EPIC, Dept of Economics
University of Chicago
(Job Market Paper) Strategic innovation and lobbying in response to regulatory uncertainty
When firms face the threat of future regulation, what do they do? Two critical channels of response have been recognized: firms may innovate or they may lobby. This paper recognizes that firms must trade off these two actions as they develop their strategic response to future regulation. I establish a model of firms' strategic responses and derive the conditions under which innovation and lobbying will be complements or substitutes in firm strategies. I then empirically estimate firm responses using a novel identification strategy: first scientific discoveries of previously unknown harms from products already adopted in markets. To estimate the model, I construct a dataset of scientific discoveries by scraping scholarly publications from the web, and reviewing over 7,000 scientific publications to identify first-time discoveries of low-dose, chronic exposure effects of a wide range of chemicals used in many disparate sectors of the economy. The timing of these information shocks and which firms are affected by them are used as plausibly random variation in estimation. I find that firms increase both innovation and lobbying in response to the threat of future regulation. Further, I find evidence consistent with substitution in firm strategies between innovation and lobbying, suggesting that the option to lobby may induce firms to innovate less.
Hsiang et al. “The effect of large-scale anti-contagion policies on the coronavirus (COVID-19) pandemic.” Nature, 2020.
Rode et al. “Estimating a social cost of carbon for global energy consumption.” Nature, 2021.
Other works in progress:
Carleton et al. “Valuing the global mortality consequences of climate change accounting for adaptation costs and benefits.” Revisions requested at Quarterly Journal of Economics.
Hultgren et al. ”Estimating Global Impacts to Agriculture from Climate Change Accounting for Adaptation.”
Hultgren et al. “Climate change and crop choice: Evidence from Australia, Brazil, China, Europe and the United States.”
Rode et al. “Human productivity in a warmer world: The impact of climate change on the global workforce.”
Hultgren, Kaplan, and Wolfson. “Are consumers willing to pay to avoid price uncertainty? Evidence from the vehicle leasing market.”
I'm a paragraph.