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Sector Indices May Not Tell the Full Financial Story of S&P 500 Companies

Investors and analysts often compare companies operating within the same sector, assuming that businesses in similar industries share important financial characteristics. However, a study examining all 500 companies in the S&P 500 suggests that conventional sector classifications capture only part of a company’s financial profile.

Researchers in Spain analysed fiscal year 2022 financial statements to investigate how closely companies’ financial structures corresponded with their assigned sectors. The analysis used accounting ratios covering several important dimensions of corporate performance, including profitability, leverage, liquidity, operational efficiency, and cash generation.

The researchers first examined how strongly these financial ratios differed across sectors. They then used seven machine-learning models to determine whether companies’ sectors could be predicted solely from their accounting information. If sector membership closely reflected financial structure, the models would be expected to classify companies with relatively high accuracy.

The best-performing model, K-nearest neighbours, achieved a validation accuracy of 49.3%. This was substantially higher than the 14.8% majority-class baseline, showing that accounting characteristics do contain meaningful information about sector membership. However, the accuracy remained too low for sector classifications to be considered a complete representation of companies’ underlying financial structures.

The researchers therefore turned to unsupervised machine learning, grouping companies according to similarities in their financial characteristics rather than their existing sector labels. “Hence, we used unsupervised learning to group firms by financial similarity rather than by their existing labels,” said corresponding author Ricardo Reier Forradellas of the Catholic University of Ávila. The approach identified nine economically interpretable groups of companies.

Each of the nine clusters contained companies drawn from more than one conventional sector, highlighting financial similarities that crossed traditional industry boundaries. The clusters also generally displayed less internal variation than standard sectors across most of the accounting ratios examined. Nevertheless, some familiar sector-specific financial patterns remained visible, with utilities, real estate, and financial companies more readily identifiable than firms belonging to several other sectors.

“Our findings do not mean that sector classifications are obsolete,” explained Forradellas. “They show that sectors tell only part of the story. When the aim is to compare companies by financial structure, accounting-based peer groups can provide a useful additional perspective.” Such groupings could therefore help investors and analysts identify financially comparable companies that may otherwise be separated by conventional sector classifications.

The researchers also compared company cluster assignments across subsequent annual reporting periods and found only moderate persistence over time, suggesting that financial peer groups can change as companies’ circumstances evolve. “This indicates that these peer groups should be updated rather than treated as fixed categories,” Forradellas added. The researchers conclude that accounting-based clustering can complement existing sector taxonomies, providing an additional tool for financial benchmarking, company peer comparisons, and broader financial analysis.

More information: Ricardo Reier Forradellas et al, Characterization of S&P 500 companies by sector using artificial intelligence: Statistical evidence and machine learning application, The Journal of Finance and Data Science. DOI: 10.1016/j.jfds.2026.100193

Journal information: The Journal of Finance and Data Science Provided by KeAi Communications Co., Ltd.

Nearly 1 in 5 Medicaid-Eligible Adults May Lose Health Coverage Due to Unstable Work Hours

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A new study suggests that nearly one in five Medicaid-eligible adults in expansion states could be at risk of losing health coverage because they may not consistently meet new federal work requirements. Women, unmarried adults, White individuals, and people with lower levels of education were among those more likely to have insufficient or inconsistent work hours.

The requirements, established under the One Big Beautiful Bill Act (OBBBA), are scheduled to take effect nationwide on January 1, 2027. Adults covered through the Affordable Care Act’s Medicaid expansion will generally need to demonstrate at least 80 hours per month of work, volunteering, education, or job training, although certain groups will be exempt. The broader legislation is expected to reduce federal Medicaid spending over the next decade substantially.

Published in JAMA Health Forum, the study found that 19.8 percent of Medicaid-eligible adults in expansion states were at risk of failing to meet the requirements. About 13.6 percent were close to the minimum work-hour threshold, while 7.6 percent reported highly inconsistent work hours. Researchers warned that these patterns could put millions of people at risk of losing coverage once the requirements are implemented.

The findings also challenge the perception that Medicaid recipients who would be subject to the requirements are largely unemployed. More than 66 percent of applicable recipients were participating in the labour force, and among those workers, more than 85 percent reported working an average of more than 35 hours per week. However, meeting an average weekly threshold does not necessarily mean workers can consistently satisfy the requirement every month.

Many Medicaid recipients work in lower-wage industries such as retail, hospitality, food service, healthcare, and agriculture, where schedules can be unpredictable and hours may fluctuate considerably. Workers may also face difficulties involving transportation, affordable childcare, health problems, or limited control over their schedules. These circumstances can make maintaining and documenting 80 hours of qualifying activity each month difficult even for people who are regularly employed.

Researchers analysed federal social and economic data from 2023 to 2025 covering non-elderly adults who were plausibly eligible for Medicaid across the 40 Medicaid expansion states and Washington, DC. They identified people whose weekly hours were close to the 20-hour threshold or whose reported hours varied substantially from their usual schedules. Risk also differed considerably among states, reflecting variations in employment patterns and working conditions.

Demographic differences were also evident. Women had a 22 percent higher probability of insufficient or inconsistent work hours than men, while married enrollees had an 18 percent lower probability of noncompliance than unmarried adults. People with higher education levels faced lower risks than those without a high school diploma. Eligible Black and Hispanic recipients also showed lower risks of noncompliance than eligible White recipients. Single mothers with children aged 14 or older could be particularly vulnerable because the parental exemption generally applies only to parents of younger children or children with recognised disabilities.

The researchers cautioned that their estimates may understate the number of people affected. States must examine at least the previous month of qualifying activity when determining compliance before a Medicaid application and may review as many as three months. Longer look-back periods could make eligibility particularly difficult for people with fluctuating schedules, gig work, part-time employment, or newly obtained jobs, potentially delaying access to Medicaid and widening disparities among workers with unstable hours.

More information: Paul Shafer et al, Medicaid Work-Reporting Requirements Under HR 1 and Insufficient or Inconsistent Work Hours, JAMA Health Forum. DOI: 10.1001/jamahealthforum.2026.2938

Journal information: JAMA Health Forum Provided by Boston University School of Public Health

Why Bigger Isn’t Always Better for Bank Networks

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Interbank lending can help banks cope with unexpected withdrawals by allowing connected institutions to share liquidity when it is needed. But these connections can also introduce vulnerabilities. If banks reduce their own reserves because they expect to rely on their partners, financial stress at one institution may spread across the wider network.

In a new study published in Risk Sciences, researchers developed a theoretical model to explore why banks form interbank credit networks and how the size of those networks affects market efficiency. Their findings suggest that bigger networks do not necessarily produce better outcomes, because the advantages of sharing risk can eventually be outweighed by strategic behaviour among participating banks.

The model considers two closely related decisions made by banks. First, each bank determines how much money to keep in reserve, balancing the potential profits from lending more money against the need to withstand unexpected liquidity shocks. Second, banks decide whether participating in an interbank network would leave them better off than operating independently.

The researchers found that membership in a network creates both cooperation and competition. Banks benefit from being able to share liquidity risk with their partners, which can provide protection when unexpected withdrawals occur. At the same time, individual banks may have an incentive to reduce their own reserves and depend more heavily on the liquidity held by other institutions in the network.

The researchers describe this strategic behaviour as a “free-riding” effect. Although each bank can benefit individually from holding fewer reserves and putting more funds into potentially profitable lending, widespread free-riding can weaken the network as a whole. Lower reserves can reduce banks’ ability to survive liquidity shocks and may ultimately decrease their expected profits.

Network size therefore plays an important role. In smaller interbank networks, the advantages of sharing liquidity risk tend to outweigh the negative effects of free-riding. However, as additional banks join, free-riding becomes increasingly significant. The researchers found a rise-and-fall relationship between expected profits and network size, suggesting that relatively small networks can sometimes be Pareto optimal—where no participating bank can be made better off without making another worse off.

The study also considers networks containing banks of different sizes. Under certain conditions, smaller and larger institutions may have incentives to establish connections even when their deposit sizes differ considerably. The findings offer a theoretical explanation for core-periphery structures commonly observed in banking systems, where a relatively small number of highly connected institutions interact with a much larger group of smaller banks.

The researchers also considered the implications for financial regulation. Implicit government guarantees may encourage institutions to take greater risks and become excessively interconnected because they expect support during periods of financial distress. The findings suggest that appropriately designed capital requirements could help counteract free-riding, discourage excessive interconnectedness, and improve market efficiency in larger banking networks. Overall, the study highlights an important trade-off: interbank connections can strengthen financial institutions through risk-sharing, but expanding those networks too far may create incentives that undermine the very benefits they are intended to provide.

More information: Tongkui Yu et al, Interbank network and market efficiency, Risk Sciences. DOI: 10.1016/j.risk.2026.100059

Journal information: Risk Sciences Provided by KeAi Communications Co., Ltd.

Customer Loyalty Programs Aren’t One-Size-Fits-All, Research Suggests

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Loyalty programs (LPs) can offer valuable savings to households facing rising cost-of-living pressures, but their benefits are not the same for every shopper. As more consumers seek discounts, coupons, gifts and vouchers to reduce everyday expenses, retailers are increasingly investing in these programs. Globally, the loyalty management market is projected to grow from US$17.38 billion in 2026 to US$51.65 billion by 2034.

New research led by Edith Cowan University (ECU) analysed survey data from more than 800 Australian supermarket customers to understand what drives engagement with loyalty programs and how effectively they encourage loyalty to retailers. The findings suggest that customers’ individual characteristics, circumstances and ability to take advantage of rewards all influence whether a program succeeds.

ECU Professor of Marketing and Service Science Sanjit Roy said retailers often reinforce loyalty program use by reminding customers to scan their rewards cards at checkouts. However, customers may question whether the rewards they receive justify sharing their personal data, particularly when discounts and promotions are not sufficiently personalised to their shopping habits.

Despite these concerns, the researchers found that engagement with loyalty programs can lead to stronger engagement with retailers and greater customer loyalty, both in shoppers’ attitudes and purchasing behaviour. However, customers’ ability to wait for discounts can significantly affect how much they benefit from a program.

Dr Saalem Sadeque, Course Coordinator and Lecturer in Marketing at ECU, said a shopper who expects a frequently purchased product to go on sale may be able to postpone buying it and purchase more when the discount arrives. By contrast, someone who urgently needs an essential product, or cannot afford to buy in bulk, may miss the savings despite being loyal to the retailer.

The research found that successful loyalty program engagement depends on a combination of factors, including trust in the retailer, commitment, perceived benefits, the ability to wait for discounts and the ability to search for better deals across different retailers. “Our findings demonstrate that no one factor leads to engagement but rather a combination of all these factors,” Professor Roy said. Poor engagement can also make it more difficult for retailers to predict customer spending and cash flow.

For retailers, transparency and personalisation may be particularly important. Professor Roy said supermarkets should be transparent about pricing and business practices, provide strong customer service and consistently deliver on their brand promises. Retailers could also make better use of customer data to provide benefits that are genuinely relevant to individual shoppers rather than treating customers simply as data points.

Ultimately, the researchers argue that loyalty programs should provide clear and consistent value while building stronger relationships with customers. “A tailored, integrated strategy that aligns a loyalty program’s value with trust and relationship building is essential for sustaining customer loyalty and long-term retailer relationships,” Dr Sadeque said. Personalised offers that reflect customers’ needs and values could increase perceived benefits and make shoppers more likely to engage with loyalty programs actively.

More information: Stephen Skinner et al, Customers’ disposition towards loyalty program engagement, European Journal of Marketing. DOI: 10.1108/EJM-08-2024-0633

Journal information: European Journal of Marketing Provided by Edith Cowan University

Online Reviews Could Leave Users Vulnerable to Cyberattacks

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Posting online reviews may seem like a win-win activity, helping businesses attract customers while giving other consumers useful information. But new research from the McCombs School of Business at The University of Texas at Austin suggests that seemingly harmless reviews may also reveal information about users’ social connections, potentially leaving them and their online friends more vulnerable to cyberattacks.

The study focuses on spear phishing, a targeted form of phishing in which an attacker impersonates someone the victim trusts to persuade them to send money or disclose sensitive information. Yan Leng, assistant professor of information, risk, and operations management at McCombs, notes that phishing has become increasingly costly. Between 2021 and 2023, the FBI’s Internet Crime Complaint Center received nearly one million complaints involving about $305 million in losses.

Leng and colleagues investigated whether attackers could reconstruct users’ social networks simply by examining their online behaviour. Although many review platforms do not publicly display friendship connections, patterns in reviews and ratings may provide clues about who knows or interacts with whom. The researchers examined Yelp data involving 4,299 reviewers from Louisiana and Pennsylvania in 2020, where both reviews and users’ friend lists were publicly accessible.

The researchers first analysed review behaviour to predict connections between users, much as a cyberattacker might. They then compared those predicted relationships with users’ actual friendship networks. Their analysis found that an attacker could correctly identify 49% of social relationships based solely on online behaviour, while incorrectly identifying 10% of unconnected pairs as connected. With a higher false-alarm rate of 20%, as many as 63% of relationships could be identified.

One particularly revealing behavioural signal was review length. The researchers found observable relationships between the lengths of reviews written by connected users. For example, when one friend wrote longer reviews, another might also begin writing longer reviews. In other cases, one person might write shorter reviews that complemented a friend’s longer contributions. Such patterns can create behavioural fingerprints that reveal relationships even when friendship information itself is hidden.

This information could make spear-phishing campaigns more effective. Once attackers infer who is connected to whom, they can impersonate trusted contacts and send targeted scam messages or emails. The researchers found that identifying larger numbers of relationships could substantially increase attackers’ potential financial returns. In the Pennsylvania data, estimated returns increased from 109% for 500 attack attempts to 1,098% for 10,000 attempts.

Existing privacy protections may not fully address this problem because sensitive information does not necessarily have to be directly disclosed to create risk. Instead, attackers may infer relationships from apparently harmless behavioural data. The researchers say review platforms, e-commerce marketplaces, and media-sharing services should therefore examine whether the information they publish could unintentionally expose users’ social networks.

One possible safeguard is to introduce carefully designed “noise” into publicly available data. For example, platforms could subtly modify review text so that its length varies while its meaning remains unchanged, making behavioural patterns more difficult to detect. Simulations suggested this approach could reduce attackers’ financial incentives and sometimes make attacks unprofitable. Leng argues that platforms should therefore protect not only information users explicitly disclose, but also sensitive information that others may be able to infer from their behaviour.

More information: Yan Leng et al, When Behavioral Data Betray Users: A Diagnostic and Protective Framework Against Social Interaction Leakages, Information Systems Research. DOI: 10.1287/isre.2024.1469

Journal information: Information Systems Research Provided by University of Texas at Austin

The Iran War Is a Wake-Up Call to End Our Reliance on Fossil Fuels

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The war in Iran has disrupted one of the world’s most important oil-producing regions and trade routes, sending fuel prices sharply higher. But Paasha Mahdavi, associate professor of political science at UC Santa Barbara and affiliated faculty at the Bren School, argues that the crisis also presents a rare opportunity to accelerate the transition away from fossil fuels and towards renewable energy.

Previous oil shocks created similar opportunities but failed to produce lasting change. From the 1973 oil embargo to the disruption caused by Russia’s 2022 invasion of Ukraine, governments repeatedly responded to energy crises without fundamentally reducing their dependence on fossil fuels. Mahdavi believes the current situation is different because the global economy is now less reliant on fossil fuels for economic growth. At the same time, renewable technologies have become cheaper and easier to deploy.

Solar and wind power, battery storage, and the electrification of transportation, heating and industry have all advanced significantly. These technologies can also provide countries with greater long-term energy independence. Mahdavi notes that this changing energy landscape has helped limit the impact of the enormous disruption in oil supplies through the Strait of Hormuz, despite millions of barrels per day being removed from global markets.

Yet governments may be undermining this opportunity. Mahdavi and a colleague recently reported in Science that nearly half of the world’s governments have introduced emergency measures in response to the Iran war that effectively subsidise fossil fuel consumption. These measures include temporary fuel-tax reductions and expanded consumer subsidies for gasoline, diesel and kerosene. By artificially lowering fossil fuel prices, such policies can weaken incentives to switch to cleaner alternatives.

Fuel subsidies can also create lasting economic and environmental problems. They consume government resources while supporting highly polluting forms of energy and discouraging investment in renewable alternatives. Research conducted by Mahdavi and colleagues over the past decade suggests that these subsidies can be exceptionally difficult to reverse because removing them often carries substantial political costs. Governments may therefore remain committed to expensive subsidies long after the immediate crisis has passed.

The political sensitivity surrounding fuel prices helps explain this reluctance. Gasoline prices are unusually visible to consumers, appearing prominently at filling stations and serving as an everyday reminder of changing living costs. Fuel prices also affect transportation and shipping expenses, influencing the cost of many other goods. As a result, the public often sees gasoline and diesel prices as important indicators of inflation and economic well-being, putting governments under intense pressure when prices rise.

Mahdavi argues that governments have better options for protecting households from energy shocks. Rather than broadly subsidising fossil fuels, countries can make sustained investments in renewable energy, public transportation and better urban and rural planning. Longer-term measures could include expanding electric-vehicle charging networks, bicycle infrastructure and intercity rail. In contrast, immediate assistance could include targeted cash transfers for lower-income households and subsidies for public transportation. Similar approaches are already appearing in countries including Pakistan, Indonesia, Egypt and the Philippines.

Reducing demand for fossil fuels could ultimately make it politically easier for governments to phase out costly subsidies while strengthening energy security. Mahdavi points to the enormous scale of existing support for fossil fuels, with government subsidies for fossil fuel consumption reaching record levels globally in recent years. Against that backdrop, arguments that renewable energy should compete without government assistance overlook how heavily fossil fuels themselves have historically been supported. The Iran war therefore represents not only an energy crisis, but an opportunity to reconsider how governments use public money and to accelerate the transition towards a cleaner and more resilient energy system.

More information: Paasha Mahdavi et al, The worst energy policy in the world, Science. DOI: 10.1126/science.aej2018

Journal information: Science Provided by University of California – Santa Barbara

Large Tax Break Deals Sparked Innovation in Communities

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When cities, counties or states offer large tax breaks to attract factories, corporate headquarters and other major facilities, the economic benefits may extend beyond the jobs and investment those companies bring. A new study suggests these incentives can also encourage innovation among other businesses in the surrounding community.

The study, co-authored by a University of California, Riverside scholar and published in the Journal of Accounting Research, examined large tax subsidy packages known as “Megadeals”. These incentives, valued at more than $50 million, may create conditions that help local companies and startups innovate by bringing skilled workers, technological expertise and new ideas into a region.

Researchers examined 115 Megadeals approved between 1990 and 2014. They measured innovation by analysing the number and value of patents filed by businesses in counties where the subsidies were awarded. Aruhn Venkat, assistant professor of accounting at UCR’s School of Business and a study co-author, said counties receiving Megadeals generally experienced increased patenting among local firms.

The researchers found that a substantial increase in the size of a subsidy was associated with approximately a 3.3% to 4.9% rise in patent filings by nearby companies. At the county level, this represented roughly two to three additional patents each year, suggesting that the arrival of a large company can have innovation effects extending beyond the subsidised business itself.

One explanation is the movement of skilled workers and knowledge between companies. Employees at technologically advanced businesses may eventually move to other local employers or establish their own companies, taking their experience and expertise with them. This can create “knowledge spillovers”, allowing ideas developed within one company to contribute to innovation elsewhere in the regional economy.

Tesla’s Nevada Gigafactory provides an example. In 2014, Nevada approved $1.3 billion in tax subsidies for Tesla, which subsequently built a $5 billion battery factory near Reno. Venkat noted that some former Tesla engineers later established businesses focused on recycling battery materials, applying knowledge and ideas related to recovering and reusing lithium from spent batteries. Similar spillovers could occur around other major technology companies as employees move between organisations or pursue entrepreneurial opportunities.

Workforce training associated with tax incentive agreements may spread knowledge further. Some agreements require subsidised companies to collaborate with community colleges on programmes that teach technical skills needed by the businesses. Not everyone receiving this training ultimately works for the subsidised company. Some may take their skills to other employers or start their own businesses, expanding the region’s pool of technically skilled workers and potentially creating a stronger environment for innovation.

The findings add another dimension to the debate over whether large corporate tax incentives provide sufficient public benefits to justify their costs. Venkat stressed that the research was not a comprehensive cost-benefit analysis and acknowledged that previous studies examining employment and business formation have often found limited benefits. However, he said innovation and workforce effects should also be considered when governments evaluate such subsidies. While these benefits do not occur after every Megadeal, the study suggests they appear, on average, across the incentives examined.

More information: Yoojin Lee et al, “Megadeal” Subsidies, Local Spillovers, and Corporate Innovation, Journal of Accounting Research. DOI: 10.1111/1475-679x.70079

Journal information: Journal of Accounting Research Provided by University of California – Riverside

Workplace Conflict and Its Effects on Team Performance

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Workplace conflict has long been central to theories about how people interact on the job. A new study takes a closer look at how workers express disagreement, finding that the way conflict is communicated can influence team dynamics and individual outcomes. Researchers developed a new measure that examines how expressions of opposition vary in their directness and intensity.

The research, published in Small Group Research, was conducted by researchers from Carnegie Mellon University, Indiana University, the University of California, Los Angeles, California State University, Stony Brook University, the University of Melbourne and INSEAD, along with an independent researcher. The study introduces a new way of understanding workplace conflict beyond traditional approaches.

Previous research has generally focused on either what workplace conflicts are about or how they are managed. The researchers instead examined how disagreement itself is expressed. According to co-author Laurie R. Weingart of Carnegie Mellon University’s Tepper School of Business, this approach provides a different perspective on how conflict operates within teams.

Building on conflict expression theory, the researchers developed the Conflict Expression Tendencies (CET) measure to identify patterns in how groups communicate disagreement. The measure includes four dimensions: arguing, debating, subverting and disguising. Each represents a different combination of how directly opposition is communicated and how intensely it is expressed.

The CET measure brings together several types of oppositional workplace communication that have often been studied separately. These range from subtle behaviours, such as passive aggression and social undermining, to more visible forms of disagreement, including arguing and debating. By examining these behaviours together, researchers can gain a broader picture of how conflict is expressed within a workgroup.

Across six laboratory and field studies involving diverse participants, the researchers found that different forms of conflict expression were associated with cognitive, emotional and psychological outcomes. Debating, characterised by high directness but relatively low intensity, was generally associated with positive outcomes, including greater information acquisition, more positive feelings and higher levels of trust.

Other approaches were associated with less favourable outcomes. Arguing, subverting and disguising tended to have negative effects, suggesting that workplace disagreement itself may not necessarily be harmful. Instead, the manner in which employees communicate their opposition can play an important role in determining whether conflict contributes to productive discussion or creates difficulties within a team.

The researchers also found that members of the same team may experience the same conflict differently depending on how they perceive the interaction. Lead author Yeonjeong Kim of Indiana University’s Kelley School of Business said the CET scale offers a more nuanced way to diagnose and manage workgroup conflict. The researchers suggest it could help leaders better understand team disagreements, encourage constructive communication and develop healthier, more responsive approaches to conflict management.

More information: Yeonjeong Kim et al, Conflict Expression Tendencies in Workgroups: Measure Validation and a Test of Theory, Small Group Research. DOI: 10.1177/10464964261448469

Journal information: Small Group Research Provided by Carnegie Mellon University

Study Examines How Reporting Changes Affect Gig Workers and Reveal Unreported Income

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The rapid growth of platform-based gig work means more U.S. workers are earning income through self-employment. Unlike traditional wages, these earnings are generally not subject to tax withholding, although they are often reported to workers and the Internal Revenue Service (IRS) through 1099 tax forms. A new study examined what happened when the reporting threshold for many gig workers unexpectedly increased from $600 to $20,000.

Researchers from Carnegie Mellon University, Michigan State University, the University of Chicago, and the IRS conducted the study, which was published in the Journal of Public Economics. They investigated whether changes in information reporting affected how much income gig workers reported when filing their taxes.

In 2017, a policy change meant that many gig workers with low to moderate earnings suddenly stopped receiving 1099 forms for their platform work. Andrew Garin, assistant professor of economics at Carnegie Mellon University’s Heinz College and lead author of the study, said the change provided an opportunity to examine whether workers reported their income differently when their earnings were no longer independently reported to the IRS.

The researchers focused on a gap in information reporting for gig economy payments between $600 and $20,000 following the adoption of the 1099-K form, which is used to report certain third-party network transactions. They examined how the change affected individual tax-filing behaviour and the overall reporting of income earned through gig work.

To measure the effect, the researchers used state-level information returns from Massachusetts and Vermont, where the reporting threshold remained at $600. They merged these records with federal tax returns filed with the IRS. They then compared platform workers living within the same labour market but on opposite sides of the Massachusetts border, allowing them to assess how different reporting requirements influenced tax-filing behaviour.

The results showed a substantial effect. For every dollar in gig payments that was no longer reported on a 1099 form, workers reported 17 cents less in self-employment net earnings on their own income tax returns. The findings suggest that third-party information reporting can play an important role in encouraging workers to accurately report their self-employment income.

The researchers also used state-level filings to estimate the size of the national online platform workforce in 2017 and 2018. They calculated that approximately 770,000 gig workers did not receive information returns because of changes in third-party reporting practices by online platforms. As a result, they estimated that about $560 million in profits went unreported on federal income tax filings.

The findings could have implications as policymakers continue to modify information-reporting requirements for freelancers and gig workers. Emilie Jackson, assistant professor of economics at Michigan State University and a co-author of the study, noted that evidence on how these changes influence taxpayer behaviour remains limited. With recent rule changes meaning millions more freelancers may no longer be subject to 1099 reporting, the researchers say their findings provide insight into how reporting thresholds could affect tax compliance and federal revenues in the years ahead.

More information: Andrew Garin et al, The impact of third-party reporting on tax compliance: Evidence from gig workers, Journal of Public Economics. DOI: 10.1016/j.jpubeco.2026.105697

Journal information: Journal of Public Economics Provided by Carnegie Mellon University

Cost Savings From Company Mergers Don’t Always Benefit Consumers, Study Finds

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Merging companies may become cheaper and more efficient to operate, but those savings do not necessarily translate into lower prices for consumers, according to new research. In some cases, shoppers may even end up paying more after a merger, suggesting that greater corporate efficiency does not automatically produce benefits for customers.

The study examined the 2019 merger of the consumer healthcare businesses of pharmaceutical giants GSK and Pfizer. Researchers from Loughborough University, the University of East Anglia (UEA), the Philippine Competition Commission, the University of the Philippines and E.CA Economics analysed how the deal affected the market. Their findings were published in the Southern Economic Journal.

Researchers focused on prices for over-the-counter cough and cold medicines in the Philippines before and after the merger. GSK and Pfizer had predicted that combining their consumer healthcare operations would eventually generate annual savings of around £500 million. The researchers found evidence that the merger did create genuine efficiencies, particularly for products previously supplied by Pfizer.

The estimated cost of supplying Pfizer products fell by 9.43% following the merger, while their prices declined by 6.57%. However, the benefits were not seen across the entire market. GSK product prices increased by an estimated 3.25%, while Sanofi, a major international competitor, raised its prices by 8.55%. Prices from lower-cost local manufacturer Unilab remained broadly unchanged.

Lead author Professor Farasat Bokhari of Loughborough University explained that companies seeking approval for mergers often argue that combining their operations will create efficiencies. A larger company, for example, may be able to manufacture, distribute or sell products at a lower cost. These savings can potentially offset some of the negative effects caused by reducing the number of competing businesses in a market.

However, the researchers said the findings demonstrate that the relationship between efficiency and consumer prices can be more complicated. Professor Sean Ennis of UEA’s Norwich Business School said the study confirmed efficiencies for one of the merging companies, an area that has not been widely studied. Still, those efficiencies ultimately did not produce lower prices across all products in the market.

The researchers also found evidence consistent with greater coordination between GSK/Pfizer and Sanofi following the merger. Bokhari stressed that this does not mean the companies explicitly agreed to set prices. Instead, when fewer independent competitors remain in a market, companies may find it easier to coordinate their pricing behaviour without making an explicit agreement, potentially resulting in higher prices than would be expected under stronger competition.

The findings could have important implications for competition authorities considering future mergers between large companies. The researchers argue that regulators should examine more than whether a proposed merger can reduce operating costs or create efficiencies. They should also assess whether reduced competition could make coordination between remaining companies more likely, potentially preventing cost savings from reaching consumers or even contributing to higher prices.

More information: Farasat Bokhari et al, Merger Efficiency and Coordinated Effects: Nothing to Sneeze at? Evidence From Cough and Cold Medicines in the Philippines, Southern Economic Journal. DOI: 10.1002/soej.70063

Journal information: Southern Economic Journal Provided by University of East Anglia

Tariffs Had an Unexpected Effect on U.S. Whiskey Prices

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A new study has found an unexpected consequence of the Trump-era trade wars: cheaper American whiskey across much of the United States. However, consumers in the major whiskey-producing states of Kentucky and Tennessee experienced the opposite effect, with prices for locally produced whiskey actually increasing.

In 2018, the Trump administration introduced a series of tariffs that triggered trade disputes with several major trading partners. In response, Mexico, the European Union, Canada and China imposed substantial retaliatory tariffs on whiskey produced in the United States. These measures reduced overseas demand for American whiskey and created new challenges for domestic producers.

“Distilled spirits are an interesting sector because consumers have significant preferences, which can influence pricing on a market-to-market basis,” said Carly Burd, co-author of the study and an assistant professor of accounting at North Carolina State University’s Poole College of Management. Because whiskey accounted for the vast majority of U.S. liquor exports before 2018, the researchers wanted to understand how producers responded when foreign sales suddenly declined.

The researchers analysed sales data from 8,674 stores throughout 2018, examining prices for 2,514 different whiskey products, each sold in 750-millilitre bottles. Altogether, the dataset covered approximately 11.4 million whiskey sales, allowing the team to examine how prices changed across different parts of the country following the introduction of the retaliatory tariffs.

To identify the effects of the tariffs, the researchers compared price changes for American whiskey before and after the export tariffs were introduced with changes in the prices of imported whiskey over the same period. Imported products served as a control group because they were not subject to the U.S. export tariffs imposed by trading partners in 2018.

Overall, American whiskey producers responded to declining exports by lowering domestic prices in an effort to encourage sales at home. However, Kentucky and Tennessee were notable exceptions. Producers increased prices for locally made whiskey in these states, which together account for the vast majority of American whiskey production. The researchers suggest consumers there may have been willing to pay more for products associated with their local whiskey-making traditions.

The results showed that whiskey prices generally remained unchanged or increased slightly in states where demand was already relatively strong. Prices declined elsewhere. One factor influencing producers’ response was the nature of whiskey production itself. Because whiskey must be aged before it can be sold, producers cannot quickly reduce production when overseas demand unexpectedly falls, leaving them with limited options for adjusting supply.

Instead, producers appear to have relied on flexible pricing strategies to respond to changing market conditions. The researchers said the findings demonstrate how political tensions, trade disputes and changes in taxation can create challenges for domestic businesses while prompting them to adapt their pricing strategies. The study also highlights how the effects of international trade policy can differ considerably within a country, with consumers in some regions benefiting from lower prices while those in major production centres may end up paying more.

More information: Carlyle S. Burd et al, Domestic Product Market Impacts of Politically Motivated Foreign Tariffs, The Accounting Review. DOI: 10.2308/TAR-2024-0708

Journal information: The Accounting Review Provided by North Carolina State University

Workplace First Impressions Can Influence Hiring and Promotions Within Seconds

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Making a good impression at work may depend less on polishing a résumé and more on strengthening communication skills. A large analysis of more than 200 studies found that workplace first impressions are shaped primarily by how people communicate, both verbally and nonverbally. At the same time, substantive information such as experience and qualifications plays a smaller role.

These impressions can form in less than a minute, yet their influence may last for weeks or even months. Researchers found that early perceptions can be associated with important workplace decisions and relationships, including hiring, performance evaluations, mentorship opportunities, promotions and whether colleagues want to work with or seek advice from someone.

The analysis identified three main factors that shape first impressions: communication style, physical appearance and “content cues”, meaning the substance of what a person says or writes. Surprisingly, content cues were the weakest predictors. “The single most shocking finding of this study is that content cues were the weakest predictors of first impressions,” said Brian Swider, Ph.D., a professor of business at the University of Florida and co-author of the study.

Swider explained that information contained in a résumé, comments from others and even the substance of what someone says during an initial interaction may have less influence than communication and appearance. Swider and colleagues at the University of Florida’s Warrington College of Business, along with T. Brad Harris of HEC Paris, published their findings on August 3 in Personnel Psychology.

The researchers combined 204 independent samples from 145 studies examining first impressions in workplace settings. By bringing together findings across different occupations, countries, education levels and research designs, the meta-analysis allowed the team to identify patterns that appeared consistently across a wide range of workplace situations rather than relying on a single experiment or setting.

The findings suggest that people generally form a broad positive or negative impression of another person instead of separately evaluating characteristics such as competence, warmth or trustworthiness. Once established, this overall impression may influence how later information about that individual is interpreted. “People want to think that they are making really high-level analytical decisions based on effectively evaluating evidence,” Swider said. Still, research on first impressions suggests that quick judgments continue to play an important role.

Those initial judgments can also be surprisingly durable. Although their influence gradually weakened over time, first impressions remained associated with how people viewed one another weeks later. According to Swider, an impression formed within the first few minutes of meeting someone can remain strongly related to how that person is perceived more than a month later. The findings linked first impressions with both achievement-related outcomes, including hiring and performance evaluations, and relationship-related outcomes in the workplace.

For employers, the findings highlight the difficulty of preventing subjective impressions from affecting important decisions. While organisations cannot stop people from forming rapid judgments, the researchers suggest their influence can be reduced through structured interviews and evaluations and by involving multiple people in decision-making. The study does not prove that first impressions directly cause later workplace outcomes, and their influence varies by situation and over time. For employees facing interviews, meeting a new manager or entering other high-stakes situations, however, Swider recommends focusing on controllable factors and making the strongest first impression possible.

More information: Junhui Yang et al, First Impressions at Work: A Meta-Analytic Review, Personnel Psychology. DOI: 10.1111/peps.70037

Journal information: Personnel Psychology Provided by University of Florida