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    Gennaioli, Nicola, Andrei Shleifer, and Robert W Vishny. 2013. “A Model of Shadow Banking.” Journal of Finance 68 (4): 1331-1363. Abstract

    We present a model of shadow banking in which banks originate and trade loans, assemble them into diversified portfolios, and finance these portfolios externally with riskless debt. In this model: outside investor wealth drives the demand for riskless debt and indirectly for securitization, bank assets and leverage move together, banks become interconnected through markets, and banks increase their exposure to systematic risk as they reduce idiosyncratic risk through diversification. The shadow banking system is stable and welfare improving under rational expectations, but vulnerable to crises and liquidity dry-ups when investors neglect tail risks.

    Gennaioli, Nicola, Rafael LaPorta, Florencio Lopez-de-Silanes, and Andrei Shleifer. 2013. “Human Capital and Regional Development.” Quarterly Journal of Economics 128 (1): 105-164. Abstract

    We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world’s surface and 96 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and human capital externalities are essential for understanding the data.

    Algan, Yann, Pierre Cahuc, and Andrei Shleifer. 2013. “Teaching Practices and Social Capital.” American Economic Journal: Applied Economics 5 (3): 189-210. Abstract

    We use several data sets to consider the effect of teaching practices on student beliefs, as well as on organization of firms and institutions. In student level data, teaching practices (such as teachers lecturing versus students working in groups) exert a substantial influence on student beliefs about cooperation both with each other and with teachers. In cross‐ country data, teaching practices shape both beliefs and institutional outcomes. The relationship between teaching practices and student test performance is nonlinear. The evidence supports the idea that progressive education promotes social capital.

    Schwartzstein, Joshua, and Andrei Shleifer. 2013. “An Activity-Generating Theory of Regulation.” Journal of Law and Economics 56 (1): 1-38. Abstract

    We propose an activity-generating theory of regulation. When courts make errors, tort litigation becomes unpredictable and as such imposes risk on firms, thereby discouraging entry, innovation, and other socially desirable activity. When social returns to innovation are higher than private returns, it may pay the society to generate some information ex ante about how risky firms are, and to impose safety standards based on that information. In some situations, compliance with such standards should entirely preempt tort liability; in others, it should merely reduce penalties. By reducing litigation risk, this type of regulation can raise welfare.

    LaPorta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer. 2008. “The Economic Consequences of Legal Origins.” Journal of Economic Literature 46 (2): 285-332. Abstract

    In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country’s laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.