Vertical integration is central to understanding patterns of economic activity, but there has been limited empirical work measuring the extent to which firms own and utilize direct upstream and downstream production links for sourcing physical inputs. We use administrative data from Karnataka, India on the universe of good shipments between any two establishments to answer this question. We can identify if two establishments are under joint ownership allowing us to map the flow of goods both within and across firms. We calculate that 11% of input value can be potentially sourced from vertically integrated upstream establishments. We find that 38% of products are sourced by establishments exclusively from within the firm when a vertically integrated supplier exists, while the rest are almost entirely sourced exclusively from outside the firm. This suggests that the supply of physical goods along the production chain is an important rationale for vertical integration in India. Our data allows us to improve upon the methodology employed in the literature so far to measure within-firm trade. We highlight two sources of measurement and aggregation bias in previous studies, and show that there is a large impact on the results. Next, we quantify the extent to which firm boundaries serve as barriers to trade in our context by estimating a gravity specification. Finally, we look at factors associated with the decision to source a given product from within and find that firm size, physical distance to outside and within firm suppliers, frequency of input requirements, product relationship specificity, volume, R&D requirements and competition both upstream and downstream are important factors.
We argue that alternative COVID-19 vaccine dosing regimens could potentially dramatically accelerate global COVID-19 vaccination and reduce mortality, and that the costs of testing these regimens are dwarfed by their potential benefits. We first use the high correlation between neutralizing antibody response and efficacy against disease (Khoury et. al. 2021) to show that half or even quarter doses of some vaccines generate immune responses associated with high vaccine efficacy. We then use an SEIR model to estimate that under these efficacy levels, doubling or quadrupling the rate of vaccination by using fractional doses would dramatically reduce infections and mortality. Since the correlation between immune response and efficacy may not be fully predictive of efficacy with fractional doses, we then use the SEIR model to show that fractional dosing would substantially reduce infections and mortality over a wide range of plausible efficacy levels. Further immunogenicity studies for a range of vaccine and dose combinations could deliver outcomes in weeks and could be conducted with a few hundred healthy volunteers. National regulatory authorities could also decide to test efficacy of fractional dosing in the context of vaccination campaigns based on existing immune response data, as some did for delayed second doses. If efficacy turned out to be high, the approach could be implemented broadly, while if it turned out to be low, downside risk could be limited by administering full doses to those who had received fractional doses. The SEIR model also suggests that delaying second vaccine doses will likely have substantial mortality benefits for multiple, but not all, vaccine-variant combinations, underscoring the importance of ongoing surveillance. Finally, we find that for countries choosing between approved but lower efficacy vaccines available immediately and waiting for mRNA vaccines, using immediately available vaccines typically reduces mortality.
Letter grades are noisy and coarse measures of academic achievement. However, these grades serve as important signals to both employers and to the student on his or her ability. I study the consequences of these noisy measures using administrative data from the National University of Singapore which records both the letter grades as well as the precise marks (0-100) received for each course that a given student takes. I exploit a regression discontinuity design -- specifically, close to the letter grade cutoffs, individuals with very similar achievement will receive different letter grades. I find that receiving a better grade in a single class for students on the margin results in 32 US dollars greater monthly earnings post-graduation. Looking at each letter grade cut off, I find that the effect is largest at the A- cutoff, followed by the A and B+ cutoffs. There is a null effect for elective courses, which indicates that only signals for major-relevant courses are important. The effect is driven by courses taken in years 1 and 2 (years 3 and 4 are graduation years). The effects are significantly larger for men than women, and for STEM courses than non-STEM courses. There are two possible mechanisms: 1) Employers use grades as a signal of ability and thus pay similar students different salaries based on this coarse measure. 2) Students interpret better or worse grades as a signal of their own ability which effects their future behavior and outcomes. Testing the second mechanism, I find that receiving a worse grade for students on the margin results in only slightly lower grades in future semesters, but these students take significantly ``easier courses". This indicates that students under invest in human capital accumulation as a result of receiving a noisy negative signal of ability.
There is a large literature on the minimum wage focused on directly exposed firms and geographies. This paper provides new evidence that the minimum wage has significant spillover effects on firms exposed to the minimum wage indirectly via firm supply chains. Using administrative firm-level tax data from South Africa, we study the impact of the 50\% agricultural minimum wage hike in 2013 on the outcomes of firms downstream from the agriculture sector with an event study design. The minimum wage increased labor costs and prices in the agriculture sector. We find that industries with greater upstream exposure to the agriculture sector experienced greater decreases in assets, sales and employment for its medium to large firms following the minimum wage increase.
Using new administrative data from 3000 cities and over 100,000 urban neighborhoods, we study residential segregation in urban India. We focus on two historically marginalized groups: Scheduled Castes and Scheduled Tribes (SC/STs) and Muslims. On average, both groups are concentrated in poorer cities, but Muslims much more so. Cities with more Muslims are characterized by worse access to schools, doctors and public hospitals, while cities with more SC/STs have better access. Within cities, lower consumption and access to public goods characterize both SC/ST and Muslim neighborhoods. The distribution of segregation in India is similar to that in U.S. cities. Cities segregated along religious lines are also segregated along caste lines. Cities with fewer minorities are more segregated, the opposite pattern of the United States. Caste segregation is associated with worse economic outcomes for both SC/STs and non-SC/STs, but the latter to a lesser extent. SC/STs have worse access to public goods in more segregated cities. Younger cities are less segregated than older cities by caste but not religion, suggesting that caste is becoming less salient in cities.
With 68% of the world population projected to live in urban areas by 2050, mass transit networks are expanding faster than ever before. But how are the economic gains from such expansions being shared between low- and high-income workers? Existing research focuses on the role of commuting to work, however much of urban travel is related to the consumption of non-tradable goods and services (retail, F&B, personal services etc.). Since low-income workers are overwhelmingly employed in these non-tradable sectors, changes in consumption travel patterns in response to a transit expansion leads to a spatial re-organization of low-income jobs in the city which has important implications for inequality. This paper develops an urban spatial model with heterogeneous worker groups and incorporating travel to consume non-tradable goods and services. We estimate our model using detailed farecard and administrative data from Singapore to quantify the impact of the Downtown Line (DTL). We find large welfare gains for high-income workers, but near zero gains for low-income workers. All workers benefit from improved access to consumption opportunities, but low-income non-tradable sector jobs move to less attractive workplaces. Abstracting away from consumption travel results in a five-fold underestimation of the inequality effects and failure to capture the spatial re-organization of low-income jobs in the city.
Many students in developing countries still lag behind their grade in learning. Improving human capital among the poor in the developing world is key to lifting this population out of poverty. Individual-level financial incentives to students for a range of outcomes such as reading books, getting better test scores, or grades have shown to yield little to no effects on student achievement at the mean (Angrist and Lavy 2009, Fryer 2011). We conduct a randomized control trial across 225 schools across Kenya with over 30,000 pupils in our study sample to study the effectiveness of group-level non-monetary incentives in Kenya for entire classes of students both in addition to and in place of individual level incentives in order to see whether student effort and positive peer interactions can be better incentivized. We find that group-level incentives raise test scores by over 0.1 standard deviations, while individual level incentives are ineffective.
Education is one of the most important determinants of wages at the individual level. However, there is much debate about the mechanisms by which education leads to higher wages. In this paper, I study the returns to taking particular courses and developing specific human capital at the university level. National University of Singapore (NUS) provides a unique setting in which students bid to take courses each semester. I exploit a regression discontinuity design (RDD) to quantify the impact of taking specific courses. Specifically, close to the thresholds that determine a winning bid, individuals with very similar bids may be enrolled or turned away from taking the course. I find that learning a second language increases monthly gross income by about 300 USD. Taking statistics elective courses increases monthly gross income by about 650 USD. I also find evidence for positive income returns to Computer Science related electives, and Finance. I don't find significant returns for elective courses offered by general science or humanities departments. In future work, I will look at occupational choice outcomes, and am planning to implement an RCT where we nudge a treatment group of students to take particular STEM courses via an information intervention.
We examine the effect of community-wide provision of chlorine solution on child survival in rural Kenya, where a long-term village-wide chlorination randomized evaluation was implemented. The WASH Benefits Kenya trial was a randomized controlled trial of water treatment, sanitation, handwashing, and nutrition interventions in western Kenya. In communities that were randomized to water treatment, chlorine solution dispensers were installed and refilled as needed. After the WASH Benefits Kenya trial ended, the NGO Evidence Action continued to refill most of the dispensers in the treatment villages. We will estimate the intent-to-treat effect of the community-wide provision of chlorine solution on child survival by 1) comparing post-intervention mortality rates between water treatment and control areas; and 2) comparing changes in mortality rates (before and after the intervention) across treatment and control areas (a difference-in-difference analysis). In addition, for the subsample of children who were enrolled in the original WASH Benefits Kenya study, we will examine effects on motor development, emergent language and literacy, emergent math/numeracy, and socio-emotional development.
Vaccinating the world's population quickly in a pandemic has enormous health and economic benefits. We analyze the problem faced by governments in determining the scale and structure of procurement for vaccines. We analyze alternative approaches to procurement, arguing that buyers should directly fund manufacturing capacity and shoulder most of the risk of failure while maintaining some direct incentives for speed. We analyzed the optimal portfolio of vaccine investments for countries with different characteristics as well as the implications for international cooperation. Our analysis, considered in light of the experience of 2020, suggests lessons for future pandemics.
The relative complexity of a country's economy explains relative per capita wealth. Measures of complexity have also been used to improve the estimation accuracy of gross domestic product (GDP) growth forecasts. Why complexity matters is settled in the theory of gains from trade. Not settled are the determinants of complexity and how complexity can be unleashed to facilitate economic growth. We explore how economic institutions, as measured by an index of economic freedom, and economic complexity interact and impact a country's equity market return. We find complex economies where realized per capita GDP is lower than comparably complex economies experience an acceleration in GDP growth when economic freedom is increased. Simultaneous to the gains in economic institutions and complexity, equity markets outperform, suggesting the wealth of a nation rests on the institutions that facilitate complexity.
The COVID-19 pandemic could result in large government interventions in the banking industry. To shed light on the possible consequences on market power, we rely on the experience of the global financial crisis and exploit granular data on government interventions in more than 800 banks across 27 countries between 2007 and 2017. For identification, we use a multivariate matching method. We find that intervened banks experience a significant decline in market power with respect to matched non-intervened banks. This effect is more pronounced for larger and longer interventions and is driven by a rise in costs—mostly because of higher loan impairment charges—which is not followed by a similar increase in prices.
There are major gains to accelerating access to a COVID-19 vaccine. The World Bank predicts a cumulative $1.02 trillion loss to the economies of Latin America and the Caribbean over 2020 and 2021 due to COVID-19. Based on this estimate, ending the pandemic just three months earlier would yield nearly $125 billion for the region in economic benefits alone. This note describes a framework for assessing the costs and benefits of at-risk investments in COVID-19 vaccines and assesses the net benefits for Latin American and Caribbean (LAC) countries. It shows that waiting for the normal vaccine timeline would mean long delays for developing countries. However, making at-risk investments that effectively pay for firms to install or repurpose manufacturing capacity while vaccine trials are still in process (before they are proven safe and effective), governments can accelerate access to a vaccine. Even under very conservative assumptions, such at-risk investments in vaccines are in the interest of LAC countries. The conservative analysis presented here shows that the high benefits associated with these investments justify the public spending or even borrowing. Finally, the paper concludes by discussing the ways contract design influences the benefits of vaccine investments because it affects how quickly LAC countries obtain the benefits of vaccine access.