The Equitable Economy

In new research exploiting state-level changes in non-compete enforceability, Kate Reinmuth and Emma Rockall find that stronger non-competes have historically reduced innovation in the United States. These declines are driven by sharp drops in inventor mobility and knowledge spillovers, especially in young, high-growth sectors.

In new research, Martin Schmalz and Jin Xie examine how shareholder preferences influence the United States pharmaceutical industry. They find that generic-drug manufacturers sometimes harm their firms’ own value when doing so benefits shareholder portfolios, who frequently have stakes in competing brand-name firms.

In new research, Anat R. Admati, Nate Atkinson, and Paul Pfleiderer argue that when misconduct is profitable, enforcement mechanisms aimed at deterring corporate misconduct often fail to achieve their goals and they may even backfire. The reason is that corporations can adjust internal governance mechanisms, particularly managerial compensation, to reduce or nullify the deterrent effects of corporate or managerial sanctions. These responses may lead to more misconduct and exacerbate social harm.

Matt Lucky reviews Dani Rodrik’s new book, “Shared Prosperity in a Fractured World: A New Economics for the Middle Class, the Global Poor, and Our Climate”

In new research, Mario Amore, Morten Bennedsen, Birthe Larsen, and Zeyu Zhao examine the symbiotic relationship between working environments and employee well-being, finding that when workers are safe and satisfied, companies profit.

The following is an adapted excerpt from “To Protect Their Interests: The Invention and Exploitation of Corporate Bankruptcy" by Stephen J. Lubben, now out at Columbia University Press. 

In new research, Dragan Filimonovic, Christian Rutzer, and Conny Wunsch find that generative artificial intelligence not only enhances the productivity of scientific researchers, but also lowers barriers to entry for early-career scholars and scholars who are not fluent in English. Rather than attempting to prohibit GenAI’s use, institutions should develop disclosure guidelines to facilitate trust and support adoption.

In recent research, Yumin Hu, Luca Macedoni, and Mingzhi Xu explore how high income inequality can raise the costs of living. They compare grocery products around the U.S., finding that large retailers will increase the prices for their goods in places where income inequality is also high.

In new research, Vikas Agarwal, Juan-Pedro Gómez, Kasra Hosseini, and Manish Jha explore how companies reward executives for meeting sustainability targets. They evaluate how ESG metrics to determine executive pay create tradeoffs with traditional financial incentives, and what that means for the future of ESG goals.

Summary Teaser: In a new working paper, Jakob Beuschlein, Jósef Sigurdsson, and Horng Chern Wong find that workers at acquired firms in Sweden experience wage cuts. Rather than from the increased monopsony power of employers, these wage cuts are due to rent redistribution toward higher CEO pay.