Working Papers
When Competition Compels Change: Gains from Trade within the Firm (Job Market Paper)
- ▷ Abstract
Past work emphasizes that pro-competitive gains from trade arise from the reallocation of resources towards more productive firms. I focus on a complementary channel operating within firms, where competition induces organizational change and raises managerial efficiency. I study this mechanism by exploiting a product-specific import competition shock in India. To do so, I assemble novel data on family-managed firms—the predominant form of corporate governance worldwide—compiling tenure records and family ties for over 6 million company executives and directors. Using an event-study design, I show that the least productive firms respond to import competition by replacing family managers with non-family, professional executives. Firms that professionalize experience productivity gains of over 20 percent. To quantify the aggregate implications of these managerial adjustments, I develop a framework embedding endogenous management choice within a Melitz model, in which firms trade off the non-pecuniary private benefits and reduced contracting frictions associated with family management against the profit gains from professionalization. My model reveals that import liberalization increased aggregate productivity in India by 9 percent, with within-firm improvements in managerial allocation explaining nearly 30 percent of this increase. Bridging macro-level trade shocks with micro-level administrative data on firm organization reveals within-firm managerial reallocation as a powerful source of gains from trade, with implications for understanding other margins of adjustment to import competition.
We study the micro sources and macro consequences of worker-job matching across countries with large income differences. Using internationally comparable data on over 120,000 individuals in 30 countries, we document that workers' skills align more closely with their jobs' skill requirements in higher-income countries, indicative of more meritocratic labor market matching. We interpret this fact through an equilibrium matching model with cross-country differences in three fundamentals: (i) endowments of worker skills and job requirements determining match feasibility; (ii) technology determining the returns to matching; and (iii) idiosyncratic frictions capturing how nonproductive traits affect matching. A developmentaccounting exercise based on the model, estimated separately for each country, shows that variation in matching frictions explains only a small share of cross-country output gaps. However, improved worker-job matching substantially amplifies the gains from adopting frontier endowments and technology.
- ▷ Abstract
We estimate the aggregate impacts of court-ordered iron ore mining bans in India and consider the counterfactual welfare gains from an alternative policy to the ban. The local sectoral ban is a command-and-control (CAC) policy that is commonly applied to natural resource settings, usually when the regulator has a signal of widespread non-compliance. The Supreme Court of India imposed bans on iron ore mining and outbound iron ore trade in two states in response to reports that mines operated under fake environmental permits and underpaid mining royalties. Using firm-level industrial survey data, mine-level output data, and bilateral mine-to-firm auction data, we decompose the bans’ effects into trade, production networks, and local labor demand channels. Our results indicate persistent declines in employment, capital stock, and borrowing by iron-consuming plants, despite the temporary duration of the ban. These findings highlight the economic spillovers caused by CAC policies, especially in industries that are upstream in the supply chain.
How Much Do Firms Save? Financial Frictions and the Microeconomic Implications of the Euler Equation
- ▷ Abstract
Neoclassical growth models with standard parameter values provide powerful self-financing incentives to financially constrained entrepreneurs. This fundamental prediction has important implications for capital misallocation. If entrepreneurs can indeed save themselves out of financial constraints, capital misallocation should disappear on its own and impose a small, transient cost to aggregate productivity. This is contrary to a large body of empirical work that has documented high dispersion in marginal products of resources, particularly capital. Using micro firm-level data and the staggered implementation of a financial liberalization policy in India, I provide causal evidence on the relationship between financial constraints and self-financing by individual firms. I find that the behavior of treated firms that see an easing in their financial constraints does not conform with standard predictions of the neoclassical growth model.
Work in Progress
AI and Bureaucratic Decision Making
Management in India
FDI and Firm Organization
AI and Judicial State Capacity
Labor Market Frictions, the Organization of Labor, and Structural Change
Globalization and Domestic Industrial Policy