The Equitable Economy

In new research, Matthias Breuer, Anthony Le, and Felix Vetter find that when companies are required by the government to seek a third-party financial audit, they turn to lower quality auditors.  As a result, the accounting industry grows, but touted benefits for markets and corporate stakeholders appear elusive.

In new research, Valentino Larcinese and Alberto Parmigiani find that the 1986 Reagan tax cuts led to greater campaign spending from wealthy individuals, who benefited the most from this policy. The authors argue that a very permissive system of political finance, combined with the erosion of tax progressivity, created the conditions for the mutual reinforcement of economic and political disparities. The result was an inequality spiral hardly compatible with democratic ideals.

Many financial commentators thought that the surge of retail investors participating in the stock market, the most notable of whom boosted “meme stocks” like GameStop, would democratize corporate governance and improve prosocial firm behavior, including the promotion of environmental, social, and governance (ESG) goals. In new research, Dhruv Aggarwal, Albert H. Choi, and Yoon-Ho Alex Lee find evidence that the exact opposite took place.

Kroger and Albertsons say they need to merge to compete with Walmart. Claire Kelloway argues that what they really want is Walmart’s monopsony power, and permitting mergers on these grounds will only harm suppliers, workers, and consumers.

New research by Vesa Pursiainen, Hanwen Sun and Yue Xiang finds that competition hurts corporate incentives to fulfill environmental, social, and governance (ESG) goals. Firms facing more competitive pressure have worse ESG scores, in particular when the firms have short-term-oriented shareholders. However, firms located in areas that are more concerned about climate change appear more willing to sacrifice profits for better ESG performance.

Claudia Goldin of Harvard University has been awarded the 2023 Nobel Prize in Economic Sciences. This column, written by two of her former students and now fellow scholars, outlines both the work on gender gaps in employment and wages for which she has been formally recognized, and her contributions to a broader agenda of understanding inequality in the labor market. Her research digs deep into the histories of education, technology and industrialization to uncover the drivers of inequalities in demand, supply, institutions and norms. And while her intellectual influence goes far beyond the study of gender gaps, she has inspired countless women to pursue the study of economics.

In new research, Michal Barzuza, Quinn Curtis, and David Webber create a framework explaining why CEOs have powerful incentives to promote ESG, why these incentives are distinct from those of shareholders, why they are powerful despite the lack of governance mechanisms, and why they are at times excessive or skewed.

Robert Margo discusses the influences of his colleague and recent Nobel Prize-winning economist Claudia Goldin, as well as her influence on other scholars.

Cecilia Rouse, a colleague and former student of Claudia Goldin, explains Goldin’s perseverance in unearthing datasets that allowed her to document trends in labor and education, particularly with respect to women. Rouse also praises Goldin’s courage to prioritize the study of women and discusses what it was like to work with the recent Nobel Prize- winning economist on seminal work.

Marianne Bertrand describes the contributions of Claudia Goldin, this year's Nobel prize winner in economics, as well as her relationship with Goldin as a colleague.