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 present a model of nonprofit governance built on two assumptions: (1) organizations wish to hold precautionary savings in order to smooth expenditures; and (2) it is relatively easy for managers to divert these funds for personal use. Hence, donors face a trade off between expenditure smoothing and donation dissipation.We examine the model's predictions using panel data on U.S. nonprofits.
While recent research has emphasized the desirability of studying effects of changes in marginal tax rates on taxable income, broadly defined, there has been comparatively little analysis of effects of marginal tax rate changes on entrepreneurial entry. This margin is likely to be important both because of the likely greater elasticity of entrepreneurial decisions with respect to tax changes (relative to decisions about hours worked) and because of recent research linking entrepreneurship, mobility, and household wealth accumulation.
We perform an econometric analysis of the effect of new drug launches on longevity, using data from the IMS Health Drug Launches database and the WHO Mortality Database.
Does country transparency affect international portfolio investment? We examine this question by constructing new measures of transparency and by making use of a unique microdata set on portfolio holdings of emerging market funds around the world. We distinguish between government and corporate transparency. There is clear evidence that funds systematically invest less in less transparent countries. Moreover, funds have a greater propensity to exit nontransparent countries during crises.
We analyze the Pareto optimal contracts between lenders and borrowers in a model with asymmetric information. The model generalizes the Rothschild-Stiglitz pure adverse selection problem by including moral hazard. Entrepreneurs with unequal "abilities" borrow to finance alternative investment projects which differ in degree of risk and productivity. We determine the endogenous distribution of projects as functions of the amount of loanable funds, when lenders have no information about borrowers' ability and technological choices.
Teacher quality is widely believed to be important for education, depsite substantial but inconsistent evidence that teachers' credentials matter for student achievement. To accurately measure variation in achievement due to teachers' characteristics—both observable and unobservable—it is essential to identify teacher fixed effects while controlling for fixed student characteristics and classroom specific variables.
Griliches' 1994 presidential address considers the limited success economists had in trying to account for the productivity slowdown of the 1970s and 1980s and "urges us toward the task of observation and measurement." In the 1990s, the high rates of productivity growth emphasized the need for new models of productivity, this time turning to estimating organization-level determinants of productivity focusing on businesses' use of new computer-based information technologies (IT), and new methods of work organization (Timothy Bresnahan et al., 2002).
The question of whether higherlifetime income households save a larger fraction of their income was the subject of much debate in the 1950s and 1960s, and while not resolved, it remains central to the evaluation of tax and macroeconomic policies. We resolve this long-standing question using new empirical methods applied to the Panel Study of Income Dynamics, the Survey of Consumer Finances, and the Consumer Expenditure Survey.
This paper articulates and applies frameworks for examining whether consumption is excessive. We consider two criteria for the possible excessiveness (or insufficiency) of current consumption. One is an intertemporal utility-maximization criterion: actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility. The other is a sustainability criterion, which requires that current consumption be consistent with non-declining living standards over time.
One of the most controversial aspects of globalization is capital-market liberalization - not so much the liberalization of rules governing foreign direct inveestment, but those affecting short-term capital flows, speculative hot capital that can come into and out of the country. In the 1980s and 1990s, the IMF and the U.S.
In recent years there have been enormous changes in our technology, our economy, and our society. But has there been progress? From most economists the first reaction to this question is: Of course there must have been progress! After all, the growth of new technologies expands opportunity sets, what we can do, the amount of output per unit input. We can choose either to have more output, more goods and services, or to work less. However we make the choice, surely we are better off. But what, then, about the sweeping changes we associate with the phenomenon of globalization?
Studies of the relationship between human resource management and establishment performance have heretofore focused on the manufacturing sector. Using a unique longitudinal dataset collected through site visits to branch operations of a large bank, the author extends that research to the service sector. Because branch managers had considerable discretion in managing their operations and employees, the HRM environment could vary greatly across branches and over time. Site visits provided specific examples of managerial practices that affected branch performance.
The research for which George Akerlof, Mike Spence, and I are being recognized is part of a larger research program which, today, embraces hundreds, perhaps thousands, of researchers around the world. In this lecture, I want to set the particular work which was sited within this broader agenda, and that agenda within the broader perspective of the history of economic thought. I hope to show that Information Economics represents a fundamental change in the prevailing paradigm within economices.
The telecommunications industry is a fragmented market, characterized by a tremendous amount of customer heterogeneity. This paper shows how such customer heterogeneity dramatically affects nonlinear pricing strategies: (i) First, if there are unbalanced calling patterns between different customer types, networks make larger profits on the least attractive customers. In addition, the nature of the calling pattern substantially affects how networks discriminate implicitly between different customer types.
Tax evasion, by its very nature, is difficult to observe. We quantify the effects of tax rates on tax evasion by examining the relationship in China between the tariff schedule and the "evasion gap," which we define as the difference between Hong Kong's reported exports to China at the product level and China's reported imports from Hong Kong. Our results imply that a one-percentage-point increase in the tax rate is associated with a 3 percent increase in evasion.
While today it is recognized that globalization may have adverse effects on particular groups, in this essay, I want to set forth some of the reasons why globalization, when not managed well, may actually be adverse to overall economic growth, and the ability of countries to take advantage of the advances associated with the New Economy. Not just the poor may suffer. There are several channels through which the adverse effects may run.
Something is wrong with the global financial system. One might think the system would shift money from rich countries, where capital is in abundance, to those where it is scarce, while transferring risk from poor countries to rich ones, which are most able to bear it. A well-functioning global financial system would provide money to countries in their times of need, thereby contributing to global economic stability.
Much has been said about the failing policies of the International Monetary Fund (IMF). In this essay, I attempt to explain why the IMF has pursued policies that in many cases not only failed to promote the stated objectives of enhancing growth and stability, but were probably counterproductive and even flew in the face of a considerable body of theoretical and empirical work that suggested these policies would be counterproductive. I argue that the root of the problem lies in the IMF's system of governance.
This essay concerns the process of globalization, the integration of economies around the world which has put new demands on nation-states at the very same time that, in many ways, it has reduced their capacities to deal with those demands. The nation-state today is squeezed, on the one side, by the forces of global economics and, on the other side, by the political demands for devolution of power.
Previous research, assuming linear pricing, has argued that telecommunications networks may use a high access charge as an instrument of collusion. I show that this conclusion is difficult to maintain when operators compete in nonlinear pricing: (i) As long as subscription demand is inelastic, profits can remain independent of the access charge, even when customers are heterogeneous and networks engage in second-degree price discrimination.
This paper analyzes the effects of tax policy on the strategic choices of multinationals and on national welfare. Contrary to existing theory, in the absence of foreign taxation, deferral of home-country taxation until earnings on outbound FDI are repatriated is generally superior to including those earnings in current income. This holds even if the home country taxes domestic investment less generously. This is also generally superior to exempting foreign income.
This paper examines the effects of the Tax Reform Act of 1986 on the international location decisions of U.S. financial services firms. The Act included rule changes that made it substantially more difficult for U.S. firms to defer U.S. taxes on overseas financial services income held in low-tax jurisdictions. We use information from the tax returns of U.S. corporations to examine how local taxes affect the allocation of financial assets held abroad by financial services firms.
We use a matched sample of individual loans, borrowers, and banks to investigate the effect of banks' financial health on the cost of loans, controlling for borrower risk and information costs. Our principal finding is that low-capital banks tend to charge higher loan rates than well-capitalized banks. This effect is primarily associated with firms for which information costs are likely to be important, and, when borrowing from weak banks, these firms tend to hold more cash.
This paper studies the delegation as an alternative to communication. We show that a principal prefers to delegate control to a better informed agent rather than to communicate with this agent as long as the incentive conflict is not too large relative to the principal's uncertainty about the environment. We further identify cases in which the principal optimally delegates control to an "intermediary," and show that keeping a veto-right typically reduces the expected utility of the principal unless the incentive conflict is extreme.
In their paper, Sydney Ludvigson, Charles Stendel, and Martin Lettau examine empirically the narrow but important issue of to what extent monetary policy affects consumer spending by altering the aggregate value of wealth. Here, I first comment on the paper itsef, then discuss implications for the broader question of whether the wealth effect is important (independent of monetary policy), and then suggest some avenues for future research.
In this paper we argue that allowing for uncertainty resolves the controversy over the importance of life-cycle and bequest saving by showing that these motives for saving are overlapping and cannot generally be distinguished.
This paper argues that the use of monetary policy in response to the Asian financial crisis worsened the economic downturn and contributed to global economic instability, that we have spent too little time thinking about the behavior of the international economic and financial institutions given the important role that they play in the global economy and that reforms are needed to return the IMF to its original mandate of focusing on global financial stability.
This paper examines the consequences of capital market liberalization, with special reference to its effects under different exchange rate regimes. Capital market liberalization has not lead to faster growth in developing countries, but has led to greater risks. It describes how International Monetary Fund policies have exacerbated the risks, as a result of the macro-economic response to crises, with bail-out packages that have intensified moral hazard problems. The paper provides a critique of the arguments for capital market liberalization.
This article aims to explain how standard economic theory—reflected in much of the popular policy folklore— has served to undermine the above propositions or runs counter to them. The first section shows how policies based on a neoclassical view of the labour market ultimately weaken workers' bargaining position because of pervasive market failures.
The advances in the economics of the public sector during the past quarter century have been as pronounced as in any field within economics. Public finance has become a rigorous branch of applied microeconomics, incorporating the best thinking and most advanced tools of both theoretical economics and econometrics.
This paper investigates the relationship between economic and social development. Contrary to the view of those who believe in the existence of a tradeoff between democracy and growth, the paper contends that consensus-building, open dialog and the promotion of an active civil society are key ingredients to long-term sustainable development. Development is a participatory process. "Best practices" or reforms that are imposed on a country through conditionality may very well fail to produce lasting change.
Medicare, which provides health insurance to Americans over the age of 65 and to Americans living with disabilities, is one of the government's largest social programs. It accounts for 12 percent of federal on- and off-budget outlays, and in fiscal year 1999, $212 billion in Medicare benefits were paid. The largest shares of spending are for inpatient hospital services (48 percent) and physician services (27 percent). In thirty years, the number of Americans covered by Medicare will nearly double to 77 million, or 22 percent of the U.S. population.
We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors? implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S.
We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S.
The seemingly quick global recovery from the Asian financial crisis and its limited effect on industrial countries produced far less sould searching about capitalism's basic principles than the Great Depression. The author argues that the global economic arrangements were inadequate in both instances and that the IMF requires serious reform to ensure a more stable global economic environment.
The paper "Whence Reform?" by the Polish economists Marek Dabrowski, Stanislaw Gomulka, and Jacek Rostowski (DGR) is a welcome and revealing commentary on what is called the "Stiglitz Perspective." Our main response is gratitude at DGR's agreement with the main theses of "Whither Reform?" such as the critiques of voucher privatization and of the attempts to quickly install institutional reforms involving long agency chains. Our positions are not poles apart.
Economists seeking explanations for the global financial crisis of 1997-99 are reaching consensus that a major factor was weak financial institutions, which resulted in part from inadequate government regulations. At the same time many developing countries are struggling with an overregulated financial system - one that stifles innovation and the flow of credit to new entrepreneurs and that can stunt the growth of well-established firms. In particular, too many countries are relying excessively on capital adequacy standards, which are inefficient and sometimes counterproductive.