by Patrick L. Warren

Yesterday afternoon, SIOE sponsered a session at the ASSAs in San Francisco entitled "Institutions, Organization, and Entrepreneurship", organized by my colleague Andy Hanssen. In case you weren't able to make it, I wanted to give a brief summary of the papers, which many of you should find interesting. I'll do two papers today and save the other two for next week.

First up, a paper by Acemoglu, Hassan, and Tahoun entitled "The Power of the Street: Evidence from Egypt's Arab Spring." The paper has two streams, each focussing on the "Arab Spring" events in Egypt in 2011-2013. The first traces the relationship between protest size/scope and the stock market performance of firms connected to the major political powers: Mubarak's NDP, the Egyptian military, and the Muslim Brotherhood. They find that when protests grow, the returns of the firms connected to the group in power fall, as power shifts from Mubarak to the Muslim Brotherhood and finally to the military. In the second stream, they analyze the relationship between the number of protesters and the the leads and lags of twitter mentions of Tahrir square. They find a strong relationship between tweets and actual protesters, in real time, suggesting that social media had an important role in organizing these protests.

Second, a paper by Jensen, Leth-Petersen, and Nanda, "Housing Collateral, Credit Constraints and Entrepreneurship - Evidence from a Mortgage Reform." They use microdata on workers in Denmark to trace the effects of a mortgage law change that allowed a subset of owners to borrow more easily against the equity in their homes. Importantly, these owners were not actually richer, they merely had more liquid access to their savings in equity. Thus, they can examine whether increased liquidity changes workers' propoensity to start a new business. They find that significant increases in liquidity had nearly negligible effects on entrepreneurship: "a $30,000 increase in credit availability led to a 12 basis point increase in entrepreneurship, equivalent to a 4% increase in the number of entrepreneurs." Futhermore, the marginal entrepreneurs did not seem to start particular promising businesses. "The new entrants were more likely to start businesses in sectors where they had no prior experience, and were more likely to fail than those who did not benefit from the reform."

Both these papers are quite interesting. I commend them to your attention.