products—a pattern mostly driven by products that consumers mistakenly believe to be healthy. On the supply side, we find substantial reformulation of products and bunching at the thresholds.
To study the impacts of NewYork’s 2018 Paid Family Leave (PFL) policy on employer outcomes, we designed and fielded a survey of small firms in NewYork and a control state, Pennsylvania, which does not have a PFL policy. We match each NY firm to a comparable PA firm and use difference-in-differences models to analyze within-match-pair changes in outcomes. Contrary to common concerns about the burdens of PFL on employers, we find no evidence that PFL had any adverse impacts on employer ratings of employee performance or their ease of handling long employee absences.
How does protecting the privacy of consumers affect the value of their personal data? We model an intermediary that uses consumers' data to influence the price set by a seller. When privacy is protected, consumers choose whether to disclose their data to the intermediary. When privacy is not protected, the intermediary can access consumers' data without their consent. We illustrate that protecting consumers' privacy has complex effects. It can increase the value of some consumers' data while decreasing that of others.
This article reviews the evidence on the impacts of paid family and medical leave (PFML) policies on workers’ health, family well-being, and employer outcomes. While an extensive body of research demonstrates the mostly beneficial effects of PFML taken by new parents on infant, child, and parental health, less is known about its impact on employees who need leave to care for older children, adult family members, or elderly relatives. The evidence on employers is similarly limited but indicates that PFML does not impose major burdens on them.
Many e-commerce platforms use buyers' personal data to intermediate their transactions with sellers. How much value do such intermediaries derive from the data record of each single individual? We characterize this value and find that one of its key components is a novel externality between records, which arises when the intermediary pools some records to withhold the information they contain. Ignoring this can significantly bias the evaluations of data records.
How does task expertise affect the allocation of attention?
Moral hazards are ubiquitous. Green ones typically involve technological fixes: Environmentalists often see ‘technofixes’ as morally fraught because they absolve actors from taking more difficult steps toward systemic solutions. Carbon removal and especially solar geoengineering are only the latest example of such technologies. We here explore green moral hazards throughout American history. We argue that dismissing (solar) geoengineering on moral hazard grounds is often unproductive.
We study a fiscal policy model in which the government is present-biased towards public spending. Society chooses a fiscal rule to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to privately observed shocks to the value of spending. Unlike prior work, we examine rules under limited enforcement: the government has full policy discretion and can only be incentivized to comply with a rule via the use of penalties which are joint and bounded. We show that optimal incentives must be bang-bang.
Introduction for Special Issue in Honor of Martin Weitzman.
We consider optimal government debt maturity in a deterministic economy in which the government can issue any arbitrary debt maturity structure and in which bond prices are a function of the government's current and future primary surpluses. The government sequentially chooses policy, taking into account how current choices - which impacts future policy -- feed back into current bond prices. We show that issuing consols constitutes the unique stationary optimal debt portfolio, as it boosts government credibility to future policy and reduces the debtfinancing costs.
We analyze a model of hierarchies in organizations in which neither decisions nor the delegation of decisions is contractible and in which power-hungry agents derive a private benefit from making decisions. Two distinct agency problems arise and interact: subordinates make more biased decisions (which favors adding more hierarchical layers), but uninformed superiors may fail to delegate (which favors removing layers). A designer may remove intermediate layers of the hierarchy (eliminate middle managers) or flatten an organization by removing top layers (eliminate top managers).
We explore the relationship between the volatility of a firm's local environment and its organizational structure. Using micro-level data on managers working for a large retailer, we empirically test and provide support for our theory that a more volatile local environment results in more decentralization only when the need for coordination among sub-units is low. In contrast, more local volatility is associated with more centralization when coordination needs are high.
We argue that economists have studied the role of management from three perspectives: contingency theory (CT), an organization-centric empirical approach (OC), and a leader-centric empirical approach (LC). To reconcile these three perspectives, we augment a standard dynamic firm model with organizational capital, an intangible, slow-moving, productive asset that can be produced only with the direct input of the firm’s leadership and that is subject to an agency problem.
We argue that economists have studied the role of management from three perspectives: contingency theory (CT), an organization-centric empirical approach (OC), and a leader-centric empirical approach (LC). To reconcile these three perspectives, we augment a standard dynamic firm model with organizational capital, an intangible, slow-moving, productive asset that can be produced only with the direct input of the firm’s leadership and that is subject to an agency problem.
The United States is one of the few countries that does not guarantee paid family leave (PFL) to workers. Proposals for PFL legislation are often met with opposition from employer organizations, which fear disruptions to business, especially among small employers. But there are limited data on employers’ views. The authors surveyed firms with 10 to 99 employees in New York and New Jersey on their attitudes toward PFL programs before and during the coronavirus disease 2019 (COVID-19) pandemic.
The social cost of nitrous oxide does not account for stratospheric ozone depletion. Doing so could increase its value by 20%. Links between nitrous oxide and other nitrogen pollution impacts could make mitigation even more compelling.
As the prospect of average global warming exceeding 1.5°C becomes increasingly likely, interest in supplementing mitigation and adaptation with solar geoengineering (SG) responses will almost certainly rise. For example stratospheric aerosol injection to cool the planet could offset some of the warming for a given accumulation of atmospheric greenhouse gases (1). However, the physical and social science literature on SG remains modest compared with mitigation and adaptation.
Hotter temperature can reduce labor productivity, work hours, and labor income. The effects of heat are likely to be a joint consequence of both exposure and vulnerability. Here we explore the impacts of heat on labor income in the US, using regional wealth as a proxy for vulnerability. We find that one additional day >32 °C (90 °F) lowers annual payroll by 0.04%, equal to 2.1% of average weekly earnings. Accounting for humidity results in slightly more precise estimates.
Climate scientists have long emphasized the importance of climate tipping points like thawing permafrost, ice sheet disintegration, and changes in atmospheric circulation. Yet, save for a few fragmented studies, climate economics has either ignored them or represented them in highly stylized ways. We provide unified estimates of the economic impacts of all eight climate tipping points covered in the economic literature so far using a meta-analytic integrated assessment model (IAM) with a modular structure.
This paper studies lockdown policy in a dynamic economy without government commitment. Lockdown imposes a cap on labor supply, which improves health prospects at the cost of economic output and consumption. A government would like to commit to the extent of future lockdowns in order to guarantee an economic outlook that supports efficient levels of investment into intermediate inputs. However, such a commitment is not credible, since investments are sunk at the time when the government chooses a lockdown. As a result, lockdown under lack of commitment deviates from the optimal policy.
This paper studies lockdown policy in a dynamic economy without government commitment. Lockdown imposes a cap on labor supply, which improves health prospects at the cost of economic output and consumption. A government would like to commit to the extent of future lockdowns in order to guarantee an economic outlook that supports efficient levels of investment into intermediate inputs. However, such a commitment is not credible, since investments are sunk at the time when the government chooses a lockdown. As a result, lockdown under lack of commitment deviates from the optimal policy.
We estimated the effects of information avoidance and information seeking among parents of children diagnosed with ASD on age of diagnosis. An online survey was completed by 1,815 parents of children with ASD. Children of parents who self-reported that they had preferred "not to know," reported diagnoses around 3 months later than other children.
Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their true economic location in official statistics. We associate the universe of traded securities issued by firms in tax havens with their issuer’s ultimate parent and restate bilateral investment positions to better reflect the financial linkages connecting countries around the world. Bilateral portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought.
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.
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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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.
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.
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.
Companies that freeze defined benefit pension plans save the equivalent of 13.5% of the long-horizon payroll of current employees. Furthermore, firms with higher prospective accruals are more likely to freeze their plans. Cost savings would not be possible in a benchmark model in which i) all workers receive compensation equal to their marginal product and ii) workers value equally all identical-cost forms of pension benefits.
Climate change has myriad physical and economic impacts. Even those that can be easily quantified indicate the need for ambitious climate action. Other climate impacts have yet to be quantified. We argue here that uncertainties in climate and weather extremes only further increase the social cost of carbon emissions.
The Centers for Medicare & Medicaid Services (CMS) and the National Quality Forum have endorsed the 30-day mortality rate as an important indicator of hospital quality. Concerns have been raised, however, as to whether post-discharge mortality rates are reasonable measures of hospital quality as they consider the frequency of an event that occurs after a patient is discharged and no longer under the watch and care of hospital staff. Estimating the causal effect of length-of-stay (LOS) on post-discharge mortality from retrospective data introduces a number of econometric challenges.
China and the United States are the two largest emitters of greenhouse gases, making them pivotal players in global climate negotiations. Within the coming decade, however, India is set to become the most important counterpart to the United States, as it overtakes China as the country with the most at stake depending on the type of global burden-sharing agreements reached, thus becoming a member of the ‘Climate G2’.
What does utility maximization subject to a budget constraint imply for intertemporal choice under uncertainty? Assuming consumers face a two period consumption-portfolio problem where asset markets are incomplete, we address this question following both the standard local infinitesimal and finite data approaches. To focus on the separate roles of time and risk preferences, individuals maximize KPS (Kreps-Porteus-Selden) preferences. The consumption-portfolio problem is decomposed into a one period portfolio problem and a two period certainty consumption-saving problem.
Cryptocurrencies provide an important dimension of innovation to the evolution of the exchange medium we call money. There are now over 2,000 such currencies, and their potential and volume is growing. How- ever, they will, collectively and in volume, create real problems for the monetary system of a country. Central banks, which are institutions tasked with providing monetary stability, are more essential than ever.
The Emerging Video Cloud System
Few questions are fraught with more long-term implications than the way we shape our communications system. If the medium is indeed the message, and if these messages influence people and institutions, then tomorrow’s media, and today’s media policies, will govern future society, culture, and economy.
Although the gender wage gap in the U.S. has narrowed, women's career trajectories diverge from men's after the birth of children, suggesting a potential role for family-friendly policies. We provide new evidence on employer provision of these policies. Using the American Time Use Survey, we find that women are less likely than men to have access to any employer-provided paid leave and this differential is entirely explained by part-time status. Using the NLSY97, we find that young women are more likely to have access to specifically designated paid parental leave, even in part-time jobs.
We test the hypothesis that the arrival of new medical ideas played a major role in the long-run increase in US cancer survival and decline in cancer mortality, by investigating whether the types of cancer (breast, colon, lung, etc.) subject to greater penetration of new ideas, measured using the MEDLINE/PubMED database, had larger subsequent survival gains and mortality reductions, controlling for changing incidence.
Pricing greenhouse-gas (GHG) emissions involves making tradeoffs between consumption today and unknown damages in the (distant) future. While decision making under risk and uncertainty is the forte of financial economics, important insights from pricing financial assets do not typically inform standard climate–economy models. Here, we introduce EZ-Climate, a simple recursive dynamic asset pricing model that allows for a calibration of the carbon dioxide (CO2) price path based on probabilistic assumptions around climate damages.
Background: We analyzed the role that the launch of new drugs has played in reducing the number of years of life lost (YLL) before three different ages (85, 70 and 55 y) due to 66 diseases in 27 countries.
Methods: We estimated two-way fixed-effects models of the rate of decline of the disease- and countryspecific age-standardized YLL rate. The models control for the average decline in the YLL rate in each country and from each disease.