The politics of bailouts: Estimating the causal effects of political connections on corporate bailouts during the 2008-2009 US financial crisis.

In 2008, as the financial crisis unfolded in the United States, the banking industry elevated its lobbying and campaign spending activities. By the end of 2008, and during 2009, the biggest political spenders, on average, received the largest bailout packages. Is that relationship causal? In this paper, I examine the effect of political connections on the allocation of funds from the Troubled Asset Relief Program (TARP) to the US financial services industry during the 2008-2009 financial crisis. I find that TARP recipients that lobbied the government, donated to political campaigns, or whose top executives had direct connections to politics received better bailout deals. I estimate regression discontinuity design and instrumental variable models to uncover how election outcomes for politicians in close races affected the distribution of bailout funds for connected firms. The results do not imply that some banks were deliberately favored over others, just that favored banks benefited because of their proximity to the right people in power. If being politically connected matters in general, in times of crisis it matters even more. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s11127-020-00871-w.

Factorial Structure of the Serbian Version of the Clinical Assessment Interview for Negative Symptoms - Evidence for Three Factors of Negative Symptoms.

Introduction: Negative symptoms are a common occurrence in patients with psychosis spectrum disorders. Previous analysis of the latent structure of the Clinical Assessment Interview for Negative Symptoms (CAINS) - which was developed to advance the assessment of negative symptomatology - showed two underlying sub-domains (Motivation and Pleasure; Expression). Recent findings indicate that a more complex structure might be more applicable. Aim: To evaluate the psychometric properties of the Serbian version of the CAINS in a sample of outpatients (N = 67) with psychosis spectrum disorders. Materials and Methods: Negative symptoms and general level of psychopathology were assessed with Serbian translations of the CAINS, the 53-item version of the Brief Symptom Inventory (BSI), and the 24-item version of the Brief Psychiatric Rating Scale (BPRS). Principal component analysis (PCA) was carried out on the CAINS items, and correlation analyses were done to assess its convergent and discriminant validity. Results: Our results showed an excellent internal consistency (Cronbach's alpha = 0.92). PCA revealed a three-component solution consisting of Expressiveness and Motivation for Social and Family Relationships (Factor 1), Motivation for Vocational Activities (Factor 2), and Motivation for Recreation (Factor 3). Convergent validity was supported by significant correlations with the Negative symptoms domain of the BPRS (Factor 1, 0.695, p < 0.01; Factor 2, 0.352, p < 0.05; Factor 3, 0.452, p < 0.01). When assessing discriminant validity, weak correlations were found with BPRS and BSI scores. Conclusion: The Serbian version of CAINS is a valid, reliable and useful tool for the assessment of negative symptomatology. Our findings support a three-factor structure of CAINS, which indicates that the construct is more complex than envisaged by the original conceptualization of two distinct factors.

To Invest or Not to Invest, That Is the Question: Analysis of Firm Behavior under Anticipated Shocks.

When companies are faced with an upcoming and expected economic shock some of them tend to react better than others. They adapt by initiating investments thus successfully weathering the storm, while others, even though they possess the same information set, fail to adopt the same business strategy and eventually succumb to the crisis. We use a unique setting of the recent financial crisis in Croatia as an exogenous shock that hit the country with a time lag, allowing the domestic firms to adapt. We perform a survival analysis on the entire population of 144,000 firms in Croatia during the period from 2003 to 2015, and test whether investment prior to the anticipated shock makes firms more likely to survive the recession. We find that small and micro firms, which decided to invest, had between 60 and 70% higher survival rates than similar firms that chose not to invest. This claim is supported by both non-parametric and parametric tests in the survival analysis. From a normative perspective this finding could be important in mitigating the negative effects on aggregate demand during strong recessionary periods.

Does the Wage Gap between Private and Public Sectors Encourage Political Corruption?

We present a dynamic network model of corrupt and noncorrupt employees representing two states in the public and private sector. Corrupt employees are more connected to one another and are less willing to change their attitudes regarding corruption than noncorrupt employees. This behavior enables them to prevail and become the majority in the workforce through a first-order phase transition even though they initially represented a minority. In the model, democracy-understood as the principle of majority rule-does not create corruption, but it serves as a mechanism that preserves corruption in the long run. The motivation for our network model is a paradox that exists on the labor market. Although economic theory indicates that higher risk investments should lead to larger rewards, in many developed and developing countries workers in lower-risk public sector jobs are paid more than workers in higher-risk private sector jobs. To determine the long-run sustainability of this economic paradox, we study data from 28 EU countries and find that the public sector wage premium increases with the level of corruption.