【 The Digital Star Seminar Series No.29 】Policy Deterrence

Date: 11 November 2022 (Fri) 
Time: 9:00am - 10:30am (Hong Kong Time, UTC+8)
Platform: Tencent Meeting (ID 343-921-471)

Host: Prof. Miaojun Wang (School of Economics, Zhejiang University)

Presenter: Prof. Mo Xiao (University of Arizona)

Abstract：

This paper provides both a theory and empirical evidence that firms act strategically to preempt unfavorable government policies in the context of the U.S. broadband investment. We build a dynamic model of an incumbent politician choosing policies for voter support and firms making investment in anticipation of its impact on voter support for the next period’s incumbent politician and accordingly his policy. To test the model, we compile all states' financial and regulatory policies to encourage entry in the broadband industry, as well as local-level broadband investment data in 2010 – 2019. We first document a robust empirical pattern that more investments occur in electorally competitive counties, controlling for various local attributes. We argue that the firms’ intention to influence future policies can explain this pattern by showing that: 1) governors are more likely to implement pro-entry policies when they face re-election pressure; 2) large firms respond to politics, but not to policies, while small firms do the opposite. Firms' actions to deter future pro-entry policies widen the digital divide between urban and rural areas by shifting investment away from rural areas, which tend to be not electorally competitive.

Intro to Prof. Mo Xiao:

Mo Xiao is a Professor of Economics at the University of Arizona, where she teaches classes in industrial organization. Professor Xiao's research applies microeconomic theory and econometrics to analyze various issues on firm behavior and market operation. She has worked on topics concerning firms' strategic provision of information and the impact of public policies on firms' entry, exit and quality choices. Her most recent research is on entry and competition in the U.S. telecommunication market. Her papers have been published in journals including the American Economic Review, American Economic Journal - Microeconomics, and RAND Journal of Economics. She is a co-editor at the International Journal of Industry Organization and Journal of Economics and Management Strategy. She is also an associate editor at Journal of Economic Behavior and Organization.

Organization：

- The Chinese University of Hong Kong-Zhejiang University Joint Research Center for Digital Economy

- China Digital Economy Research Center of School of Economics, Zhejiang University

- Zhejiang University Digital Economy Innovation Research Team

Intro to The Digital Star Seminar Series：

The Digital Star Seminar Series is co-hosted by the China Digital Economy Research Center of School of Economics, Zhejiang University, and the Chinese University of Hong Kong-Zhejiang University Joint Research Center for Digital Economy. This series of seminars will study the development of the digital economy and China's economic transformation based on the practice of China's digital transformation. We will invite domestic and overseas scholars to share and discuss the latest research on the digital economy and the Chinese economy. We hope that this academic platform can become a paradise for the study of the digital economy. More importantly, it can generate insights that significantly impact the digital economy and Chinese economy, which will help promote digital transformation and high-quality economic development in Chinese society.