Academic Publications
Job Loss, Credit and Crime in Colombia
with Gaurav Khanna, Carlos Medina, Anant Nyshadham, and Christian Posso
American Economic Review: Insights, VOL. 3, NO. 1, MARCH 2021 (pp. 97-114)
Abstract | pdf
We investigate the effects of job displacement, as a result of mass-layoffs, on criminal arrests using a novel matched employer-employee-crime dataset in Medellín, Colombia. Job displacement leads to immediate earnings losses, and an increased likelihood of being arrested for both the displaced worker and for other youth in the family. We leverage variation in opportunities for legitimate reemployment and access to consumption credit to investigate the mechanisms underlying this job loss-crime relationship. Workers in booming sectors with more opportunities for legitimate reemployment exhibit weaker criminal responses to job losses. Greater exposure to an expansion in consumption credit also weakens the criminal response to employment shocks
Managerial Quality and Productivity Dynamics
with Achyuta Adhvaryu and Anant Nyshadham
Review of Economic Studies, 90, Issue 4, July 2023, Pages 1569–1607
Abstract | pdf | VoxDev | WEF | Ideas for India | VoxEu
Which managerial skills, traits, and practices matter most for productivity? How appropriately are these features priced into wages? Combining two years of daily, line-level production data from a large Indian garment firm with rich survey data on line managers, we find that several key dimensions of managerial quality, like attention, autonomy, and control, are important for learning-by-doing as well as for overall productivity, but are not commensurately rewarded in pay. Counterfactual simulations of our structural model show large gains from screening potential hires via psychometric measurement and training to improve managerial practices.
Formal Employment and Organized Crime: Regression Discontinuity Evidence from Colombia
with Gaurav Khanna, Carlos Medina, Anant Nyshadham, and Nicolas Torres
The Economic Journal, Volume 133, Issue 654, Pages 2427–2448, 2023
Abstract | pdf
Canonical models of crime emphasize economic incentives. However, causal evidence of sorting into criminal occupations in response to individual-level variation in incentives is limited. We link administrative micro-data with the universe of arrests in Medellin over a decade. We exploit exogenous variation in formal-sector employment around a socioeconomic-score cutoff, below which individuals receive benefits if not formally employed, to test whether a higher cost to formal-sector employment induces crime. Re- gression discontinuity estimates show this policy generated reductions in formal-sector employment and a corresponding spike in organized crimes, but no effects on crimes of impulse or opportunity.
Helping Children Catch Up: Early Life Shocks and the Progresa Experiment
with Achyuta Adhvaryu, Teresa Molina, Anant Nyshadham
The Economic Journal, Volume 134, Issue 657, Pages 1–22, 2024
Abstract | pdf | VoxDev
Can investing in children who faced adverse events in early childhood help them catch up? We answer this question using two orthogonal sources of variation { resource availability at birth (local rainfall) and cash incentives for school enrollment { to identify the interaction between early endowments and investments in children. We find that adverse rainfall in the year of birth decreases grade attainment, post-secondary enrollment, and employment outcomes. But children whose families were randomized to receive conditional cash transfers experienced a much smaller decline: each additional year of program exposure during childhood mitigated almost 20 percent of the early disadvantage in grade attainment..
Absenteeism, Productivity, and Relational Contracting Inside the Firm
with Achyuta Adhvaryu, J.F. Gauthier, Anant Nyshadham
Journal of the European Economic Association (forthcoming)
Abstract | pdf | Ideas for India | HBS Working Knowledge
Relational contracts are essential building blocks of the theory of the firm. Yet empirical evidence of the properties of these contracts within firms is limited by the scarcity of records of coworker cooperation. To address this gap, we leverage a unique dataset that tracks transfers between production line managers in Indian ready-made garment factories. We study how managers cope with worker absenteeism on their teams. We first document that worker absenteeism shocks are frequent, often large, weakly correlated across managers, and have substantial negative impacts on team productivity. There are thus gains from sharing workers. We show that managers do indeed respond to shocks by lending and borrowing workers in a manner consistent with relational contracting. But many potentially beneficial transfers are left unrealized, meaning that while relational contracts mitigate some of the adverse impacts of shocks, risk is still imperfectly shared across managers. This is because managers' primary relationships are with a very small subset of potential partners, who tend to be demographically similar and work on spatially contiguous lines. Counterfactual simulations show that there is potential for large gains to the firm from reducing the barriers to forming additional relationships among managers. Even at the high observed levels of worker absenteeism, resolving as much of the worker misallocation problem as possible through these relationships can meaningfully increase productivity
The health costs of dirty energy: Evidence from the capacity market in Colombia
with Achyuta Adhvaryu, Teresa Molina, Anant Nyshadham, and Nicolas Torres
Journal of Development Economics, Volume 164, 2023
Abstract | pdf
The health effects of “dirty” (fossil fuel driven) energy production are difficult to measure accurately due to the endogeneity of fuel choice. We exploit an electricity policy in Colombia that generates a price-based trigger for the use of thermal energy sources. Comparing municipalities near high versus low capacity plants, we first document that the activation of this trigger – which increased thermal energy production – led to significantly higher local pollution levels. This change increased cardiovascular-related ER mortality by 56% and respiratory-related morbidity by 9%. Our results translate to a cost of 996 million USD in terms of lives lost and higher healthcare costs
No Line Left Behind: Assortative Matching Inside the Firm
with Achyuta Adhvaryu, Vittorio Basi, and Anant Nyshadham
Review of Economics and Statistics (forthcoming)
Abstract | pdf | Ideas for India
How do workers and managers sort within the firm? Do the most talented managers match with the most productive workers, or with those who are struggling to perform? We characterize this sorting pattern in six factories of a large garment manufacturer in India. Workers in this firm are organized into production lines, each supervised by a manager. We exploit the high degree of worker mobility across lines, together with worker-level productivity data, to estimate the sorting of workers to managers. We find negative assortative matching (NAM) -that is, better managers tend to match with worse workers, and vice versa. This stands in contrast to our estimates of the produc- tion technology, which reveal that if the firm were to positively sort, productivity would increase by between 1-4%. Coupling these findings with a survey of managers and with data on buyers and orders, we find that NAM is strongest for factories where manage- ment is most worried about falling behind and not meeting deadlines with important buyers. That is, NAM arises, at least in part, because the value of buyer relationships imposes minimum productivity constraints on each production line. Our results em- phasize that suppliers to the global market, concentrated in developing countries, may be beholden to a small set of powerful buyers from developed countries, and as a result, may be driven to \misallocate" managerial skill in service of these relationships, but at the expense of productivity.
Competitive Price Discrimination
Dynamic Competition for Customer Memberships
with Cristian Chica and Julian Jimenez-Cardenas
Journal of Economics & Management Strategy (Accepted)
Abstract | pdf
This paper analyzes a two-period membership market with two symmetric firms charging a membership fee, allowing consumers to buy products or services at a given price. Firms can offer short- or long-term memberships. When firms employ long-term memberships, they have incentives to prevent their old customers from being poached by competitors and price-discriminate them based on purchase behavior. Conversely, short-term memberships lead to no unit price discrimination for old customers, but instead, they lead to membership fee discrimination, increasing the share of switchers. We find that, under general assumptions, short-term memberships are offered in equilibrium. This result is robust to various extensions, including switching coupons or discounts, naive consumers, sunk costs, and asymmetric differentiation parameters. We find that firms are indifferent between short- and long-term memberships only when the customer's switching coupon or discount is high relative to the transportation cost
Working Paper (Revision Requested / Under Review)
An Anatomy of Performance Monitoring
with Achyuta Adhvaryu, and Anant Nyshadham
R&R Journal of Political Economy
Abstract | pdf
Does better monitoring improve firm performance? We study the introduction of a technology that enabled managers to track the progress of drive-thru orders in a large quick-service restaurant chain. Sales increased by 5\%, but impacts diminished to half that within two months. Worker skill dynamics play an important role in explaining this pattern. Managers provided greater training inputs at key workstations, but only a subset provided ``refresher'' training to counteract skill depreciation. Stores in which managers utilized refresher training intensively pre-technology had more persistent gains, suggesting that managers' attention to skill dynamics is critical to the success of performance monitoring.
Organizational Responses to Product Cycles
with Achyuta Adhvaryu, Vittorio Basi, Anant Nyshadham, and Nicolas Torres
R&R Journal of Political Economy
Abstract | pdf
Product cycles entail the mass production of new -- and often increasingly complex -- products on a regular basis. How do firms manage these changes? We use granular daily data from a leading automobile manufacturer to study the organizational impacts of introducing new models to the auto assembly line. We show that the numbers of vehicles and parts do not change after a new model is introduced; the main change is a large, discontinuous increase in *new* parts. The product cycle thus necessitates dealing with new complex problems: we accordingly show that defects increase substantially after the production change, then decrease to prior levels over about three weeks. We next ask how the firm’s organization facilitates this problem-solving. We find that the firm trains and promotes mid-level employees to manage the production of new parts, but waits to back-fill mid-level positions until after defect rates recover. That is, the firm reduces the distance -- in terms of knowledge layers -- between front-line workers, who are dealing with these new tasks, and managers further up the hierarchy, who have the necessary knowledge to solve complex problems. This organizational response is unique to the product cycle: when the firm increases the scale of production of existing models, it adds layers to the hierarchy without increasing average skills, as predicted by canonical models of knowledge-based hierarchies. We develop an extension to this theory that reconciles our novel empirical results on product cycle responses.
The Luck of the Draw: The Causal Effect of Physicians on Birth Outcomes
with Arlen Guarin, Christian Posso, and Estefania Saravia
R&R AEJ: Applied Economics
Abstract | pdf
We estimate the effect of physicians on health outcomes by exploiting a Colombian government program that randomly assigns newly graduated physicians to hospitals across the country. Using administrative data from the program, vital statistics records, and individual records from the mandatory field-specific college graduation exams, we show that more-skilled physicians improve health at birth of infants whose mothers received care in those hospitals during their pregnancy. We show that the mechanisms underlying the results are the time physicians spend with the patient and their success in targeting care toward the most vulnerable patients.
Spatial Mobility, Economic Opportunity, and Crime
with Gaurav Khanna, Carlos Medina, Anant Nyshadham, Daniel Ramos-Menchell, and Audrey Tiew
R&R American Economic Review
Abstract | pdf
Neighborhoods are strong determinants of both economic opportunity and criminal activity. Does improving connectedness between segregated and unequal parts of a city predominantly import opportunity or export crime? We use a spatial general equilibrium framework to model individual decisions of where to work and whether to engage in criminal activity, with spillovers across the criminal and legitimate sectors. We match at the individual level various sources of administrative records from Medell\'in, Colombia, to construct a novel, granular dataset recording the origin and destination of both workers and criminals. We leverage the rollout of a cable car system to identify key parameters of the model, informing how changes in transportation costs causally affect the location and sector choices of workers and criminals. Our counterfactual exercises indicate that, when improving the connectedness of almost any neighborhood, overall criminal activity in the city is reduced, and total welfare is improved.
Human-Computer Interactions in Demand Forecasting and Labor Scheduling Decisions
with Caleb Kwon and Ananth Raman
R&R Management Science
Abstract | pdf
We investigate whether corporate officers should grant managers discretion to override AI-driven demand forecasts and labor scheduling tools. Analyzing five years of administrative data from a large grocery retailer using such an AI tool, encompassing over 500 stores, 100,000 employees, and 1.5 million store-date observations, we find that managers persistently make overrides, on average 3 weeks in advance of each focal work date, that reallocate labor away from the AI tool's forecasted demand. Fixed effects and instrumental variables regressions reveal that these overrides increase store labor productivity. Supporting the hypothesis that managers' private information about store demand drives these productivity gains, we show that overrides made by managers: (1) positively correlate with foot traffic, with increases (decreases) in labor on a given day following increases (decreases) in foot traffic, (2) have larger effects for customer-interaction-intensive categories like made-to-order foods and tobacco products, (3) increase basket sizes, (4) reduce self-checkout usage, and (5) become more effective with increasing managerial tenure, suggesting accrual of domain knowledge over time. However, overrides consume significant managerial time and lead to less consistent employee work schedules, potentially due to managers aggressively aligning labor with their private beliefs about demand, which may not fully account for its impact on employee welfare
Rapport in Organizations: Evidence from Fast Food
with Achyuta Adhvaryu, Parker Howell, and Anant Nyshadham
Abstract | pdf
Common identity often provides a foundation for workplace rapport. Though gender is perhaps the most frequently studied dimension of identity among workers, little is known about how gender match between managers and their workers might affect team performance. Using personnel and productivity data from the universe of fast food restaurants of a large chain in Colombia, we study whether mismatched gender identity between managers and workers affects the team's ability to deal with demand shocks. We leverage the staggered expansion of a leading food delivery platform across the country to study how well managers are able to adjust worker staffing to match resulting increases in demand. In this setting, managers spend considerable time and attention on training workers in tasks and allocating them to shifts to meet variable demand. Worker cooperation is critical for the manager to successfully accomplish both of these tasks. We show that stores in which managers and workers share predominantly the same gender: 1) have better communication and rapport between their managers and workers; 2) have more broadly-skilled workers who are more easily reallocated across shifts; 3) exhibit the largest impacts on observed worker reallocation following the delivery platform implementation; and consequently, 4) realize nearly three times the sales gains relative to stores in which predominantly male managers supervise predominantly female workers. Stores with female managers and predominantly male workers suffer less from gender mismatch, consistent with female managers being generally more aware of and responsive to workers' scheduling constraints
Prices and Concentration: A U-shape? Theory and Evidence from Renewables
with Michelle Fioretti and Junnan He
Abstract | pdf
We show that market power can either exacerbate or mitigate fluctuations in energy prices due to renewable energy availability and provide empirical evidence from the Colombian energy sector, where hydropower generation is prevalent, and energy suppliers have a diversified technology portfolio. Incentives to crowding-out rivals make a supplier produce more during a drought if it has access to other technologies with capacities unaffected by the drought. During abundance, instead, access to other technologies reduces a firm's supply compared to a scenario where these technologies are owned by its rivals, as rivals cannot crowd-out the firm experiencing abundance as easily. Jointly, these two effects create a U-shaped relationship between market concentration and prices when firms have diversified production technologies: initially, transferring high-cost capacity to a large firm with the most efficient technology lowers prices but eventually leads to unilateral price increases. Our results and framework apply more broadly to other industries.
Optimal Contracts with Psychometrics
with Achyuta Adhvaryu, J.F. Gauthier, and Anant Nyshadham
Abstract | pdf
The skills, personality traits, and the cost of effort of workers partly explain variation in responses to pay incentives. However, the workers' “type” and realized effort are hard to observe and, therefore, hard to contract on for employers. As the demand for routine tasks decreases, personality traits or “soft skills” are increasingly valuable on the labor market. Sophisticated firms have internalized this and increasingly use psychometric tools to screen workers for hiring and promotion decisions. However, screening is costly and imperfect. We study the potential gains from psychometric screening to enable personalized performance pay contract in the context of a digital labor market experiment where such contracts are the norm. To do so, we measured a broad array of personality traits and cognitive skills of 350 workers on Amazon's Mechanical Turk digital labor market. Workers were then hired to perform three different customer service tasks varying in difficulty and skill requirements. We experimentally vary performance pay within worker and within task type which allow us to nonparametrically recover the mapping between realized effort and worker type. We simulate gains for a sophisticated firm capable of screening workers and offer personalized contracts in competition with unsophisticated firms who do not screen and offer a common contract. We use machine learning methods to predict the workers' type from the psychometric data which allows us to characterize which type of workers provides the greatest opportunity for gains in different tasks and to study how noise from the psychometric data erodes gains.
Diagnosing Quality: Patient-Provider Interactions and the Demand for Health Care
with Achyuta Adhvaryu, Emilio Gutierrez, and Anant Nyshadham
Abstract | pdf
We study the role of amenities in increasing demand for underutilized healthcare services. We randomized the price of a high-amenity diagnostic consultation for cataract surgery. Using this variation, we show that providing amenities doubles surgery take-up for patients diagnosed with operable cataracts. We then structurally estimate a model of patient demand to evaluate the importance of two mechanisms for this effect: amenities as quality signals versus sunk cost accounting. Results show that effects are largely driven by the former channel, suggesting that adoption of underutilized services may be increased by providing extra amenities at low prices in early patient interactions.
Model Selection for Optimal Screening with AI in Hiring
with Achyuta Adhvaryu, J.F. Gauthier, and Anant Nyshadham
Abstract | pdf
We introduce a cost-sensitive machine learning framework that can minimize hiring costs under different labor market conditions for firms using machine learning to screen and escalate applicants to interviews. We show that the optimal algorithm depends on the abundance of quality applicants in the market, the interview cost, and the value to the firm of filling vacancies. We provide ways to train the machine learning models in order to provide a fair and nondiscriminatory treatment of all applicants regardless of their identity
Competitive Price Discrimination
Competitive Two-Part Tariffs
with Guofu Tan
R&R American Economic Journal: Microeconomics
Abstract | pdf
We study competitive two-part tariffs in a model of asymmetric duopoly firms offering vertically and horizontally differentiated products. We provide necessary and sufficient conditions for marginal cost pricing to arise in equilibrium, respectively, and determine the socially optimal outcome. When firms are asymmetric, either in marginal costs or in demands, the less efficient firm typically engages in a cross-subsidization strategy in the sense that it sets a marginal price below its marginal cost and compensates the loss with a positive fixed fee. Moreover, we show that this equilibrium outcome is not socially optimal.
Exclusive Dealing and Entry by Competing Two-Sided Platforms
with Cristian Chica, Kenneth Chuk, and Juan Lara
R&R IJIO
Abstract | pdf
We study competition between horizontally differentiated platforms offering exclusive and non-exclusive contracts in a two-sided market. When content providers can choose between exclusive or non-exclusive contracts, content availability does not react to increases in consumer value for content despite increases in subsidies paid to content providers. Introducing nonexclusive in addition to exclusive prices benefits platforms, but may hurt consumers and content providers. Entry of new platforms may increase prices and platform profits. We attribute the results to the reduction in “threat of tipping.” Finally, incumbent platforms can offer exclusive contracts to deter entry
Saving for a Dry Day: Coal, Dams, and Energy Prices
with Michelle Fioretti
Abstract | pdf
Hydropower generation creates a trade-off between current and future energy production as a firm must choose when to release previously-stored resources. In the Colombian wholesale energy market, suppliers strategically shift production from hydropower to fossil fuels in expectation of severe droughts. We explain these responses showing that the intertemporal opportunity cost of water oppositely affects pricing of a firm’s fossil and hydro generators. As a result, diversifying a supplier’s productiontechnology mix reduces market prices ahead of a drought due to the increased supply of fossil energy. These results highlight a new role for fossil sources in the clean-energy transition.
Works in Progress:
Training within Firms
with Brayan Diaz, Andrea Neyra-Nazarrett, Julian Ramirez, and Raffaella Sadun
Generalists: on the Organizational Benefits of Broad Skilling
with Achyuta Adhvaryu, Julian Jimenez-Cardenas, and Anant Nyshadham
Digital Transformation and Organizational Adaptation: Evidence from a Bank
with Eleonora Brandimarti, Brayan Diaz, Virginia Minni, and Raffaella Sadun
Customer Facing Technologies and Organizational Frictions to Adoption
with Eleonora Brandimarti, Brayan Diaz, Virginia Minni, and Raffaella Sadun
New Products Diffusion within Retailers: Adoption Barriers and Managerial Quality
with Tomomichi Amano
Strategy for Multiunit Organizations
with Julian Jimenez-Cardenas
Healing the Gender Gap: The Impacts of Randomized first-job on Female Physicians
with Arlen Guarin, Christian Posso, and Estefania Saravia
AI-Directed Job Search among Frontline Service Workers
with Achyuta Adhvaryu, Jean-Francois Gauthier, Parker Howell, Anant Nyshadham
Screening Technologies to Improve Managerial Productivity: Evidence from a Large-Scale Experiment in Garment Factories in India
with Achyuta Adhvaryu, Jean-Francois Gauthier, Emir Murathanoglu, and Anant Nyshadham
Other
Monetary Policy and Inflation Targeting Dynamics in Colombia: A FAVAR Approach
with Andres Londoño and Carlos Velásquez
Ensayos sobre Política Económica, 68, June, 2012
Credit Market and Monetary Policy: a Possible Source of Fluctuations and Financial Crisis
with Mauricio Arango, Carlos Esteban Posada
Ensayos sobre Política Económica, 24, 2011
Chapter in Books
The Unemployment Subsidy Program in Colombia: An Assessment,
with Carlos Medina and Jairo Nuñez
Protecting Workers Against Unemployment in Latin America and the Caribbean, ed. by Veronica Alaimo, Jacqueline Mazza, Carmen Pagés-Serra and Robert LaLonde, IDB, 2011
An Assessment of How Urban Crime and Victimization Affects Life Satisfaction
with Carlos Medina
Subjective Well-Being and Security, ed. by Dave, Webb and Eduardo, Wills-Herrera (Eds.), Springer, Social Indicators Research Series, Vol. 46.
Dynamics of Labor Demand in the Colombian Manufacturing Industry 1993-2009: A Panel VAR Approach
with Carlos Medina and Christian Posso
El Mercado de Trabajo en Colombia Hechos, Tendencias e Instituciones, ed. Luis, E. Arango and Franz, Hamann, (Eds.), Central Bank of Colombia, 2012 (Published in Spanish)
Asymmetries in the Demand for Work in Colombia: The Role of the Business Cycle
El Mercado de Trabajo en Colombia Hechos, Tendencias e Instituciones, ed. Luis, E. Arango and Franz, Hamann, (Eds.), Central Bank of Colombia, 2012 (Published in Spanish)