Causes and Consequences of Policy Uncertainty: Evidence from McGirt vs. Oklahoma

Weekly seminar organized by the Navarra Center for International Development of the Institute for Culture and Society.
Abstract: Economists agree that policy uncertainty should distort private investment but several questions remain. What causes empirically relevant uncertainty? And, if uncertainty distorts investment, does it do so by delaying, accelerating or reducing it? We study these questions in the context of the July 2020 U.S. Supreme Court ruling in McGirt vs. Oklahoma. In a difficult-to-predict 5-4 decision, the court ruled the eastern half of Oklahoma is "Indian Country" rather than state land. Commentators, including Chief Justice Roberts, have since argued the ruling creates significant policy uncertainty over regulatory, taxing, and criminal law enforcement, and we find that media mentions of "uncertainty" with "Indian reservation" spiked with the ruling. But has the ruling truly impaired investment? To shed light on this question, we econometrically estimate its effects on Zillow home sales and prices, and on oil, gas, and renewable energy investments. We find no evidence that the ruling reduced home sale prices. There is, however, some evidence that it induced a race to extract oil in eastern Oklahoma.
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