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New research on policy from Harvard Business School faculty on issues such as how business scholars are using their research to make a difference in government policy.
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Complex Disclosure

by Ginger Zhe Jin, Michael Luca, and Daniel Martin

This study shows that companies looking to hide unfavorable information might strategically be making contract terms unnecessarily complex, harming consumers and undermining the effectiveness of disclosure. These results highlight a role for regulation that would encourage simpler forms of disclosure.

Structural Transformation: A Competitiveness-based View

by Christian Ketels

A critical challenge for many economies is how to accelerate structural change when market forces alone seem insufficient. This paper explores the relationship between two approaches. The Structural Transformation framework argues for identifying and supporting target sectors in line with ‘latent’ competitive advantages. The competitiveness framework emphasizes the need to systematically strengthen competitive advantages, with new sectors the outcome rather than the driver of competitiveness upgrading.

Op-Ed: Can the Proposed American Health Care Act Improve on 'Obamacare'?

by John Quelch, Dr. Gordon Moore, and Emily Boudreau

Politics aside, the primary question to be asked about the newly proposed American Health Care Act is this: Will it improve choice, cost, and outcomes for health care consumers? Open for comment; Comment(s) posted.

Government and Financial Tech Can Fix Cash Woes for Small Businesses

by Karen Mills

Cash flow is a major concern for small businesses, which, on average, hold only 27 days’ reserve. Karen Mills looks at how "fintech" and government policies can pull companies off the cash flow edge. Open for comment; Comment(s) posted.

Can Obamacare Be Saved?

by John A. Quelch and Emily Boudreau

Is Obamacare in trouble? With premiums rising and some health providers pulling back, The Affordable Care Act might seem wobbly. John A. Quelch and Emily Boudreau argue for remedies that include more education for consumers, innovation from insurers, and flexibility on behalf of regulators. Open for comment; Comment(s) posted.

The Unintended Consequences of the Zero Lower Bound Policy

by Marco Di Maggio and Marcin Kacperczyk

In the aftermath of the financial crisis of 2007-2008, the United States Federal Reserve took an unprecedented decision to lower short-term nominal interest rates to zero, a policy commonly known as zero lower bound policy. This study shows that the policy adversely affected an important part of the shadow banking system, money market funds, whose returns are linked to the Fed funds rate. During times of unusually low interest rates, fund managers tended to increase their portfolios’ risk. The policy also triggered a reduction in capital supply to financial firms and large corporations and increased the financial markets’ exposure to costly runs and defaults.

The Impact of the Entry of Biosimilars: Evidence from Europe

by Fiona Scott Morton, Ariel Dora Stern, and Scott Stern

Biosimilars are large-molecule drugs that, while not an exact copy of already-approved large-molecule drugs, have been shown to be therapeutically equivalent. Much like generic drugs, which become available when a small-molecule drug goes off patent, biosimilars are lower in cost than their reference products and present an opportunity for savings when large-molecule drugs’ patents expire. Biosimilars have been available in the United States only since 2015 but have been regulated, approved, and sold in Europe for over a decade. This paper examines the European experience to help inform policy design and institutional choices for the United States. Topics covered include the entry of distributors and unique products; predictors of average product prices following biosimilar competition; and penetration of biosimilars as a share of total sales.

How Consumers and Businesses are Reshaping Public Health

by John A. Quelch

Through a collection of case studies, John A. Quelch and co-authors explore the intersection of health care and business in the new book, Consumers, Corporations, and Public Health. Read an excerpt. Open for comment; Comment(s) posted.

The Impact of Mass Shootings on Gun Policy

by Michael Luca, Deepak Malhotra, and Christopher Poliquin

The authors constructed and analyzed a dataset of all United States gun legislation and mass shootings between 1989 and 2014, finding that mass shootings do lead to significant policy responses: Lawmakers introduce 15 percent more bills the year after a shooting, an effect that is 66 times larger than the impact of non-mass shooting gun homicides. When it comes to enacting laws, Republican-controlled legislatures loosen restrictions on guns. Overall, the results suggest that random and infrequent events can be crucial levers for policy consideration. In the context of gun policy, the results highlight the need for a broader approach to solve gun violence.

Net Neutrality: A Fast Lane to Understanding the Trade-offs

by Shane Greenstein, Martin Peitz, and Tommaso Valletti

Shane Greenstein and colleagues identify the economic dimensions involved with net neutrality and show that many questions can be informed by simple economic models of the market for internet services.

Enhancing the Practical Relevance of Research

by Michael W. Toffel

Research is relevant when it has the potential to improve the decision making of managers or policymakers. Elaborating on his remarks at the 2015 Production and Operations Management Society conference, Toffel explains why research relevance matters and how scholars can increase the relevance of their research. Journals, professional societies, and doctoral programs can also foster research that is more useful and influential in society at large.

Business Research that Makes for Smarter Public Policy

by Michael Blanding

Just as researchers in the life sciences often target their work to tackle the most dangerous diseases, business scholars are using their research to make a difference in government policy. Open for comment; 0 Comment(s) posted.

Gradualism in Monetary-Policy: A Time Consistency Problem?

by Jeremy C. Stein & Adi Sunderam

Jeremy C. Stein and Adi Sunderam develop a model of monetary policy in which the observed degree of policy inertia is not optimal from an ex ante perspective, but rather reflects a fundamental time consistency problem.

How Should Wealth Be Redistributed?

by James Heskett

SUMMING UP James Heskett's readers weigh in on Thomas Piketty and how wealth disparity is burdening society. Closed for comment; 42 Comment(s) posted.

US Healthcare Reform and the Pharmaceutical Industry

by Arthur Daemmrich

The 2010 Patient Protection and Affordable Care Act (ACA) will restructure the US health care market in the coming years. For the pharmaceutical industry, the ACA is likely to prove a mixed blessing. In this paper, Assistant Professor Arthur Daemmrich analyzes the political economy of health care, specifically concerning health care reform. He then considers how the ACA will affect the pharmaceutical sector, both quantitatively in terms of the size of the prescription drug market and qualitatively in terms of industry structure and competitive dynamics. Daemmrich also places the current reforms into historical context and describes the political negotiations that enabled passage of the ACA. Key concepts include: Since the United States is the world's largest prescription drug market and has among the fewest price control mechanisms, the ACA holds significance to pharmaceutical firms internationally. Over the course of its implementation in coming years, the ACA will significantly expand prescription drug use, including at the relative expense of other health services. In 2015, Daemmrich projects pharmaceutical spending between $435 and $440 billion (12.5 percent of total health care spending) and in 2020 it will near $700 billion (14 percent of total health care spending). Congress and the Department of Health and Human Services will be hard pressed to explain increased drug spending to consumers, especially compared to Europe and Japan where reference pricing (capping prices at an average within a therapeutic category or among peer countries) has become the norm. The ACA nevertheless holds the potential for the United States to be the first country to break out of the silo framework that dominates health budgeting in countries using reference price systems and to instead set budgets at the disease (or patient) level, linked to health outcomes. Closed for comment; 0 Comment(s) posted.

HBS Faculty on 2010’s Biggest Business Developments

by Staff

Three Harvard Business School professors—former Medtronic chairman and CEO Bill George, economist and entrepreneurship expert William Sahlman, and innovation and strategy authority Rosabeth Moss Kanter—offer their thoughts on the most significant business and economic developments of 2010. Key concepts include: Social networking is the most significant business development of 2010, says Bill George, noting that some 600 million people are now active on Facebook—and half of them spend at least an hour per day on the site. The problems of the Great Recession continued to dominate the economy in 2010, according to Bill Sahlman, who says that the popular media have grossly underestimated both the current deficit and level of debt in the United States. Rosabeth Kanter points out that new technology shined in 2010, in spite of the world's economic anxieties. She gives kudos to the Apple iPad, which accelerated the trend toward digital content. Closed for comment; 0 Comment(s) posted.

Should Immigration Policies Be More Welcoming to Low-Skilled Workers?

by Jim Heskett

Immigration is a topic that stirs passions globally, judging from the responses to this month's column, says HBS professor Jim Heskett. Readers suggested ways to bring immigration policy into alignment with the reality of what is happening at borders and in workplaces around the world. (Online forum now closed. Next forum begins January 6.) Closed for comment; 43 Comment(s) posted.

Financing Constraints and Entrepreneurship

by William R. Kerr & Ramana Nanda

Financing constraints are one of the biggest concerns impacting potential entrepreneurs around the world. Given the important role that entrepreneurship is believed to play in the process of economic growth, alleviating financing constraints for would-be entrepreneurs is also an important goal for policymakers worldwide. In this paper HBS professors William R. Kerr and Ramana Nanda review two major streams of research examining the relevance of financing constraints for entrepreneurship. They then introduce a framework that provides a unified perspective on these research streams, thereby highlighting some important areas for future research and policy analysis in entrepreneurial finance. Key concepts include: Promoting entrepreneurship is an important goal of many governments, and researchers need to define for policymakers a more unified perspective for how studies and samples fit together. The "slice" of entrepreneurship examined is very important for the appropriate positioning of research on financing constraints, but studies too often fail to consider this dimension in the conclusions drawn from empirical results. The framework presented here is useful for thinking about the appropriate role of public policy in stimulating entrepreneurship. Closed for comment; 0 Comment(s) posted.

The Height Tax, and Other New Ways to Think about Taxation

by Martha Lagace

The notion of levying higher taxes on tall people—an idea offered largely tongue in cheek—presents an ideal way to highlight the shortcomings of current tax policy and how to make it better. Harvard Business School professor Matthew C. Weinzierl looks at modern trends in taxation. Key concepts include: Studies show that each inch of height is associated with about a 2 percent higher wage among white males in the United States. If we as a society are uncomfortable taxing height, maybe we should reconsider our comfort level for taxing ability (as currently happens with the progressive income tax). For Weinzierl, the key to explaining the apparent disconnect between theory and intuition starts with the particular goal for tax policy assumed in the standard framework. That goal is to minimize the total sacrifice borne by those who pay taxes. Behind the scenes, important trends are evolving in tax policy. Value-added taxes, for example, are generally seen as efficient by tax economists, but such taxes can bear heavily on the poor if not balanced with other changes to the system. Closed for comment; 0 Comment(s) posted.

Diagnosing the Public Health Care Alternative

by Staff

With deep experience in health insurance reform, HBS faculty describe how improved competition in insurance plans could improve value for patients. Professors Regina E. Herzlinger, Robert Huckman, and Michael E. Porter take the pulse of a debate. Key concepts include: "A government market with an underpriced Medicare would likely lead to the death of private-sector markets and products," say Professor Regina E. Herzlinger and coauthor Tom Coburn (R-OK). Patients would like the option of a public insurance plan, according to Professor Robert Huckman. Competition among insurers should be based on improving patients' health outcomes achieved per dollar spent, writes Professor Michael E. Porter. Closed for comment; 0 Comment(s) posted.