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We exploit variation in demand induced by demographics to provide causal evidence of the precautionary motive of cash holdings. We show that firms significantly increase their cash levels in response to exogenous increases in investment opportunities. We also provide novel evidence of the dynamics of accumulation and use of cash. Financially constrained firms build their cash reserves using internal sources. Consequently, they start saving earlier and keep high cash levels longer. Unconstrained firms rely on external financing to both invest and build cash reserves, requiring them to save less and allowing them to incur lower costs of carry.

Using brokerage mergers and closures as natural experiments, we examine how exogenous changes in the information environment affect a firm’s financing choice. Our difference-in-differences approach shows that exogenous increases in information asymmetry lead firms to substitute away from equity and public debt toward bank debt. Firms with higher risk tend to substitute equity for bank debt, and firms with lower risk tend to substitute bonds for bank debt. The effect of the change in the information environment on a firm’s financing choice is more pronounced for firms with worse information environments, such as those with few initial analysts and younger firms. We demonstrate that the mechanism of the change is through a reduction of the issuance of equity and bonds but with an increase of the issuance of bank loans. Further analysis reveals that such firms tend to reduce long-term borrowing, reduce their issuance of subordinated debt, and increase their revolving credit lines. This paper was accepted by Tomasz Piskorski, finance.

Foreign investment in Africa's mineral resources has increased dramatically. This paper addresses three questions raised by this trend: do commercial mining investments increase the likelihood of social or armed conflict? If so, when are these disputes most prevalent? And, finally, what mechanisms help explain these conflicts? I show, first, that mining has contrasting effects on social and armed conflict: while the probability of protests or riots increases (roughly doubling) after mining starts, there is no increase in rebel activity. Second, I show that the probability of social conflict rises with plausibly exogenous increases in world commodity prices. Finally, I compile additional geo-spatial and survey data to explore potential mechanisms, including reporting bias, environmental harm, in-migration, inequality, and governance. Finding little evidence consistent with these accounts, I develop an explanation related to incomplete information—a common cause of conflict in industrial and international relations. This mechanism rationalizes why mining induces protest, why these conflicts are exacerbated by rising prices, and why transparency dampens the relationship between prices and protest.

This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two new identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduced BHC valuations. We also find that the geographic diversification of BHC assets increased insider lending and reduced loan quality. Taken together, these findings are consistent with theories predicting that geographic diversity intensifies agency problems.

We estimate and test the restrictions of a collective model of household consumption, usingz-conditional demands, in the context of a large conditional cash transfer program in rural Mexico. The model can explain the impacts of the program on the structure of food consumption. We use two plausible and novel distribution factors: the random allocation of a cash transfer to women and the relative size and wealth of the husband’s and wife’s family networks. Our structure does better at predicting the effect of exogenous increases in household income than an alternative, unitary, structure. We cannot reject efficiency of household decisions.

Economists have long argued that the sex imbalance in developing countries is caused by underlying economic conditions. This paper uses exogenous increases in sex-specific agricultural income caused by post-Mao reforms in China to estimate the effects of total income and sex-specific income on sex-differential survival of children. Increasing female income, holding male income constant, improves survival rates for girls, whereas increasing male income, holding female income constant, worsens survival rates for girls. Increasing female income increases educational attainment of all children, whereas increasing male income decreases educational attainment for girls and has no effect on boys' educational attainment.

BackgroundPoverty is associated with intimate partner violence (IPV), but whether exogenous increases in wage could reduce IPV among low-income women is still unclear. We examined whether the 2018 minimum wage hike led to a reduction in IPV risk among women.MethodsUsing the 2015–2019 Korean Welfare Panel Study, we employed a difference-in-differences (DID) approach to assess the effect of the minimum wage hike on IPV. The analysis focused on married women aged 19 or older. We categorised participants into a target group (likely affected by the minimum wage increase) and a comparison group based on their hourly wage. Three IPV outcomes were examined: verbal abuse, physical threat and physical assault. We conducted DID analyses with two-way fixed-effects models.ResultsThe increase in minimum wage was correlated with a 3.2% decrease in the likelihood of experiencing physical threat among low-income female workers (95% CI: −6.2% to −0.1%). However, the policy change did not significantly influence the risk of verbal abuse, physical assault or a combined IPV outcome. The study also highlights a higher incidence of all IPV outcomes in the target group compared with the comparison group.ConclusionsThe 2018 minimum wage increase in Korea was associated with a modest reduction in physical threat among low-income female workers. While economic empowerment through minimum wage policies may contribute to IPV prevention, additional measures should be explored. Further research is needed to understand the intricate relationship between minimum wage policies and IPV, and evidence-based prevention strategies are crucial to address IPV risk.

Despite clear evidence of a sharp income gradient in voting participation, it remains unclear whether income truly causes voting. In this article, we investigate how exogenous increases in unearned income affect voting in U.S. elections for two generations (parents and children) from the same household. Incontrast to predictions made by current models of voting, we find the income shock had no effect on parents’ voting behaviors. However, we also find that increasing household income has heterogeneous effects on the civic participation of children from different socioeconomic backgrounds. It increases children’s voting propensity among those raised in initially poorer families—resulting in substantially narrowed participatory gaps. Our results are consistent with a more nuanced view of how individual resources affect patterns of voting than the dominant theoretical framework of voting—the resource model—allows. Voting is fundamentally shaped by the human capital accrued long before citizens are eligible to vote.

Drawing on county-level data from Kansas for the period 1977-2011, we examine whether plausibly exogenous increases in the number of establishments licensed to sell alcohol by the drink are related to violent crime. During this period, 86 out of 105 counties in Kansas voted to legalise the sale of alcohol to the general public for on-premises consumption. Using legalisation as an instrument, we show that a 10% increase in drinking establishments is associated with a 3-5% increase in violent crime. The estimated relationship between drinking establishments and property crime is also positive, although smaller in magnitude.

Priority spreading refers to the practice of firms increasing their reliance on secured and subordinated debt and reducing their reliance on senior debt as their credit quality deteriorates. We argue that priority spreading occurs because security provides creditors with greater protection from dilution from other creditors than do covenants that prioritize payments. Consistent with this argument, we find that secured bank creditors are rarely diluted by junior creditors in distressed restructurings, whereas senior unsecured creditors are frequently diluted, exogenous increases in asset volatility result in greater priority spreading and yields on senior and subordinated bonds converge as asset volatility increases.