Many ideas. Not enough data. Sharing below some early ideas, hoping to take them further when the time is right. Please reach out if you have any thoughts on these or have suggestions on how to make them into more formalized research projects.
The Market for Institutions
What types of institutions do people create to provide the products they demand? Historically, the world has seen three types of institutions: private, public and non-profit. Economic theory provides little guidance as to how and when different types of institutions are created to serve the products and services which people want and need. Are hospitals better kept public? Should churches remain as non-profits? Do household prefer buying their cars from private entities? Any answers to these questions require addressing endless nuances and complete solutions are difficult to establish without partial tradeoffs. This work introduces a phenomenon, called institutional substitution, to provide new lens on the origins of organizations.
Paper – Draft
Presentation – Slides
Incentive Alignment and Investment Distance
Can increased financial intermediation create unintended welfare consequences, when investments produce externalities? This paper tests whether negative externalities matter less when investments take place faraway and whether positive externalities matter more when investments are closer to home. While ESG (environmental, social and governance) factors are being improved upon by corporations and increasingly priced by market participants, little is known about the investors who either bear or do not bear the negative impacts of their investments. As financial intermediation has distanced the investors from the final investment outcome, the resulting increase in financial efficiency might have created unintended consequences. To understand whether those who do not internalize the negative externalities caused by their investments will be a crucial next step for understanding the ethical financial dilemmas that have risen in recent decades.
Proposal – Document
Social Banking and Social Growth
The proposal below is outdated and no longer represents the core of what is needed today to understand the international presence of social banks. It does however, indirectly showcase some of foundational frictions between “finance & growth” literature and the new questions that must be addressed to understand why social banks exist today. In short, the way I was taught to understand finance theory, would have argued (under certain assumptions) that social banks should not exist. However, they do of course exist and they have global presence as well. Overall, it would be great to understand the type of welfare optimal growth such banks contribute to, given their existence. In the future, if enough data were available, i.e. real ESG metrics at the SME level and data on “distance to local social bank”, it would be great to test whether the supply of socially responsible credit is a significant contributor to the existence of socially responsible firms. If this were the case, the results would imply that that the traditional (non-socially focused) banks would have never financed projects that were both NPV positive as well as well as able to address societal needs. As it stands, the Orbis ESG dataset is not detailed enough to conduct this research project. Ultimately, I hope such an exercise could help us imagine the firms we could have had today, if socially responsible finance were politically enabled in our foundational financial system design.
Proposal – Document