NBER

Filippo Mezzanotti

Kellogg School of Management
4389 Global Hub
2211 Campus Drive
Evanston, IL 60201

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Institutional Affiliation: Northwestern University

NBER Working Papers and Publications

November 2019Financing Entrepreneurship through the Tax Code: Angel Investor Tax Credits
with Sabrina T. Howell: w26486
A central issue in public finance is the tradeoff between maintaining tax revenues and using the tax code to incentivize particular economic activities. One important dimension of this tradeoff is whether incentive policies are used in practice as policymakers intend. This paper examines one particular tax program that many U.S. states use to stimulate entrepreneurship. Specifically, angel tax credits subsidize wealthy individuals’ investments in startups. This paper finds that these programs have no measurable effect on local entrepreneurial activity or beneficiary company outcomes, despite increasing some measures of angel activity. This appears to reflect the programs failing to screen out financially unconstrained firms and often being used for tax arbitrage. Over 90 percent of benefic...
December 2018Capital Destruction and Economic Growth: The Effects of Sherman's March, 1850-1920
with James J. Feigenbaum, James Lee: w25392
Using General William Sherman’s 1864–65 military march through Georgia, South Carolina, and North Carolina during the American Civil War, this paper studies the effect of capital destruction on medium and long-run local economic activity, and the role of financial markets in the recovery process. We match an 1865 US War Department map of Sherman’s march to county-level demographic, agricultural, and manufacturing data from the 1850-1920 US Censuses. We show that the capital destruction induced by the March led to a large contraction in agricultural investment, farming asset prices, and manufacturing activity. Elements of the decline in agriculture persisted through 1920. Using information on local banks and access to credit, we argue that the underdevelopment of financial markets played a ...
July 2017Private Equity and Financial Fragility during the Crisis
with Shai Bernstein, Josh Lerner: w23626
Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing greater equity and debt inflows. The effects are stronger among financially constrained companies and those whose private equity investors had more resources at the onset of the crisis. PE-backed companies consequentially experienced higher asset growth and increased market share during the crisis.

Published: Shai Bernstein & Josh Lerner & Filippo Mezzanotti, 2019. "Private Equity and Financial Fragility during the Crisis," The Review of Financial Studies, vol 32(4), pages 1309-1373.

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