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Full-Text Articles in Social and Behavioral Sciences

The Tax Cuts And Jobs Act’S Incorporation “Incentive”, Michael S. Knoll Oct 2019

The Tax Cuts And Jobs Act’S Incorporation “Incentive”, Michael S. Knoll

Wharton Public Policy Initiative Issue Briefs

Many observers have asserted that the reduced corporate tax rate instituted by the 2017 Tax Cuts and Jobs Act (TCJA) has transformed entity choice for business owners, incentivizing owners of businesses structured as sole proprietorships or passthrough entities to incorporate their businesses and to use these new corporations as pocketbook investment vehicles to invest in and hold portfolio investments, substantially reducing wealthy individuals’ tax obligations and Treasury’s tax collections. This brief offers a different view, and discusses why predictions of widespread conversions to the corporate form at a substantial cost to the fiscal position of the U.S. are ...


Improving Future Policy Responses To Foreseeable Bank Risk-Taking, Joao F. Gomes, Marco Grotteria, Jessica A. Wachter Sep 2019

Improving Future Policy Responses To Foreseeable Bank Risk-Taking, Joao F. Gomes, Marco Grotteria, Jessica A. Wachter

Wharton Public Policy Initiative Issue Briefs

This brief offers new perspectives on the behavior of banks during the financial crisis of 2007-08 and the limited success of unconventional monetary policies in stimulating bank credit to the private sector during the subsequent economic recovery. The common narrative about the financial crisis is that it was caused by a large credit expansion with overly risky loan-granting behavior by banks. We argue, however, that banks actually made optimal financial decisions in the lead-up to the crisis, based on their calculation of their franchise value. The brief explains the mechanics of franchise value—how it led banks to shift their ...


Updating The Crowdfunding Narrative, Gerry Tsoukalas, Simone Marinesi, Volodymyr Babich Jul 2019

Updating The Crowdfunding Narrative, Gerry Tsoukalas, Simone Marinesi, Volodymyr Babich

Wharton Public Policy Initiative Issue Briefs

Policymakers concerned about stimulating small business and entrepreneurial growth need to better understand the dynamics of crowdfunding as a vehicle for that growth. The conventional wisdom is that raising cash through crowdfunding always benefits entrepreneurs. But that is not the complete picture. In reality, there are ways in which entrepreneurs, as well as VCs looking for new investments, may actually be left worse off after a successful crowdfunding campaign. This issue brief examines the potential pitfalls of a successful campaign. These include a moral hazard problem that comes into play when entrepreneurs explore both crowdfunding and venture capital investment, which ...


The U.S. Needs A National Vision For Housing Policy, Vincent Reina Jun 2019

The U.S. Needs A National Vision For Housing Policy, Vincent Reina

Wharton Public Policy Initiative Issue Briefs

Recent demographic changes—the sharp increase in single-person households, especially among single individuals over the age of 65, as well as racial disparities in homeownership and the increasing cost burden of home rentals—are underscoring the need for a new vision with respect to U.S. housing policy. This Issue Brief

lays out several policy prescriptions for improving housing affordability and fairness, both for renters and owners: modifying the federal Housing Choice Voucher program as well as local and state land-use regulations; investing in the maintenance of existing affordable housing stock; making good on HUD’s Affirmatively Furthering Fair Housing ...


Preferred Pharmacy Networks: Health Care Savings On The Margins, Ashley Swanson May 2019

Preferred Pharmacy Networks: Health Care Savings On The Margins, Ashley Swanson

Wharton Public Policy Initiative Issue Briefs

While policymakers have talked a lot recently about finding a comprehensive fix for escalating health care costs, such as Medicare-for-all, many economists have been exploring the possibility that the answer for excessive health care spending may rest instead in series of smaller adjustments. This issue brief presents research on one such small fix: preferred pharmacy networks. This is a relatively new tool whereby health insurers aim to steer consumers to lower cost “preferred” pharmacies, where insurers are able to negotiate lower drug prices. The research concludes that preferred pharmacy contracting results in a roughly 1 percent decrease in Medicare Part ...


Identifying Cartels That Use The Illinois Brick Ruling As A Shield, Serguei Netessine Mar 2019

Identifying Cartels That Use The Illinois Brick Ruling As A Shield, Serguei Netessine

Wharton Public Policy Initiative Issue Briefs

“Identifying Cartels that Use the Illinois Brick Ruling as a Shield” looks at a landmark Supreme Court ruling, known as the Illinois Brick (IB) decision, which bars “indirect purchasers” from bringing antitrust suits against upstream product manufacturers. The research suggests the IB ruling not only reduced the costs associated with antitrust enforcement but has the potential to enable firms upstream in the supply chain to engage in collusion through the use of the wholesale price plus fixed fee structure (WPFF). WPFF allows manufacturers to pay a fixed fee to retailers, compensating them for stocking fewer, higher cost items than they ...


Shining A Light On The Federal Reserve’S Foreign Affairs, Peter Conti-Brown, David T. Zaring Feb 2019

Shining A Light On The Federal Reserve’S Foreign Affairs, Peter Conti-Brown, David T. Zaring

Wharton Public Policy Initiative Issue Briefs

Throughout its history, the U.S. Federal Reserve has engaged in international diplomacy, outside the bounds of (and sometimes in conflict with) the priorities of the White House and U.S. State Department. In directing monetary policy, the Fed’s primary concern is to benefit the U.S. economy. In the process, the Fed at times acts in concert with foreign central banks, as was the case in setting new bank regulations after the 2008 financial crisis. At other times, the Fed acts in ways that other countries view as detrimental to their economic interests. Either way, the Fed operates ...


State Foreclosure Law: A Neglected Element Of The Housing Finance Debate, Brian D. Feinstein Nov 2018

State Foreclosure Law: A Neglected Element Of The Housing Finance Debate, Brian D. Feinstein

Wharton Public Policy Initiative Issue Briefs

Proponents of robust mortgage finance regulation would do well to look to the states, and specifically to the regulatory effects of state-mandated judicial foreclosure. Judicial foreclosure, which is authorized in almost half of U.S. states, requires that lenders seeking to foreclose on a mortgage file an action in state court. This not only provides borrowers with a forum for holding lenders accountable for their behavior and obligations, but puts the onus on the lender to show that the requirements for foreclosure have been met. It also aids borrowers by delaying the foreclosure process and allowing them to remain in ...


Regulating Initial Coin Offerings (Icos), David Hoffman Oct 2018

Regulating Initial Coin Offerings (Icos), David Hoffman

Wharton Public Policy Initiative Issue Briefs

Research led by the University of Pennsylvania Professor David Hoffman presents legal literature’s first detailed analysis of the inner workings of Initial Coin Offerings (ICO). Startups are using the novel funding mechanism with increasing frequency. In 2017, an estimate 370 ICOs raised around $6.2 billion, and by July 2018, an additional 430 ICOs had raised almost $17.2 billion. ICOs come with the promise of a “smart contract”, or an automated contract that governs real world relationships where before a legal document would have been employed. Human oversight is supposed to be unnecessary because the embedded code ensures ...


Antitrust In 2018: The Meaning Of Consumer Welfare Now, Herbert Hovenkamp Sep 2018

Antitrust In 2018: The Meaning Of Consumer Welfare Now, Herbert Hovenkamp

Wharton Public Policy Initiative Issue Briefs

Modern antitrust policy follows the consumer welfare principle (CWP), the proposition that antitrust policy should encourage markets to produce high output consistent with sustainable competition, and low prices. The market dominance of giant firms such as Amazon, however, is opening the door to a reevaluation of this antitrust standard, particularly from a new antitrust “movement” that has economic goals, such as protecting small businesses and controlling runaway profits, that can be at odds with promoting low prices. Penn Law and Wharton Professor Herbert Hovencamp evaluates the merits of three antitrust frameworks within the context of the law and economic history ...


The Missing Pieces Of The Economic Debate Over Immigration Reform, Exequiel Hernandez Aug 2018

The Missing Pieces Of The Economic Debate Over Immigration Reform, Exequiel Hernandez

Wharton Public Policy Initiative Issue Briefs

To the extent that immigration reform is discussed in terms of economics, the debate tends to focus exclusively on labor issues-specifically, how immigrants affect jobs and wages for native citizens. But to understand the economic effects of immigration, and thus develop sounder policies, policymakers need to consider how immigration affects all three core components of economic growth: not just labor, but capital and innovation too.

In the Penn Wharton Public Policy Brief, "The Missing Pieces of the Economic Debate Over Immigration Reform/whr.tn/2vmKbK8>," Professor Exequiel Hernandez discusses new research showing that immigration produces gains for the U.S ...


Policy Options For Improving The Resilience Of Us Transportation Infrastructure, Gina Tonn Ms., Jeffrey Czajkowski, Howard Kunreuther Jul 2018

Policy Options For Improving The Resilience Of Us Transportation Infrastructure, Gina Tonn Ms., Jeffrey Czajkowski, Howard Kunreuther

Wharton Public Policy Initiative Issue Briefs

Despite the vulnerability of America’s aging infrastructure to costly disruptions from man-made and natural disasters, infrastructure insurance under-utilized. On average, only 30% of catastrophic losses in the past 10 years have been covered by insurance. Most infrastructure project managers have relied instead on taxpayer-funded federal aid when disaster strikes. But it doesn’t need to be this way. In this brief, Gina Tonn, Jeffrey Czajkowski, and Howard Kunreuther use technical reports and input from infrastructure managers to outline steps that policymakers can take to help maximize the use of infrastructure insurance for providing financial protection, encouraging investment in loss ...


Cryptocurrency Competition And The U.S. Monetary System, Jesus Fernandez-Villaverde Jun 2018

Cryptocurrency Competition And The U.S. Monetary System, Jesus Fernandez-Villaverde

Wharton Public Policy Initiative Issue Briefs

Advocates of cryptocurrencies such as Bitcoin believe that having currency competition will help achieve the economic objective of price stability. This Issue Brief summarizes research that explores whether competition among privately issued fiat currencies can actually produce price stability. The research finds that in most cases, a system of private monies does not deliver price stability. And even when it does, it always is subject to self-fulfilling inflationary episodes, and it supplies a suboptimal amount of money. Although there is no economic reason to curb the use of cryptocurrencies at the moment, it is important to review key regulatory issues ...


The Policy Trajectories Of Autonomous Vehicles, John Paul Macduffie May 2018

The Policy Trajectories Of Autonomous Vehicles, John Paul Macduffie

Wharton Public Policy Initiative Issue Briefs

Autonomous Vehicle (AV) technology promises to dramatically reduce deaths and economic losses from crashes caused by human error, increase mobility for those with disabilities, and revolutionize the auto industry. Yet legislation to facilitate oversight of the development and deployment of AVs is stalling in Congress. Professor John Paul MacDuffie offers a primer on AV technology policy, and discusses strategies for addressing safety and other public concerns while still facilitating AV innovation in the private sector.


The Other Side Of A Merger: Labor Market Power, Wage Suppression, And Finding Recourse In Antitrust Law, Ioana Marinescu Mar 2018

The Other Side Of A Merger: Labor Market Power, Wage Suppression, And Finding Recourse In Antitrust Law, Ioana Marinescu

Wharton Public Policy Initiative Issue Briefs

Labor market concentration can worsen after a merger takes place, and this heightened concentration can negatively affect wages. The focus of antitrust analysis, however, has been on the prices of consumer products, not the wages of laborers. New research indicates that, on average, labor markets are highly concentrated, and that higher concentration is associated with significantly lower posted wages for new jobs. This brief uses existing economic tools to develop a model for evaluating labor market concentration and its effects, to determine if a merger will run the risk of anticompetitively suppressing wages, employment, and output. Regulators can use this ...


The Policy Barriers To Marijuana Banking, Peter Conti-Brown Feb 2018

The Policy Barriers To Marijuana Banking, Peter Conti-Brown

Wharton Public Policy Initiative Issue Briefs

Although cannabis-related businesses have thrived in the localities that have legalized marijuana as a consumer product, the industry has suffered from crippling uncertainty, in the form of limited access to the banking system. The cannabis industry thus has been forced to operate in a cash-intensive “gray market,” which is a problem. An entire industry conducting all of its business in cash cannot be fairly taxed or regulated and, historically, has been associated with lawlessness—everything from security concerns, transportation and currency problems, money laundering, and cash hoarding. This brief reviews and analyzes the issues that surround marijuana banking and offers ...


Bright Lines: How Regulatory Asset Thresholds Change The Banking Industry, Allison Nicoletti, Michael Iselin, Hailey Ballew Jan 2018

Bright Lines: How Regulatory Asset Thresholds Change The Banking Industry, Allison Nicoletti, Michael Iselin, Hailey Ballew

Wharton Public Policy Initiative Issue Briefs

One of the key features of the Dodd-Frank Act is that it imposes specific and costly regulatory requirements on banks that cross the threshold of having more than $10 billion in total assets. Anecdotal accounts have suggested that this threshold has led to increased consolidation in the banking industry. This brief provides new statistical evidence of that phenomenon. Banks that approach the $10 billion threshold are significantly more likely to engage in an acquisition, pay more for that acquisition, and acquire bigger target banks than similar banking institutions did prior to Dodd-Frank. To the extent that policymakers are concerned with ...


Why Taxing Carbon May Not Make The World More Green, Serguei Netessine, Sam Aflaki Dec 2017

Why Taxing Carbon May Not Make The World More Green, Serguei Netessine, Sam Aflaki

Wharton Public Policy Initiative Issue Briefs

Although taxing carbon is an idea that enjoys significant support among policymakers and business leaders, new research indicates that carbon taxation can actually cause energy investments to gravitate away from the cleanest energy technologies. This counterintuitive finding reflects two key characteristics of energy markets: the worldwide increase in renewable energy sources whose output is intermittent and variable; and greater market liberalization, which has made the spot driving of electricity more volatile. The intermittency of renewable energy sources requires backup generation, typically from generators using fossil fuels. The dynamics of market liberalization amplify this negative effect of intermittency. Policymakers need to ...


Addressing Personal-Income-Tax Manipulation With Tools From Psychology, Alex Rees-Jones Oct 2017

Addressing Personal-Income-Tax Manipulation With Tools From Psychology, Alex Rees-Jones

Wharton Public Policy Initiative Issue Briefs

In order to better understand the tax manipulation decision-making process—both legal uses of tax deductions and illegal tax evasion—this brief looks at the impact of gain/loss framing. Analysis of tax data confirms that tax decisions are influenced by “loss aversion.” For instance, taxpayers are more likely to pursue tax reduction activities when they make a loss smaller, as compared to when they make a gain larger. The brief looks at tools that policymakers have at their disposal for both deterring tax evasion and making exiting tax incentives maximally effective. The brief discusses instances when such gain/loss ...


Before International Tax Reform, We Need To Understand Why Firms Invert, Michael Knoll Sep 2017

Before International Tax Reform, We Need To Understand Why Firms Invert, Michael Knoll

Wharton Public Policy Initiative Issue Briefs

A wave of corporate inversions by U.S. firms over the past two decades has generated substantial debate in academic, business, and policy circles. The core of the debate hinges on a couple of key economic questions: Do U.S. tax laws disadvantage U.S.-domiciled companies relative to their foreign competitors? And, if so, do inversions improve the competitiveness of U.S. multinational firms both abroad and at home? This brief, summarizes both old and new research that views these questions through the lens of corporations’ global effective tax rates (ETRs), and finds that the stronger case seems to ...


Regulating Robo Advisors: Old Policy Goals, New Challenges, Tom Baker, Benedict Dellaert Jul 2017

Regulating Robo Advisors: Old Policy Goals, New Challenges, Tom Baker, Benedict Dellaert

Wharton Public Policy Initiative Issue Briefs

Financial “robo advice”—an automated service that ranks or matches consumers to financial products—has gained significant attention in the investment industry and on the Hill, but there has not yet been a consensus on how to regulate these new services. Robo advisors often are on par with and can exceed the standards of human advices, but they don’t fit into the category of fiduciary, and therefore won’t be held to the same regulatory standard that humans advisors are. Nonetheless, they are subject to systemic risks and the potential for abuses that can hurt consumers. Professors Tom Baker ...


An Updated Look At Student Loan Debt Repayment And Default, Laura W. Perna, James Kvaal, Roman Ruiz Jun 2017

An Updated Look At Student Loan Debt Repayment And Default, Laura W. Perna, James Kvaal, Roman Ruiz

Wharton Public Policy Initiative Issue Briefs

Over 41 million Americans now owe more than $1.2 trillion in outstanding federal student loan debt. Policymakers are considering a number of amendments related to federal student aid programs in the context of the Higher Education Act reauthorization. In addition to providing a snapshot of key data related to student loan debt that all policymakers should consider, this brief discusses recommendations for facilitating repayment and curbing defaults on student loans, including: protecting students from low-performing institutions; encouraging use of forbearance and deferment mechanisms; and strengthening income-driven repayment options.


A Financial Assessment Of Municipal Fiber In The U.S., Christopher S. Yoo, Timothy Pfenninger May 2017

A Financial Assessment Of Municipal Fiber In The U.S., Christopher S. Yoo, Timothy Pfenninger

Wharton Public Policy Initiative Issue Briefs

In the interest of bringing high-speed broadband access to communities underserved by current Internet service providers, many U.S. cities have initiated municipal broadband projects. Such efforts have received favorable attention from those eager to help close the digital divide. This brief presents a first look at a new, comprehensive empirical analysis of 20 U.S. municipal fiber builds for which financial data is available. The findings show that half of the projects in this study are cash-flow negative, and based on their performance from 2010-2014, 90 percent are unable to generate sufficient cash to recover their project costs within ...


The Issue At The Heart Of America’S Great Unbanking, Lisa Servon May 2017

The Issue At The Heart Of America’S Great Unbanking, Lisa Servon

Wharton Public Policy Initiative Issue Briefs

Consumer protection regulation targets services like payday lenders under the presumption that these services can be predatory and associated with high costs. Yet an increasing number of Americans are utilizing such alternative financial services and joining the ranks of the “unbanked” and “underbanked.” Altering this status quo and promoting greater middle-class stability will require that policymakers foster innovation in the development of high-quality, transparent, and consumer-oriented financial services within the mainstream banking system.


The Economic Realities Of Replacing The Affordable Care Act, Hanming Fang Mar 2017

The Economic Realities Of Replacing The Affordable Care Act, Hanming Fang

Wharton Public Policy Initiative Issue Briefs

Using simulations based on a new economic model, this brief empirically examines the pivotal mechanisms of the Affordable Care Act, such as the individual mandate, employer mandate, and premium subsidies, to inform the debate over repealing and replacing the Affordable Care Act. The research suggests that the ACA, if left intact, in the long run significantly reduces the uninsured rate. The simulations also suggest that the employer mandate is not a crucial pillar for the success of the ACA. The analysis indicates it is the premium subsidy, rather than the employer mandate or the individual mandate, that is crucial for ...


The Presidency, Congressional Republicans, And The Future Of Financial Reform, Peter Conti-Brown Feb 2017

The Presidency, Congressional Republicans, And The Future Of Financial Reform, Peter Conti-Brown

Wharton Public Policy Initiative Issue Briefs

This brief examines the tension between the Republican ideological commitment to curbing executive power and the opportunity Republicans now have for Trump to dominate the direction of financial regulatory reform. The discussion will focus on three key policy outcomes that Republicans have sought during the last six years: reforming the Federal Reserve, overhauling the Consumer Financial Protection Bureau, and changing the way in which the nation’s largest financial institutions are designated and regulated.


Lessons For Policymakers And Regulators On The (Predictable) Future Of The Digital Economy, Kevin Werbach Jan 2017

Lessons For Policymakers And Regulators On The (Predictable) Future Of The Digital Economy, Kevin Werbach

Wharton Public Policy Initiative Issue Briefs

The next stage in the evolution of the digital economy involves the creation of what can be called the “Internet of the World”—an expanding web of transactions, anticipated today by on-demand platforms such as Uber and Airbnb, that eventually will occur across trillions of networked devices and penetrate every sphere of human activity. This brief looks at the many legal questions raised by these novel services, in particular, at the regulatory classification of on-demand services, as well as the application of antitrust provisions, the imposition of taxes and fees, and the assignment of liability to these new platforms.


The Economic Costs And Benefits Of Implementing The Clean Power Plan, Jose Miguel Abito, Christopher R. Knittel, Konstantinos Metaxoglou, Andre Trindade Nov 2016

The Economic Costs And Benefits Of Implementing The Clean Power Plan, Jose Miguel Abito, Christopher R. Knittel, Konstantinos Metaxoglou, Andre Trindade

Wharton Public Policy Initiative Issue Briefs

This brief looks at the costs of implementing the EPA’s Clean Power Plan. Specifically, it examines whether implementing the CPP on a state-by-state basis—that is, with each state meeting its own individual target for emissions reduction by 2030, rather than establishing regional targets—is economically efficient. The economic analysis uses data from electricity-generating firms participating in the Pennsylvania-New Jersey-Maryland (PJM) Interconnection to examine the relative economic efficiency of regional versus state-by-state implementation of the CPP. The research indicates that state-by-state implementation would yield the lowest electricity prices in 2030.


Excessive State Debt: A New Approach To A Growing Problem, Vincent Buccola Nov 2016

Excessive State Debt: A New Approach To A Growing Problem, Vincent Buccola

Wharton Public Policy Initiative Issue Briefs

Economists and political observers agree state governments defaulting on their debt obligations is a growing concern. How best to aid struggling states, however, is a point of contention. This Issue Brief makes a case against ex post restructuring measures, specifically bankruptcy modeled on Chapter 9 of the U.S. Bankruptcy Code, and in favor of ex ante debt mitigation action. In particular, it introduces tax-credit borrowing (TCB) as a potential commitment device for states that would allow for the creation of super-priority, risk-free debt. TCB ensures that states internalize the risk of default and avoids the moral hazard problem of ...


Insurance Against Extreme Events: Pairing Short-Term Incentives With Long-Term Strategies, Howard Kunreuther Oct 2016

Insurance Against Extreme Events: Pairing Short-Term Incentives With Long-Term Strategies, Howard Kunreuther

Wharton Public Policy Initiative Issue Briefs

Consumers tend to purchase too little insurance or purchase it too late. Consequently, taxpayers wind up bearing substantial burdens for paying reconstruction costs from extreme events. The 2005 and 2012 hurricane seasons alone cost taxpayers nearly $150 billion. There is much that can be done to better facilitate the role that insurance can play in addressing losses from extreme events, both natural and man-made.