Jason A. Snyder

Ethical Spillovers in Firms: Evidence from Vehicle Emissions Testing

In this paper, we explore how organizations influence the unethical behavior of their employees. Using a unique data set of over three million vehicle emissions tests, we find strong evidence of ethical spillovers from firms to individuals. When inspectors work across different organizations, they adjust the rate at which they pass vehicles to the norms of those with whom they work. These spillovers are strongest at large facilities and corporate chains, and weakest for the large-volume inspectors. These results are consistent with the economics literature on productivity spillovers from organizations and peers and suggest that managers can influence the ethics of employee behavior through both formal norms and incentives. The results also suggest that employees have persistent ethics that limit the magnitude of this influence. These results imply that if ethical conformity is important to the financial and legal health of the organization, managers must be vigilant in their hiring, training, and monitoring to ensure that employee behavior is consistent with firm objectives.

Discretion and Manipulation by Experts: Evidence from a Vehicle Emissions Policy Change

Environmental regulation seeks to limit pollution through strict emissions thresholds for existing cars, yet it remains unclear how frequently inspectors enforce these regulations and what impact test manipulation has on policy efficacy. We demonstrate (1) that there is a distinct discontinuous drop in the distribution of emissions results at the regulatory threshold (2) that when the state tightens emissions standards, over 50% of the vehicles newly at risk for failure now pass instantaneously after the regulation changes. These improvements cannot be explained by legitimate repairs but are consistent with facilities exploiting procedural discretion in order to help consumers evade the strengthened regulations.

Losing Hurts: The Happiness Impact of Partisan Electoral Loss

Partisan identity shapes social, mental, economic, and physical life. Using a novel dataset, we study the consequences of partisan identity by examining the immediate impact of electoral loss and victory on happiness and sadness. Employing a quasi-experimental regression discontinuity model we present two primary findings. First, elections strongly affect the immediate happiness/sadness of partisan losers, but minimally impact partisan winners. This effect is consistent with psychological research on the good-bad hedonic asymmetry, but appears to dissipate within a week after the election. Second, the immediate happiness consequences to partisan losers are relatively strong. To illustrate, we show that partisans are affected two times more by their party losing the 2012 U.S. Presidential Election than both respondents with children were to the Newtown shootings and respondents living in Boston were to the Boston Marathon bombings. We discuss implications regarding the centrality of partisan identity to the self and its well-being.

Unethical Demand and Employee Turnover

This paper argues that consumer demand for unethical behavior such as fraud can impact employee turnover through market and psychological forces. Widespread conditions of unethical demand can improve career prospects for employees of unethical firms through higher income and stability associated with firm financial health. Similarly, unethical employees enjoy increased tenure from the financial and psychological rewards of prosocial behavior toward customers demanding corrupt or unethical behavior. We specifically examine the well-documented unethical demand for fraud in the vehicle emissions testing industry, and its impact on employee tenure. We use data from tests conducted by several thousand licensed inspectors to demonstrate that fraudulent employees and employees of fraudulent firms enjoy longer tenure. These results suggest further work to separate the multiple psychological and economic mechanisms likely driving our findings.

Do Powerful Politicians Really Cause Corporate Downsizing

Cohen, Coval, and Malloy (2011) suggest that increased government spending crowded out private corporate investment by publicly-traded corporations, as identified by changes in Congressional chairmanships. Yet, the same inference would obtain in a placebo that begins years earlier, the capital-expenditure decline was primarily a 1987-92 Texas effect (following a 1980-86 oil price decline), and the standard errors were not clustered by state.

Information Disclosure and Firm Performance: Evidence from the Dialysis Industry

We study the impact of information disclosure policies on firm performance by exploiting a policy change that provides plausibly exogenous “shocks” to firms’ reputations based on their allocation to coarse performance categories. Medicare grades dialysis firms using three coarse performance categories based on patient survival rates: worse than expected, as expected, and better than expected. We exploit the underlying continuous performance measures used to create these categories to implement a regression discontinuity design. We find firms that just barely fall into the worse than expected category subsequently experience a reduction in patient mortality rates. We provide suggestive evidence that this improvement is driven largely by strategic patient selection. There is no impact of ratings on overall patient volumes, but facilities receiving poor grades treat fewer well-informed patients post- disclosure. We do not find comparable supply-side or demand-side effects for firms that just barely fall into the better than expected category. The overall evidence is consistent with disappointing information being a significant motivator of firm behavior.

The Historical Roots of Firm Access to Finance: Evidence from the African Slave Trade

This paper shows that access to finance is a crucial factor in explaining the link between the historical African slave trade and current GDP. We show that (1) the slave trade is strongly linked to modern firm access to finance, (2) the slave trade is associated with reduced access to both formal and trade credit, (3) ethnic fractionalization and intraethnic political centralization are plausible historical channels for this relationship, and (4) while the slave trade is strongly related to access to finance, it cannot explain most other business obstacles, suggesting that long-term shocks to culture are exceptionally important for finance.

The Empirics of Learning from Failure

The ability to learn from experience is central to an organization’s performance. A set of qualitative management studies argues that learning from failure is the exception rather than the rule. Another literature, using econometric methods, finds strongly statistically- and economically-significant effects. There are many possible explanations for this discrepancy, but we argue that one contributor is that a problem with one of the standard empirical approaches to identifying learning from failure may result in erroneously significant results. We generate simulated placebo data in which no learning takes place and show that the standard approach yields strong significant results. We provide a simple example that provides intuition for why this might be. We then propose and implement improved specifications using data on liver transplantation and find no direct evidence of learning from failure.