Corporate Finance, Political Economy, Labor Economics, Corporate Governance.
1. “Trading Credit (Subsidies) for Votes: The Effect of Local Politics on Small Business Lending” with Sahil Raina (Presented at Paris December Finance Meeting 2019, ASU Sonoran Winter Finance Conference 2020, Finance Down Under 2020; Accepted at FIRS 2020, Northeastern Finance Conference 2020, WFA 2020, EFA 2020) – Link to Internet Appendix.
Small businesses are championed by politicians seeking votes. We study how the competitiveness of congressional elections affects small business loan subsidies. To identify the causal impact of electoral competitiveness, we examine politically-motivated congressional redistricting (“gerrymandering”) and exploit the discontinuity in post-redistricting electoral competitiveness between districts where the redistricting party narrowly won and lost the pre-redistricting election. Using our novel regression discontinuity design, we find that districts with more vulnerable congressional representatives receive larger Small Business Administration (SBA) loan guarantees and lower interest rates on SBA loans. This increased lending is accompanied by higher rates of employment growth, particularly in the manufacturing sector, and greater concentrations of labor and capital in a smaller number of establishments. Overall, our findings indicate that local politics affect the allocation of government-subsidized credit, and that larger businesses and politically-important industries capture larger shares of the resulting gains.
2. “Politics and Hidden Borrowing: Electoral Cycles and State Defined Benefit Pension Plans” (Job Market Paper, Presented at 2017 WFA, Awarded WFA Cubist Systematic Strategies Ph.D. Candidate Award)
I investigate how political incentives affect the policies of public-sector defined benefit (DB) pension plans in the United States. Incumbent Governors with discretion over state DB pension plan policies can borrow through the public pension system in a non-transparent manner by lowering contributions or raising benefits. In election year, the Governor faces the incentive to incur higher “pension deficits” in order to finance policies that improve his/her re-election chances. I document that such pension deficits are systematically higher in the final year of an election cycle, driven largely by election year decreases in governmental contributions. To formalize the intuition behind my findings, I present a stylized principal-agent model in which the key friction is temporary information asymmetry between incumbent politicians and voters regarding public pension policy. Consistent with the model’s predictions, the empirically documented electoral cycle pattern in pension deficits is stronger for pension plans that are more opaque and when gubernatorial elections are more closely contested. I also conduct falsification tests using private-sector DB pension plans in order to rule out alternative explanations for my findings.
3. “Skilled Labor Supply and Corporate Investment: Evidence from the H-1B Visa Program“(Presented at 2017 SFS Cavalcade, 2017 NFA Meeting, 2018 AFA Meeting)
I study how a firm’s ability to hire skilled workers affects corporate investment. To this end, I exploit the 2003 reduction in the legislative cap for the H-1B visa program, which U.S. firms use to recruit foreign skilled (college-educated) workers. I find that the reduction in the cap caused a significant decrease in the investment rate of firms that were ex ante more reliant on H-1B workers as a source of skilled labor. The effect persists for several years past the 2003 cap drop, and is more pronounced for firms hiring workers in “industrial” occupations related to science and engineering compared with firms hiring workers in “knowledge” occupations related to computers and administration. My research shows that constraints on access to human capital, much like constraints on access to financial capital, can hinder corporate investment.
Work in Progress
“Organized Crime and Corruption in Labor Union Pension Plans” (with Pablo Slutzky)
“The Real Effects of Unfunded Public Pension Plan Liabilities”