Can a temporary negative shock generate long-lasting effects on economic activities? To show causal evidence, we utilize data from Japanese multinational corporations (MNCs) and explore the economic impact of the unexpected escalation of an island dispute between China and Japan in 2012. Our...

Economic volatility varies substantially across democracies. We study how the difference between federal and unitary systems of government can contribute to these variations. We show empirically that a higher degree of federalism is associated with less volatility in both economic growth and...