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  • 2021
  • Working Paper

Financial Flexibility and Corporate Employment
By: Rebecca Lester, Ethan Rouen and Braden Williams
We study the role of financial flexibility on COVID-19 employment actions. Using daily data from March through May 2020 for 354 of the largest U.S. employers, we find that firms facing a negative demand shock were 28.8 percentage points more likely to reduce their...  View Details
Keywords: Financial Flexibility; COVID-19; Pandemic; Employment; Health Pandemics; System Shocks; Finance
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  • March 2021
  • Article

On the Direct and Indirect Real Effects of Credit Supply Shocks
By: Laura Alfaro, Manuel García-Santana and Enrique Moral-Benito
We explore the real effects of bank-lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all Spanish firms with a matched bank-firm-loan dataset of all corporate loans from 2003 to 2013 to estimate...  View Details
Keywords: Credit Supply Shocks; Bank Lending Channel; Input-output Linkages; Output; Mechanisms; Trade Credits; Price Effects; Economics; Credit; System Shocks; Employment; Investment; Spain
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  • February 2021
  • Article

Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers During the Great Recession
By: S. Bernstein, T. McQuade and R. Townsend
We investigate how the deterioration of household balance sheets affects worker productivity, and, in turn, economic downturns. Specifically, we compare the output of innovative workers who experienced differential declines in housing wealth during the financial crisis...  View Details
Keywords: Great Recession; Household; Financial Condition; System Shocks; Employees; Performance Productivity
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  • January 2021
  • Article

Turbulence, Firm Decentralization and Growth in Bad Times
By: Philippe Aghion, Nicholas Bloom, Brian Lucking, Raffaella Sadun and John Van Reenen
What is the optimal form of firm organization during “bad times”? We present a model of delegation within the firm to show that the effect is ambiguous. The greater turbulence following macro shocks may benefit decentralized firms because the value of local information...  View Details
Keywords: Decentralization; Growth; Turbulence; Great Recession; Organizational Design; System Shocks; Economic Growth; Performance
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  • November 2020
  • Teaching Note

Unrest in Chile
By: Vincent Pons, John Masko, Rafael Di Tella and William Mullins
In 2020, Chileans would head to the ballot box to decide their country’s future. Many international observers credited Chile’s decades of neoliberal governance with turning the country into Latin America’s “Tiger,” a prosperous, diversified economy on its way to...  View Details
Keywords: Developing Countries and Economies; Macroeconomics; Economy; Political Elections; Public Opinion; Social Issues; Equality and Inequality; System Shocks; Chile; Latin America
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  • 2020
  • Working Paper

An Executive Order Worth $100 Billion: The Impact of an Immigration Ban's Announcement on Fortune 500 Firms' Valuation
By: Dany Bahar, Prithwiraj Choudhury and Britta Glennon
On June 22, 2020, President Trump issued an Executive Order (EO) that suspended new work visas, barring nearly 200,000 foreign workers and their dependents from entering the United States and preventing American companies from hiring skilled immigrants using H-1B or L1...  View Details
Keywords: Visa; Foreign Workers; Fortune 500; Immigration; Policy; System Shocks; Business Ventures; Valuation
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  • Fall 2020
  • Article

Sizing Up Corporate Restructuring in the COVID Crisis
By: Robin Greenwood, Benjamin Iverson and David Thesmar
In the wake of the COVID-19 pandemic, the financial and legal system will need to deal with a surge of financial distress in the business sector. Some firms will be able to survive, while others will face bankruptcy and thus need to be liquidated or reorganized. Many...  View Details
Keywords: COVID-19; Health Pandemics; Economy; System Shocks; Financial Crisis; Restructuring
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  • Summer 2020
  • Article

Is It Time to Rethink Globalized Supply Chains?: The COVID-19 Pandemic Should Be a Wake-up Call for Managers and Prompt Them to Consider Actions That Will Improve Their Resilience to Future Shocks
By: Willy C. Shih
The COVID-19 pandemic has exposed the complex interdependencies of globalized supply chains. While these global multistage production networks had spread during a relatively benign environment of falling trade barriers and increasing interdependencies among countries,...  View Details
Keywords: Supply Chains; Pandemic; Resilience; Supply Chain Management; Supply Chain; Global Range; Health Pandemics; Disruption; System Shocks; Crisis Management; Manufacturing Industry; United States; Asia; Europe; China
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  • 2020
  • Working Paper

Optimal Illiquidity
By: John Beshears, James J. Choi, Christopher Clayton, Christopher Harris, David Laibson and Brigitte C. Madrian
We calculate the socially optimal level of illiquidity in an economy populated by households with taste shocks and present bias (Amador, Werning, and Angeletos 2006). The government chooses mandatory contributions to respective spending/savings accounts, each with a...  View Details
Keywords: Illiquidity; Social Security; Econometric Models
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  • 2020
  • Working Paper

EMEs and COVID-19: Shutting Down in a World of Informal and Tiny Firms
By: Laura Alfaro, Oscar Becerra and Marcela Eslava
Emerging economies are characterized by an extremely high prevalence of informality, small-firm employment and jobs not fit for working from home. These features factor into how the COVID-19 crisis has affected the economy. We develop a framework that, based on...  View Details
Keywords: COVID-19; Emerging Economies; Informality; Firm-size Distribution; Health Pandemics; Developing Countries and Economies; Economy; System Shocks; Latin America
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  • April 2020 (Revised July 2020)
  • Case

Unrest in Chile
By: Vincent Pons, William Mullins, John Masko, Annelena Lobb and Rafael Di Tella
In 2020, Chileans would head to the ballot box to decide their country’s future. Many international observers credited Chile’s decades of neoliberal governance with turning the country into Latin America’s “Tiger,” a prosperous, diversified economy on its way to...  View Details
Keywords: Developing Countries and Economies; Macroeconomics; Economy; Political Elections; Public Opinion; Social Issues; Equality and Inequality; System Shocks; Chile; Latin America
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  • 2021
  • Working Paper

Local Shocks and Internal Migration: The Disparate Effects of Robots and Chinese Imports in the U.S.
By: Marius Faber, Andres Sarto and Marco Tabellini
Migration has long been considered one of the key mechanisms through which labor markets adjust to economic shocks. In this paper, we analyze the migration response of American workers to two of the most important shocks that hit US manufacturing since the late 1990s —...  View Details
Keywords: Migration; Employment; Technology; Trade; System Shocks; United States
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  • 2019
  • Article

More Amazon Effects: Online Competition and Pricing Behaviors
By: Alberto Cavallo
I study how online competition, with its shrinking margins, algorithmic pricing technologies, and the transparency of the web, can change the pricing behavior of large retailers in the U.S. and affect aggregate inflation dynamics. In particular, I show that in the past...  View Details
Keywords: Amazon; Online Prices; Inflation; Uniform Pricing; Price Stickiness; Monetary Economics; Economics; Macroeconomics; Inflation and Deflation; System Shocks; United States
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  • May 2019
  • Article

Corporate Debt, Firm Size and Financial Fragility in Emerging Markets
By: Laura Alfaro, Gonzalo Asis, Anusha Chari and Ugo Panizza
The post-Global Financial Crisis period shows a surge in corporate leverage in emerging markets and a number of countries with deteriorated corporate financial fragility indicators (Altman’s Z-score). Firm size plays a critical role in the relationship between...  View Details
Keywords: Corporate Debt; Firm Size; Financial Fragility; Emerging Market; Organizations; Borrowing and Debt; Financial Condition; Emerging Markets; System Shocks
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  • 2019
  • Working Paper

Labor Market Shocks and the Demand for Trade Protection: Evidence from Online Surveys
By: Rafael Di Tella and Dani Rodrik
We study preferences for government action in response to layoffs resulting from different types of labor-market shocks. We consider the following shocks: technological change, a demand shift, bad management, and three kinds of international outsourcing. Respondents...  View Details
Keywords: Labor; Markets; System Shocks; Trade; Attitudes; Surveys
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  • 2017
  • Working Paper

The Effectiveness of White-Collar Crime Enforcement: Evidence from the War on Terror
By: Trung Nguyen
This paper studies the deterrent effect of criminal enforcement on white-collar criminal activities. Using the 9/11 terrorist attacks as a shock to the FBI’s allocation of investigative resources and priorities, and variations in the Muslim population in the United...  View Details
Keywords: Regulation; Fraud; White-collar Crime; Enforcement; Crime and Corruption; Law Enforcement; System Shocks
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  • 2018
  • Book

A Crisis of Beliefs: Investor Psychology and Financial Fragility
By: Nicola Gennaioli and Andrei Shleifer
The collapse of Lehman Brothers in September 2008 caught markets and regulators by surprise. Although the government rushed to rescue other financial institutions from a similar fate after Lehman, it could not prevent the deepest recession in postwar history. A...  View Details
Keywords: Financial Fragility; Economic Risk; Investor Behavior; Behavioral Economics; Financial Crisis; Risk and Uncertainty; Financial Markets; Investment; Values and Beliefs; United States
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  • September 2018
  • Article

Asset Price Dynamics in Partially Segmented Markets
By: Robin Greenwood, Samuel G. Hanson and Gordon Y. Liao
We develop a model in which capital moves quickly within an asset class but slowly between asset classes. While most investors specialize in a single asset class, a handful of generalists can gradually reallocate capital across markets. Upon the arrival...  View Details
Keywords: System Shocks; Asset Pricing
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  • 2017
  • Working Paper

The Decline of Big-Bank Lending to Small Business: Dynamic Impacts on Local Credit and Labor Markets
By: Brian S. Chen, Samuel G. Hanson and Jeremy C. Stein
Small business lending by the four largest banks fell sharply relative to others in 2008 and remained depressed through 2014. We explore the dynamic adjustment process following this credit supply shock. In counties where the largest banks had a high market share, the...  View Details
Keywords: Small Business; Financing and Loans; Banks and Banking; System Shocks; Credit; Labor; United States
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  • June 12, 2017
  • Article

Corporate Balance Sheets in Emerging Markets: A Comparison of the Global Crisis and the Asian Financial Crisis
By: Laura Alfaro, Gonzalo Asis, Anusha Chari and Ugo Panizza
Leverage levels in emerging market firms rose dramatically in the aftermath of the Global Crisis. This column examines whether concerns of a repeat of the Asian financial crisis, which was largely attributed to corporate financial roots, are justified. While firm...  View Details
Keywords: Financial Crisis; Emerging Markets; System Shocks
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