RESEARCH

Selected Work by Topic

Economic Effects of Democratic Institutions:

1. The effect of political power on Labor Market inequality: Evidence from the 1965 Voting Rights Act

with Abhay Aneja, Conditionally Accepted at American Economic Review

Animated Summary Courtesy of Econimate
Issue Briefs in: Washington Center for Equitable Growth and UC Berkeley Opportunity Lab

A central concern for racial and ethnic minorities living in democratic societies is having access to opportunities for economic advancement equal to their majority counterparts. In this paper, we examine whether and how democratic institutions facilitate such advancement. We explore how the political re-enfranchisement of black Americans in the U.S. South, stemming from the passage of the 1965 Voting Rights Act (VRA), contributed to improvements in relative economic status during the 1960s and 1970s. Using spatial and temporal variation arising from the federal enforcement provision of the VRA, we document that counties where voting rights were more strongly protected experienced larger reductions in the black-white wage gap between 1950 and 1980. We then show how the VRA’s effect on the relative wages of black Americans operates through two demand-side channels. First, the VRA contributed to the expansion of public employment opportunities. Second, in line with previous work on the importance of civil rights laws, the VRA contributed to and complemented the enforcement of labor market policies such as affirmative action and anti-discrimination laws.

2. IS BANNING CORPORATE CONTRIBUTIONS ENOUGH? THE DYNAMICS OF INCOMPLETE CAMPAIGN FINANCE REFORM

with Diego Aparicio, Journal of Law & Economics, 2022, 65(3), 581–606.

This paper studies whether banning corporate contributions suffices to curb firms' efforts at influencing politics. We examine Brazil's 2015 campaign finance reform which banned companies from making political contributions but did not ban political contributions made by individuals. Following the reform, overall contributions decreased significantly. However, this does not mean that influence in politics disappeared. We document firms with high pre-reform contributions responded by increasing individual donations at both the intensive and extensive margins. More critically, individual contributions became more valuable after the reform: post-ban individual contributions to winning candidates increased firm valuation substantially, replicating what only corporate donations achieved pre-ban and partially offsetting the reform's intent. Despite this, the reform reduced total contributions, increased shareholder protection by reducing excessive contributions, and leveled political participation among firms. Moreover, the reform itself increased market valuations for contributing firms. Overall, incomplete campaign finance reform does deliver notable successes but with critical loopholes.

3. Disenfranchisement and economic inequality: downstream effects of shelby county V. Holder

with Abhay Aneja, American Economic Association Papers & Proceedings, 2019, Vol. 109, p. 161–65.

Despite the importance of political representation for the disadvantaged, the U.S. Supreme Court in 2013 struck a blow to minorities’ political voice by invalidating a core provision of the VRA in Shelby County v. Holder. We consider how the removal of voting rights protection can affect downstream socioeconomic wellbeing. We find that the removal of VRA protections has contributed to modest increases in income inequality, suggesting that protecting minorities’ right to vote guards against not only “backsliding” in the electoral arena but also in terms of minority welfare.

4. The Racial Politicization of the Safety Net (NEW!)

with William Mullins and Troup Howard.

We show that the introduction of the Food Stamp program drove long-run political polarization across racial groups. Using voter roll data for the entire U.S. we show that individuals of voting age at the time of the program’s rollout (1961–1975) diverge along racial lines in their likelihood of voting and registering as Republicans or Democrats up to a half-century later. Our design ensures that these findings are not driven by geographic or age-specific racial trends. Critically, these diverging political patterns on average benefited Republicans. We also explore mechanisms. First, we show that access to the safety net also had short-run effects consistent with racial politicization on voter turnout, voter registration, and changes in the ideological composition of Congress. Second, we explore the interaction between Food Stamps and contemporaneous events such as the Voting Rights Act of 1965, religious prevalence, and recessions.

 

Economics of Housing:

1. The Assessment Gap: Racial Inequalities in Property Taxation

with Troup Howard, Quarterly Journal of Economics, 2022, 137(3), 1383–1434

Data Appendix

Animated Summary Courtesy of Econimate

Issue Briefs in: Washington Center for Equitable Growth and Federal Reserve Bank of Minneapolis

We use panel data covering 118 million homes in the United States, merged with geolocation detail for 75,000 taxing entities, to document a nationwide "assessment gap" which leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities. We show that holding jurisdictions and property tax rates fixed, black and Hispanic residents face a 10-13% higher tax burden for the same bundle of public services. This assessment gap arises through two channels. First, property assessments are less sensitive to neighborhood attributes than market prices are. This generates racially correlated spatial variation in tax burden within jurisdiction. Second, appeals behavior and appeals outcomes differ by race. This results in higher assessment growth rates for minority residents. We propose an alternate approach for constructing assessments based on small-geography home price indexes, and show that this reduces inequality by at least 55-70%.

2. Assessment caps and the racial assessment gap

with Troup Howard, National Tax Journal, 2022, 75 (1): 169–200.

We show that legislative caps on assessment growth are associated with reduced racial inequality in property taxation. These reductions increase in treatment intensity and are largest in highly-minority neighborhoods and low-income neighborhoods, which prior work shows are more susceptible to assessment misvaluations. We provide support for two channels explaining this finding. First, conditional on a binding cap, Black and Hispanic homeowners are exposed to slightly higher home price growth within jurisdiction, which leads to a small mechanical reduction of existing inequality. Second, caps appear to discipline assessor errors by reducing the correlation between neighborhood amenities and erroneously high assessments.

Equitable Finance:

1. resilience in collective bargaining

with Alessio Piccolo and Roberto Pinto, Washington Center for Equitable Growth Working Paper Series, Revise & Resubmit at Journal of Financial Economics.

Issue Brief in: Washington Center for Equitable Growth

A central finding of the theoretical literature on bargaining is that parties’ attitudes towards delay influence bargaining outcomes. However, the ability to endure delays, resilience, is often private information and hard to measure in most real-world contexts. In the context of collective bargaining, we show firms actively attempt to become financially resilient in anticipation of labor negotiations. Firms adjust their financial resilience to respond to the passage of right-to-work laws (RWLs), unionization, and labor negotiation events. Unions’ financial structure also responds to RWLs. Our findings suggest resilience is key to understanding the process through which collective bargaining determines wages.

2. No credit for time served? Incarceration and credit-driven crime cycles

with Abhay Aneja.

New version coming soon.

Issue Brief in The Hill

We document that incarceration significantly reduces access to credit, and that in turn leads to substantial increases in recidivism, creating a perverse feedback loop. In the first part of the paper, we use random assignment of criminal cases across judges to document significant post-release reductions in credit outcomes, including credit scores, mortgages, autoloans, and lender assessment of income. In the second part, we use sharp discontinuities in lending based on credit scores to show that this loss of financial access feeds back into future crime. Consequently, the financial distortions that imprisonment creates undermine the crime-reduction goal of incarceration.

3. The intangible gender gap: an asset Channel of gender inequality

with Leslie Sheng Shen, International Finance Discussion Papers 1322. Board of Governors of the Federal Reserve

This paper replaces “The Persistence of Gender Inequality: Evidence from Labor Market Reactions to Bank Deregulation”

We propose an “asset channel of inequality” that contributes to gender inequities. We establish that industries with low (high) gender pay gaps have high (low) shares of tangible assets. Because asset tangibility determines firms' ability to collateralize assets and borrow, credit conditions affect industries differently. We show that credit expansions further reduce the pay gap in low-pay-gap industries while leaving it unaffected in high-pay-gap industries, making low-pay-gap industries more appealing for women. Consequently, gender sorting across industries increases, which then cements gender roles and accentuates workplace gender bias. Ultimately, credit expansions help women “swim upstream” but also reinforce glass ceilings.