Grossman, G., S. Kim, J. Rexer and H. Thirumurthy. 2020. "Political partisanship influences behavioral responses to governors' recommendations for COVID-19 prevention in the United States." Proceedings of the National Academy of Sciences, 117 (39) 24144-24153
Abstract: Despite productivity advantages, multinational firms may operate less effectively than their local competitors in markets plagued by corruption and conflict. In natural resource sectors where firms face predation by armed groups, local firms may more easily engage in efficient corruption to buy law enforcement protection for their assets. I study a two-decade indigenization drive in Nigeria's turbulent oil sector, during which the share of local ownership grew substantially. Local takeover considerably increases oilfield output and reduces the share of nonproducing assets, despite evidence that local firms are of lower quality. Local firms increase output by reducing black-market activity: oil theft, maritime piracy, and militant violence all fall following local takeover. A simple bargaining model illustrates that political connections enable local firms to align law enforcement incentives, explaining their superior output performance. Data on anti-oil theft raids by government forces show that local firms receive preferential law enforcement protection. I find evidence that connections to high-level politicians and the security forces drive local firms' advantage in obtaining state protection and reducing criminal activity.
Presentations: NBER Summer Institute Political Economy (2021), Barcelona GSE (2021), GLaD (2021), MWIEDC (2021), WGAPE (2021), GSIPE (2021), NBER Development (2020), PACDEV (2020), NEWEPS (2020), YES (2020), AfDB Seminar (2020), CSAE (2020)
Abstract: We use original data on the locations, alliances, black market activities, and attacks of militant commanders in the Niger Delta conflict to show that a peace agreement led to large declines in attacks on the oil sector and sustained growth in the black market for stolen oil. We formalize the decision problem of a ruling elite bargaining with an armed rebel over the allocation of natural resource income. Our model predicts that the government may rationally allow resource theft among militarily strong rebels in locations favorable to black market. We find that post-conflict oil theft is elevated and anti-theft law enforcement is muted in these areas. Our analysis highlights how local conditions in the black market and relative military capabilities jointly shape incentives for participants in resource conflicts.
Presentations: PACDEV (2021), ESOC seminar (2020), DEVPEC (2020), BI Norwegian Business School (2019), PDRI workshop (2019)
Abstract: We develop a framework to estimate the economic value of housing regulations, and apply it to a 2016 zoning reform in the city of São Paulo, which altered maximum permitted construction to land area at the city-block level. Using a spatial regression discontinuity design, we find that developers swiftly reacted to the reform by filing for more multi-family construction permits in blocks with higher allowable densities. We incorporate these micro-estimates of developer responses to zoning reforms into an equilibrium model of housing supply and demand to estimate the long term impact of zoning changes on construction, house prices, residential location decisions and resident welfare. Supply responses from the reform produce a 1.4 percent increase in the total housing stock, leading to a 0.4-1% reduction in prices, and consequently small gains in welfare. But these welfare gains increase five fold once we account for equilibrium changes in the built environment, since higher neighborhood density and lower building age are features highly valued by households. There is also substantial heterogeneity, with neighborhoods with the largest increases in permitted density receiving more construction (14%) and consequently ending up with lower house prices (5.6%). Moreover, college-educated and higher income households gain the most from the reform, because more of those families can now move from the suburbs to the more central parts of the city. Finally, counterfactual simulations of more aggressive zoning reforms - e.g. doubling allowed densities - produce much larger gains in welfare.
Presentations: NBER Summer Institute Real Estate/Urban (2021, accepted), Wharton Urban lunch, EUEA (2021), Imperial College (2021)