Working Papers
When Competition Compels Change: Trade, Management, and Firm Productivity (Job Market Paper)
- ▷ Abstract
How does competition affect firm management and productivity? I investigate this question by using an import competition shock in India and new data on family-managed firms, the predominant form of corporate governance in the developing world. I construct novel data on tenure records and family ties for more than 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 unrelated professional executives. Firms that professionalize increase productivity by over 20 percent. To quantify the contribution of professionalizing management to aggregate productivity, I develop a theoretical framework, embedding management choice in a Melitz model, where firms balance non-pecuniary private benefits of retaining family management and the contracting frictions avoided by keeping management in-house, against the higher profits from professionalization. The estimated model reveals that import liberalization increased aggregate productivity in India by 12 percent. Within-firm improvements in talent allocation account for almost one-third of these gains, underscoring managerial restructuring as a key channel for productivity growth.
- ▷ Abstract NBER Working Paper No. 32375
Are labor markets in higher‑income countries more meritocratic, in the sense that worker‑job matching is based on skills rather than idiosyncratic attributes unrelated to productivity? If so, why? And what are the aggregate consequences? Using internationally comparable data on worker skills and job skill requirements of over 120,000 individuals across 28 countries, we document that workers’ skills better match their jobs’ skill requirements in higher‑income countries. To quantify the role of worker‑job matching in development accounting, we build an equilibrium matching model that allows for cross‑country differences in three fundamentals: (i) the endowments of multidimensional worker skills and job skill requirements, which determine match feasibility; (ii) technology, which determines the returns to matching; and (iii) idiosyncratic matching frictions, which capture the role of non‑productive worker and job traits in the matching process. The estimated model delivers two key insights. First, improvements in worker‑job matching due to reduced matching frictions account for only a small share of cross‑country income differences. Second, however, improved worker‑job matching is crucial for unlocking the gains from economic development generated by 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
Labor Market Frictions, the Organization of Labor, and Structural Change
Globalization and Domestic Industrial Policy
Digitizing Historical Indian Plant‑Level Data on Labour Outcomes