Daniel G. Garrett

Daniel G. Garrett
  • Assistant Professor of Finance

Contact Information

  • office Address:

    2328 Steinberg-Dietrich Hall
    3620 Locust Walk
    Philadelphia, PA 19104

Research Interests: Public Finance, Financial Intermediation, Corporate Finance, Taxation

Links: CV, Personal Website

Research

  • Daniel Garrett, Andrey Ordin, James Roberts, Juan Carlos Suarez Serrato (Forthcoming), Tax Advantages and Imperfect Competition in Auctions for Municipal Bonds.

    Abstract: We study the interaction between tax advantages for municipal bonds and the market structure of auctions for these bonds. We show that this interaction can limit a bidder's ability to extract information rents and is a crucial determinant of state and local governments' borrowing costs. Reduced-form estimates show that increasing the tax advantage by 3 pp lowers mean borrowing costs by 9-10%. We estimate a structural auction model to measure markups and to illustrate and quantify how the interaction between tax policy and bidder strategic behavior determines the impact of tax advantages on municipal borrowing costs. We use the estimated model to evaluate the efficiency of Obama and Trump administration policies that limit the tax advantage for municipal bonds. Because reductions in the tax advantage inflate bidder markups and depress competition, the resulting increase in municipal borrowing costs more than offsets the tax savings to the government. Finally, we use the model to analyze a recent non-tax regulation that affects entry into municipal bond auctions.

  • Daniel Garrett, Mark Curtis, Kevin Roberts, Eric Ohrn, Juan Carlos Suarez Serrato (Under Review), Capital Investment and Labor Demand.

    Abstract: We study how tax policies that lower the cost of capital impact investment and labor demand. Difference-in-differences estimates using confidential US Census Data on manufacturing establishments show that tax policies increased both investment and employment, but did not lead to wage or productivity gains. Using a structural model, we show that the primary effect of the policy was to increase the use of all inputs by lowering overall costs of production. The policy further stimulated production employment due to the complementarity of production labor and capital. Supporting this conclusion, we find that investment is greater in plants with lower labor costs. Our results show that recent tax policies that incentivize capital investment do not lead manufacturing plants to replace workers with machines.

  • Daniel Garrett (Working), Conflicts of Interest in Municipal Bond Advising and Underwriting.

    Abstract: A regulation following from Dodd-Frank prohibits municipal financial advisors from simultaneously acting as municipal bond underwriters. Using a difference-in-differences approach, I test whether this reduction in advisor privileges affects financial advice and bond outcomes. Bonds with potential dual advisor-underwriters see financing costs fall by 11.4 basis points (5.3% of average yield) after the advisor is no longer allowed to underwrite. The decline is concentrated in opaque school district bonds and new money issues. Non-advisors compete for underwriting business more aggressively since they are less likely to face adverse selection after previously conflicted advisors encourage creditworthy borrowers to obtain credit ratings.

  • Daniel Garrett, Eric Ohrn, Juan Carlos Suarez Serrato (2020), Tax Policy and Local Labor Market Behavior, American Economic Review: Insights, 2 (1), pp. 83-100. 10.1257/aeri.20190041

    Abstract: Since 2002, the US government has encouraged business investment using accelerated depreciation policies that significantly reduce investment costs. We provide the first in-depth analysis of this stimulus on employment and earnings. Our local labor markets approach exploits cross-industry variation in policy generosity interacted with county-level industry location data. This strategy identifies the partial equilibrium effects of accelerated depreciation. Places that experience larger decreases in investment costs see an increase in employment and earnings. In contrast, the policy does not have positive effects on earnings-per-worker. Overall, our findings suggest federal corporate tax policy has large effects on local labor markets.

  • Daniel Garrett and Juan Carlos Suarez Serrato (2019), How Elastic is the Demand for Tax Havens? Evidence from the US Possessions Corporations Tax Credit, AEA Papers and Proceedings, 109, pp. 493-499. 10.1257/pandp.20191044

    Abstract: Why do some firms adopt certain tax havens and how sensitive is the demand for tax havens? We address these questions by studying how the repeal of Section 936 tax credits affected firms with affiliates in Puerto Rico. We first describe the characteristics of US multinationals that were exposed to Section 936. We then show that the market value of exposed firms decreased after losing access to Section 936, implying that firms could not perfectly substitute to other tax havens. Finally, we find that firms exposed to Section 936 did not respond by expanding their network of tax havens.

Teaching

Past Courses

  • FNCE203 - ADVANCED CORP FINANCE

    This course discusses the theory and empirical evidence related to the various investment and financing policies of the firm and attempts to improve decision-making ability in these areas. This course covers aspects of financial management not covered in FNCE 100, including mergers and acquisitions, corporate reorganizations, financial planning and working capital management. It also offers a more rigorous coverage of topics discussed in FNCE 100, such as investment under uncertainty, cost of capital, capital structure, pricing of selected financial instruments and dividend policy.

  • FNCE2030 - Advanced Corp Finance

    This course discusses the theory and empirical evidence related to the various investment and financing policies of the firm and attempts to improve decision-making ability in these areas. This course covers aspects of financial management not covered in FNCE 1000, including mergers and acquisitions, corporate reorganizations, financial planning and working capital management. It also offers a more rigorous coverage of topics discussed in FNCE 1000, such as investment under uncertainty, cost of capital, capital structure, pricing of selected financial instruments and dividend policy.

  • FNCE7030 - Advanced Corp Finance

    (Formerly FNCE 726) The objective of this course is to study the major decision-making areas of managerial finance and some selected topics in financial theory. The course reviews the theory and empirical evidence related to the investment and financing policies of the firm and attempts to develop decision-making ability in these areas. This course serves as an extension of FNCE 6110. Some areas of financial management not covered in FNCE 6110 are covered in FNCE 7030. These may include leasing, mergers and acquisitions, corporate reorganizations, financial planning, and working capital management, and some other selected topics. Other areas that are covered in FNCE 6110 are covered more in depth and more rigorously in FNCE 7030. These include investment decision making under uncertainty, cost of capital, capital structure, pricing of selected financial instruments and corporate liabilities, and dividend policy.

Activity

Latest Research

Daniel Garrett, Andrey Ordin, James Roberts, Juan Carlos Suarez Serrato (Forthcoming), Tax Advantages and Imperfect Competition in Auctions for Municipal Bonds.
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