"Do Foreign Gifts Buy Corporate Political Action? Evidence from the Saudi Crude Discount Program"
Between 1991 and 2003, Saudi Aramco sold its crude to U.S. refineries at a substantial discount relative to Asian refineries at a total cost of approximately 8.5 billion USD. This study examines where rents accrued when Saudi Aramco sold its crude at a discount and how discount receipts affected the political behavior of refiners. Using variation in discount receipts across refineries over time, I find that the discount rents were entirely captured by refiners as profits and were not passed through to consumers in the form of lower retail gasoline prices. There is also evidence that the discount policy affected refiners’ political action. In particular, I find that discount receipts are associated with an increase in refiners’ overall political donations, and that other types of profit shocks were not associated with changes in political giving. This suggests that the effect of the discount was not simply a consequence of the increase in refining profits. Finally, I show that the discount resulted in a reallocation of contributions toward members of congressional committees that reviewed bills of interest to Saudi Arabia and away from those who received donations from pro-Israel interest groups.
"Can Hiring Quotas Work? The Effect of the Nitaqat Program on the Saudi Private Sector"
In the past two years, Saudi Arabia has dramatically extended its active labor market policies in order to address the issue of growing youth unemployment and low Saudi participation in the private sector workforce. This paper studies the 2011 introduction of the Nitaqat program, which imposed a quota system for Saudi hiring at private firms. The analysis uses a unique dataset from the Saudi Ministry of Labor on the full universe of Saudi private-sector firms and exploits kinks in firm incentives generated by the program to examine the effects of this quota policy on nationalization, firm size, and firm exit. I complement the regression kink results with a differences- in-differences approach to estimate the overall effects of the program. The analysis finds that the program succeeded in increasing native employment but also had significant negative effects on firms. Program compliance rates were high, with firms increasing their Saudization rate by 0.2 percentage points on average for every percentage point increase required by the quota. Quota compliance was primarily accomplished by hiring Saudis, and Nitaqat was responsible for the addition of an estimated 96,000 Saudi workers to the private sector workforce over the 16 month period. There were also significant costs, however, and the program caused approximately 11,000 firms to shut down, raising exit rates by nearly 50%. The program also decreased total employment among surviving firms, and overall private sector employment decreased by 418,000 workers.
Research in Progress
"Import, Baby, Import: The Economic Impact of Global Conflict on the U.S. Domestic Refined Product Market"
One of the primary arguments in favor of the expansion of offshore drilling in the U.S. is that energy independence would make the U.S. less vulnerable to supply disruptions due to international and civil conflict in oil-exporting countries. This study uses variation in the sources of oil supplies across refineries to estimate the effect of conflict in exporting countries on refiner profits and local retail gasoline prices. Preliminary results suggest that large conflicts do cause supply interruptions, but that these disruptions have little differential effect on the refiners and markets supplied by countries in which conflicts occur.
"The Impact of Global Climate Change on Mortality and Health" (with Laura Ralston)
This paper estimates the impact of climate change on global health-related welfare. In particular, we examine the relationship between annual climate fluctuations and human mortality, electricity consumption, net migration, and overseas development aid (ODA). We use historical temperature and precipitation fluctuations within countries to identify the effect of climate changes on these outcomes, and then use two different climate models to predict the effects on future mortality and other outcomes. The results show a strong impact of extreme temperatures on mortality, with cold days associated with an increase in mortality among infants and the elderly and hot days increasing mortality in all age groups. Electricity usage is highest in years with more cold days in poor countries and lowest for years with more hot days. Precipitation fluctuations are correlated with migration and aid flows, with low precipitation leading to greater migration out of autocratic nations and greater ODA directed to Asian nations, while high precipitation is associated with an increase in per capita ODA to poor countries.