Industrial Development

Adhvaryu, A., Nyshadham, A., and Tamayo, J.A. (2019), Managerial Quality and Productivity Dynamics

Abstract | pdf

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.

Adhvaryu, A., Molina, T., Nyshadham, A., and Tamayo, J., (2019), Helping Children Catch Up: Early Life Shocks and the Progresa Experiment [R&R Journal of Political Economy]

Abstract | pdf

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..

Adhvaryu, A., Bassi, V., Nyshadham, A., and Tamayo, J., (2019), No Line Left Behind: Assortative Matching Inside the Firm

Abstract | pdf

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.

Adhvaryu, A., Gutierrez, E., Nyshadham, A., and Tamayo, J., (2019) Diagnosing Quality: Patient-Provider Interactions and the Demand for Health Care

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.

Adhvaryu, A., Gauthier, J.F., Nyshadham, A., and Tamayo, J. “Absenteeism, Productivity, and Relational Contracting Inside the Firm” [draft coming soon]

Adhvaryu, A., Gauthier, J.F., Nyshadham, A., and Tamayo, J. “Optimal Contracts with Psychometrics”  [draft coming soon]


Memberships & Competition

Tamayo, J., (2019), Dynamic Competition for Customer Memberships

Abstract | New Draft Coming Soon

A competitive two-period membership (subscription) market is analyzed. Two symmetric firms charge a "membership" fee that allows consumers to buy products or services at a given unit price, for both periods. Transactions are not anonymous, and firms price discriminate based on purchase history. Three main features of the tariff structure affect the competition. They are: (i) the length of the membership (long-term vs. short-term); (ii) the ability to price discriminate between "old" and "new" customers with the membership fee and the unit price; and (iii) the incentives to price discriminate between different consumers’ types (low and high-demand/value customers). When firms employ short-term membership, they don’t discriminate with their unit price but only with their membership fee regarding the length of the customer relationship. Instead, with long-term membership, firms have incentives to prevent their old most valuable customers from being "poached" by the competitor. In equilibrium, firms price discriminate with their membership fee and unit price regarding customer purchased-behavior and volume of demand (i.e., second-degree price discrimination). Overall, the number of consumers poached is smaller with long-term subscriptions. Given that poaching erodes welfare and firms are better extracting surplus with short-term memberships, consumers are better off with long-term memberships.

Tamayo, J. and Tan, G. (2019), Competition in Two-Part Tariffs between Asymmetric Firms

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 be in equilibrium, in both the Hotelling and general discrete choice approaches to horizontal differentiation. When firms face symmetric demands but have asymmetric marginal costs, we show that in equilibrium the less-efficient firm sets its marginal price below its own marginal cost and compensates for this loss with the fixed fee, while the more-efficient firm sets its marginal price above its own marginal cost but below its rival's price. A similar pattern holds in a setting where firms have identical marginal costs but asymmetric demands, that is, the inferior firm “cross-subsidizes” between fixed fee and marginal price. When the market shares are determined by Logit with outside option we show that, even in the symmetric model, the equilibrium outcome with two-part tariffs is not efficient.

Fioretti, M., and Tamayo, J., The price of water and dynamic spillovers: hydropower generation in Colombia

Abstract | New draft coming soon

Chuk, K. and Tamayo, J., (2017), “The Exclusive Non Exclusive Two-Sided Market”.

Abstract | New draft coming soon

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

Tamayo, J. and Tan, G., “Competition and Asymmetric Two-Part Tariffs,” USC. (Work in Progress)

Crime & Strategic Interactions

Khanna, G., Medina, C., Nyshadham, A. and Tamayo, J., “Restrictions to Employment Opportunities and Participation in Organized Crime”.

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.

Guarin, A., Medina, C.A., and Tamayo, J. (2019), The Effects of Punishment of Crime in Colombia on Deterrence, Incapacitation, and Human Capital Formation

Abstract | New draft coming soon

We assess whether the change in punishment at age 18, mandated by law, 1) has a deterrent effect on arrests, 2) Diminishes, through incapacitation, the crime rate, and 3) explain future changes in school attendance. Based on longitudinal individual data of the arrested population in the Medellin Metropolitan Area, we use both before-after and regression discontinuity design approaches. No deterrent effect was found on index, violent or property crimes, but a deterrence effect was found on crimes related to drug consumption and trafficking. The number of days that arrested individuals take to recidivate is 300, higher for index crimes if they are arrested right after reaching 18 years of age. The change in criminal penalties at 18 years of age does not explain future differences in human capital formation among the population that had been arrested immediately after reaching 18 years of age. This paper suggest that the change in punishment at age 18 increases the relative cost of being arrested and sentenced immediately after rather than before reaching 18. Implications and the structure of criminal legislation in Colombia are discussed.

Medina, C.A., Nuñez, J. and Tamayo, J. (2016), “The Unemployment Subsidy Program in Colombia: An Assessment,” Working paper, IDB. R&R Labour.

Tamayo, J.A. (2016), “The Impact of Peer Effects on Student Outcomes: Evidence from Colombia”. [under review]


Londoño, A. F., Tamayo, J. and Velásquez, C.A. (2012), “Monetary Policy and Inflation Targeting Dynamics in Colombia: A FAVAR Approach,” Ensayos sobre Política Económica, 68, June.

Arango, M., Posada, C. E. and Tamayo J. (2011), “Credit Market and Monetary Policy: a Possible Source of Fluctuations and Financial Crisis,” Ensayos sobre Política Económica, 24.

Chapter in Books

Medina, C.A., Nuñez, J. and Tamayo, J. (2011), “The Unemployment Subsidy Program in Colombia: An Assessment,” Veronica Alaimo, Jacqueline Mazza, Carmen Pagés-Serra and Robert LaLonde, Protecting Workers Against Unemployment in Latin America and the Caribbean, IDB.

Medina, C.A. and Tamayo, J. (2011), “An Assessment of How Urban Crime and Victimization Affects Life Satisfaction,” in Dave, Webb and Eduardo, Wills-Herrera (Eds.), Subjective Well-Being and Security, Springer, Social Indicators Research Series, Vol. 46.

Medina, C.A., Posso, C.M. and Tamayo, J. (2012), “Dynamics of Labor Demand in the Colombian Manufacturing Industry 1993-2009: A Panel VAR Approach,” in Luis, E. Arango and Franz, Hamann, (Eds.), El Mercado de Trabajo en Colombia Hechos, Tendencias e Instituciones, Central Bank of Colombia. (Published in Spanish)

Tamayo, J. (2012), “Asymmetries in the Demand for Work in Colombia: The Role of the Business Cycle,” in Luis, E. Arango and Franz, Hamann, (Eds.), El Mercado de Trabajo en Colombia Hechos, Tendencias e Instituciones, Central Bank of Colombia. (Published in Spanish)