January 27, 2023
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Posted by NCID
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Maximiliano Sosa, Ph.D. Candidate in Economics at University of Uppsala, visited NCID to give a seminar entitled "Legal uncertainty and its consequences: A natural language processing approach." Producing comparable measures across countries and time of legal uncertainty is very challenging. Our speaker explained that he has developed a new measure of legal uncertainty based on texts from laws:

“I’m analyzing the texts of the laws directly to produce a measure of unexpected changes in the legal environment. I use this measure to analyze firms’ reactions to a change in legal uncertainty”. In this paper, he also compares the measure against other available measures of institutional quality and explain the relationship between his measure and other available variables.

In the economic application, Sosa explained the procedure: “I analyze how firms react to an unexpected change in legal uncertainty. The main conclusion of the paper is that giving an increase in the legal uncertainty, firms react by reducing investments and reducing employment and therefore increasing unemployment”.