NYU Stern

Fall 2011 


Fall 2011 Research Grant Awards

November 1, 2011

The Center for Global Economy and Business offers a small number of limited research grants to Stern faculty for projects related the interests of its research groups. In the Fall of 2011, the Center completed its first grant cycle. All full-time faculty were invited to apply for grants. In November, nine research grants were awarded to a total of eleven Stern faculty members.

The following Stern faculty received Fall 2011 Center research grants (sum in parentheses):

Fall 2011 Research Grants
Resulting Papers and Materials
  • Viral Acharya
    • The 'Greatest' Carry Trade Ever? Understanding Eurozone Bank Risks

    • Abstract: We show that eurozone bank risks during 2007-2013 can be understood as a form of “carry trade” behavior. Bank equity returns load positively on peripheral (Greece, Ireland, Portugal, Spain, and Italy, or GIPSI) bond returns and negatively on German government bond returns, a position that generated “carry” until the deteriorating GIPSI bond returns impacted bank balance sheets. The positive GIPSI loadings correlate with banks’ holdings of GIPSI bonds, as well as the negative German loading with banks’ short-term debt exposures. We find support for risk-shifting moral hazard and regulatory arbitrage motives at banks in that carry trade behavior is stronger for large banks and banks with low capital ratios and high risk-weighted assets. We also evaluate alternative hypotheses such as the home bias of peripheral banks and suasion by domestic governments.

  • Marcin Kacperczyk and Philipp Schnabl
    • How Safe are Money Market Funds?

    • Abstract:
      We examine the risk-taking behavior of money market funds during the financial crisis of 2007-10. We show that as a result of the crisis: (1) money market funds experienced an unprecedented expansion in their risk taking opportunities; (2) funds had strong incentives to take on risk because fund inflows were highly responsive to fund returns; (3) funds sponsored by financial intermediaries that also offered non-money market mutual funds and other financial services took on less risk, consistent with their sponsors internalizing concerns over negative spillovers to the rest of their business in case of a run; (4) funds sponsored by financial intermediaries with limited financial resources took on less risk, consistent with their sponsors having limited ability to stop potential runs. These results suggest that money market funds' risk-taking decisions trade off the benefits of fund inflows with the risk of causing negative spillovers to other parts of fund sponsors' business.

  • Robin Lee
    • Insurer Competition and Negotiated Hospital Prices

    • Abstract:
      We examine the impact of increased health insurer competition on negotiated hospital prices. Insurer competition can lead to lower premiums and reduced industry surplus, thereby depressing hospital prices; however, hospitals may also leverage fiercer insurer competition when bargaining in order to negotiate higher prices. We rely on a theoretical bargaining model to derive a regression equation relating negotiated prices to the degree of insurer competition, and use the presence of Kaiser Permanente in a hospital's market as a measure of insurer competition. We estimate a model of consumer demand for hospitals and use it to derive many of the other independent variables specified in the regression equation. Leveraging a unique dataset on negotiated prices between hospitals and commercial insurers in California in 2004, we find that increased insurer competition reduces hospital prices on average, but has a positive and empirically meaningful effect on the prices of attractive and high utility generating hospitals. This heterogeneous effect across hospitals - which has not been emphasized in the recent literature on hospital-insurer bargaining - provides incentives for hospital investment and consolidation, and implies that hospital market power can lead to high input prices even in markets where many insurers are present.

  • Robin Lee
    • Hospital and Physician Prices and Treatment Choice in Labor and Delivery

    • Abstract:
      We study the effect of changing the price differential for cesarean versus vaginal deliveries paid by commercial insurers to hospitals and physicians on cesarean rates. Using eight years of claims data containing negotiated prices, we exploit within-hospital-physician-group price variation arising from contract renegotiations over time. We find that increasing the physician price differential by $100 yields a 0.55 percentage point (1.9%) increase. Increasing the hospital price differential by $1000 for births delivered by hospital-exclusive physician groups yields a 1.1 percentage point (3.7%) increase. Our findings have implications for understanding hospital-physician principal-agent problems and the future of accountable care organizations.

  • Gabriel Natividad
    • Quotas, Productivity and Prices: The Case of Anchovy Fishing

    • Abstract:
      I exploit a 2009 reform that introduced individual fishing quotas (catch shares) for Peruvian anchovy - the largest fishery in the world - to assess the causal impact of production quotas on within-firm productivity and market prices. Unique features of the data allow me to create two alternative counterfactuals: (i) anchovy fishing operations in a region of the country that was mandated to implement quotas with a delay, and (ii) variation in quota allocations across ships. I find that quotas do not increase within-asset or within-firm productivity in quantities. Instead, a 200% increase in anchovy prices benefits extraction firms through higher revenues, consistent with two mechanisms enacted by individual fishing quotas: more orderly industry operations reducing excess supply and an increase in bargaining power of extraction firms with respect to fish-processing. Several market characteristics across geographies differentially affect market prices after the quota regime. Supplementary evidence on fewer operational infractions, higher product quality, and a lower banking delinquency observed during the quota regime suggests the existence of efficiency gains rather than purely rent transfers.