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New research on economics from Harvard Business School faculty on issues including economic theory, economic slowdown and stagnation, economic growth, and economic sectors.
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Nonprofits in Good Times and Bad Times

by Christine L. Exley, Nils H. Lehr, and Stephen J. Terry

Tax returns from millions of US nonprofits reveal that charities do not expand during bad times, when need is the greatest. Although they are able to smooth the swings of their activities more than for-profit organizations, nonprofits exhibit substantial sensitivity to economic cycles.

Has the New Economy Finally Arrived?

by James Heskett

Economists have long tied low unemployment to inflation. James Heskett considers whether the US economic policy of the past four years has shaken those assumptions. Open for comment; Comment(s) posted.

Aggregate Advertising Expenditure in the US Economy: What's Up? Is It Real?

by Alvin J. Silk and Ernst R. Berndt

We analyze total United States advertising spending from 1960 to 2018. In nominal terms, the elasticity of annual advertising outlays with respect to gross domestic product appears to have increased substantially beginning in the late 1990s, roughly coinciding with the dramatic growth of internet-based advertising.

Economic Jitters Push Pandemic Job Seekers to Big Companies, Not Startups

by Rachel Layne

Small companies are receiving fewer applications, particularly from experienced professionals, according to research by Shai Bernstein and colleagues. How can startups overcome pandemic fears and compete for talent? Open for comment; Comment(s) posted.

Party-State Capitalism in China

by Margaret Pearson, Meg Rithmire, and Kellee Tsai

China’s political economy has evolved from “state capitalism” to a distinctly party-driven incarnation. Party-state capitalism, via enhanced party monitoring and industrial policy, deepens ambiguity between the state and private sectors, and increases pressure on foreign capital, prioritizing the regime’s political survival above all.

COVID Was Supposed to Increase Bankruptcies. Instead, They've Gone Down.

by Rachel Layne

Down economic cycles and increasing unemployment usually usher in a rise in bankruptcies. Not so in the COVID-19 recession, where just the reverse has happened. Research by Raymond Kluender and colleagues. Open for comment; Comment(s) posted.

Financial Meltdowns Are More Predictable Than We Thought

by Danielle Kost

Robin Greenwood and Samuel G. Hanson discuss new research that shows economic crises follow predictable patterns. Open for comment; Comment(s) posted.

Capitalism Works Better When I Can See What You're Doing

by Sean Silverthorne

Lower prices. More innovation. Better government. Transparency fuels the basic principles of competitive business and open government. Well, most of the time. Open for comment; Comment(s) posted.

Transaction Cost Economics in the Digital Economy: A Research Agenda

by Frank Nagle, Robert Seamans, and Steve Tadelis

The increasing dominance of the digital economy has brought new questions about the interplay of organizations and the market-based ecosystem. Transaction Cost Economics theory is a useful lens to understand firm organization and possibly guide policy and regulation.

How Countries Use Financial Policy to Fight COVID-19

by Rachel Layne

Developing countries have fewer fiscal tools and policy options to combat COVID-19 damage to their economies, according to research by Alberto Cavallo and colleagues. Open for comment; Comment(s) posted.

Sticky Capital Controls

by Miguel Acosta-Henao, Laura Alfaro, and Andrés Fernández

One of the legacies of the 2007–2008 global financial crisis has been a reassessment of the potential for restriction of capital flows policies. This paper documents a set of stylized facts on capital controls along their intensive and extensive margins for emerging markets and document them to be “sticky.” We then rationalize them through a model that includes fixed cost of implementing such policies, which lower the welfare gains of implementation.

Making Economics More Useful: How Technological Eclecticism Could Help

by Amar Bhidé

This paper shows how tools, such as simulations used to design new technologies, can facilitate collaborative economic policy judgments. The paper forms part of a broader, ongoing study of knowledge in practical fields such as engineering, medicine, and business.

How Should US Bank Regulators Respond to the COVID-19 Crisis?

by Michael Blank, Samuel G. Hanson, Jeremy C. Stein, and Adi Sunderam

Instead of the "watchful waiting" approach taken by US bank regulators to the pandemic crisis, they should use their prudential authorities to encourage banks to increase their equity capital. This is effectively a way of buying low-cost insurance against adverse scenarios that have become more likely.

Predictable Financial Crises

by Robin Greenwood, Samuel G. Hanson, Andrei Shleifer, and Jakob Ahm Sørensen

One central issue in the study of macroeconomic stability is financial crisis predictability. This paper estimates the probability of financial crises as a function of past credit and asset price growth.

Inflation with COVID Consumption Baskets

by Alberto Cavallo

Examining the impact that changes in expenditure patterns are having on the measurement of consumer price indices (CPI) inflation in 17 countries, this study finds that the cost of living for the average consumer is higher than estimated by the official CPI. This implies that real consumption is falling more quickly over time.

The Rise of the Investor State: State Capital in the Chinese Economy

by Hao Chen and Meg Rithmire

Researchers document and explain the rise of a novel form of intervention on the part of the Chinese state: the expansion of state capital beyond ownership of state firms.

Financial Distancing: How Venture Capital Follows the Economy Down and Curtails Innovation

by Sabrina T. Howell, Josh Lerner, Ramana Nanda, and Richard Townsend

Common wisdom holds that VC investment and VC-backed startups are relatively insulated from downturns. This study shows that the relative quantity and quality of innovation declines more for VC-backed firms than for other types of firms during downturns.

China Tariffs and Coronavirus a Double Hit to American Retailers

by Michael Blanding

American retailers have yet to pass along higher prices caused by Chinese tariffs, but shrinking product demand caused by the coronavirus could change that, warns Alberto Cavallo. Open for comment; Comment(s) posted.

This Crisis Loan Program Preserved Jobs—and Made Money

by Rachel Layne

Following the 2008 financial crisis, France offered a business loan program that helped firms, employees, and even the government, says Boris Vallee. Open for comment; Comment(s) posted.

Has COVID-19 Broken the Global Value Chain?

by Sean Silverthorne

4Questions Companies and consumers depend on the global value chain to create and distribute products around the world. What happens when the chain breaks? Insights from Laura Alfaro and Ester Faia. Open for comment; Comment(s) posted.