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 uncertainty over regulatory, taxing, and criminal law enforcement and we find that media mentions of “uncertainty” with “Indian reservation” did in fact surge after the ruling. But has the ruling impaired investment? To shed light on this question, we econometrically estimate the ruling’s effect on Zillow home values and on oil, gas, and renewable energy investments. We find no evidence that the ruling impaired these outcomes and offer possible explanations for the null findings.