Research
Working Papers:
"Do Small Firms Partially Insure Customers from Price Increases? Evidence from Retail Firms in Tanzania"
R&R at Journal of Development Economics
Abstract: Price variation is a typical feature of markets in low and middle income countries. Retail firms that regularly stock food staples and other household commodities face substantial price variation when purchasing in wholesale markets. How much of this input price variation passes through to output prices for rural customers? I use a panel of firm-level wholesale and retail prices from 270 urban and rural retail firms in Tanzania to evaluate passthrough from input price shocks on staple food prices. Rural firms smooth both negative and positive input price shocks more than urban firms. Urban firms passthrough nearly 95% of input price increases, while rural firms passthrough only 55% of input price increases. Price adjustments are asymmetric; rural firms passthrough more cost savings and less cost increases, suggesting that rural customers enjoy partial insurance from negative price shocks. By exploring possible mechanisms, I find evidence that smaller community size among rural firms is associated with lower passthrough on negative price shocks. At the same time, distance to markets and competitive pressure matters as well - rural firms with more competitors and further from urban markets have higher passthrough rates, consistent with a competitive market framework with transaction costs. STEG Working Paper Series Link.
Abstract: This paper studies experimental designs for estimation and inference on policies with spillover effects. Units are organized into a finite number of large clusters and interact in unknown ways within each cluster. First, we introduce a single-wave experiment that, by varying the randomization across cluster pairs, estimates the marginal effect of a change in treatment probabilities, taking spillover effects into account. Using the marginal effect, we propose a test for policy optimality. Second, we design a multiple-wave experiment to estimate welfare-maximizing treatment rules. We provide strong theoretical guarantees and an implementation in a large-scale field experiment.
Field implementation: We tested an optimal design strategy to detect treatment and spillover effects in a phone-based advisory service that reaches over 400,000 cotton farmers in Pakistan. We find that treated farmers are attentive to forecasts by listening to more calls, recalling forecast information, and changing their farming activities to days with better weather. Short-run forecasts can provide meaningful information to help farmers increase input efficiency - especially for irrigation, fertilizer, and pesticide applications.
In collaboration with Precision Development and CERP. Funding support from IFAD, Chae Family Economics Research Fund, NBER Social Learning Fund.
"Search Costs and Relational Contracting: The Impact of a Digital Phonebook on Small Firms in Tanzania" with Brian Dillon [New revision coming soon]
Abstract: Search frictions can be substantial in rural markets in developing countries and raise the cost of learning market information. For small firms, search frictions interfere with learning about new suppliers in their upstream market, and raise the cost of meeting new customers in their downstream market. We experimentally investigate whether lowering upstream and downstream search costs for small firms in rural Tanzania improves firm outcomes and alters the incentive to engage in relational contracts with suppliers and customers. Using a randomized experiment of 507 small firms, we study the impact of a digital phonebook that lowers the cost of accessing new business and customer contacts. Participating firms are split into a control and treatment group with two variations: 1) a phonebook listing that is visible to upstream suppliers in urban areas, and 2) a phonebook listing that is visible to downstream customers in rural areas. We find that treated firms increase relational contracting with their suppliers and decrease it with their customers. Yet, there is no strong evidence that the number of new customers or suppliers increases. It suggests that being listed in the phonebook caused firms to update their valuation of relational contracts and respond by negotiating better terms with suppliers and customers.
World Bank Development Impact Blog
Abstract: In the absence of insurance and credit markets, the effect of adverse environmental shocks on rural firms is ambiguous because drought shifts both demand and supply curves. I use spatial and temporal variation in the 2016-2017 drought in Kenya to characterize the direct and indirect effects of drought-induced food insecurity on local firm outcomes. Firms in areas directly affected by drought have lower sales, profits, and hire fewer workers than firms in non-drought areas. Firm entry also increases in drought areas compared to non-drought areas, consistent with prior evidence that farming households form new businesses as a coping strategy following shocks. Sub-sector analysis reveals substantial heterogeneity. Service firms fare better than retail firms. But examining retail sub-sectors shows that firms selling higher-value food products (meat/fish and fruits/vegetables) experience greater declines than staple grain sellers in markets directly affected by drought, while firms selling high-value foods increase sales in non-drought areas. This is consistent with consumers in drought regions decreasing consumption of non-necessities.
Works in Progress
"Learning from Weather Forecasts and Adaptation among Cotton Farmers in Pakistan," with Davide Viviano.
In collaboration with Precision Development and CERP. Funding support from IFAD, Chae Family Economics Research Fund, NBER Social Learning Fund.
Abstract: Agricultural production is inherently risky and subject to weather shocks that threaten livelihoods for small-scale farmers worldwide. Short-range weather forecasts can help farmers plan immediate agricultural activities and take preventative measures that lower the likelihood of losses due to unforeseen weather. Advisory services coupled with weather forecasts can speed up learning about how forecasted weather patterns can affect crop production. We study short run agricultural outcomes related to recieving advisory services - including cropping decisions, yields, profits, and input expenditure. We also study whether receiving weather forecasts causes farmers to update their beliefs about long-run weather trends related to climate change.
"Supply chain networks and diffusion of shocks in rural markets," with Daniel Putman.
Funding support from PEDL. Research Summary. Data collection on-going.
Abstract: Tightly linked firm networks may enable firms to engage in risk-sharing and recover more easily from shocks, particularly idiosyncratic shocks. However, if covariate shocks occur (such as seasonal price and demand shocks), suppliers may reduce the number of benefits provided to downstream firms in their supply chain network and increase the likelihood that firms exit the market. This might occur up and down a supply chain between buyers and sellers linked by transactions or across sectors with firms that are linked as neighbours. Thus this study will address the research question: How do firm networks affect individual firms' ability to cope with shocks and changes in competition? We are collecting a novel dataset by conducting a high-frequency bi-monthly survey to monitor entry, exit, shocks, input and output prices, inventory choices and investment, and credit provision. The survey will involve 900 firms in 30 communities drawn from a firm census of 9,800 firms located throughout Kagera, Tanzania.
"Willingness-to-Pay to avoid tax exposure among small firms in Tanzania," with Jovin Lasway.
Funding support from IGC. Data collection on-going.
Abstract: Small firms in LMICs do not consolidate or grow as often as economic theory predicts. Many small firms are informal businesses that are not often registered with local governments. If firm owners are provided an opportunity to advertise their business, they may refrain from taking actions to increase their visibility if they want to remain under the radar of tax officials. We study the relationship between tax avoidance and growth by offering small firms an opportunity to advertise their contact information to prospective customers around the region. Respondents will be asked to participate in a incentivized willingness-to-pay elicitation to list their phone number in a digital phonebook service. It will include a randomized component with two different primings - 50% of respondents will randomly hear the standard priming, and 50% of respondents will hear a second priming script that lets people know that anyone will be able to access the digital phonebook, including tax collecting officials. The goal is to learn whether being primed to think about taxes lowers firms' willingness-to-pay to list their contact information.
"Two-sided Subsidies to Support Biofortified Crop Adoption in Guatemala," with Karen Macours and Paola Mallia.
In collaboration with Semilla Nueva. Funding support from DIV. Pilot launching in March 2024.
Summary: As new climate-smart farming technologies become available, it will be necessary to learn which market mechanisms are effective at increasing access for rural farmers. If higher quality seeds are under-adopted due to information, behavioral, and/or financial frictions, it justifies subsidizing their distribution. This research considers two ways to subsidize seed dissemination - using demand-side subsidies to encourage farmers to try new seeds and supply-side subsidies for agrodealers to stock new seeds. Subsidizing agrodealers is a potentially appealing and scalable policy option because they face market incentives. A major concern with subsidizing agrodealers is that they may use the incentive to push hybrid seeds on inappropriate farmers. We study the effect of subsidizing both sides of the market to learn how subsidies affect uptake among inexperienced and experienced hybrid seed farmers.
The role of mechanistic explanations in technology adoption across contexts: Evidence from Uganda," with Vesall Nourani, Anirudh Sankar, Godfrey Taulya, Haroon Sseguya, Abraham Salomon.
In collaboration with Agriworks. Funded by IGC. Data collection on-going.
"Search costs, mobile phones, and agricultural investment: a telephone directory intervention in Tanzania," with Jenny Aker, Richard Anderson, Brian Dillon, and Hosea Mpogole.
Data collection on-going.
"Input Adoption and Supplier Search: The Impact of a Market Information Service for Kenyan Farmers," with Georges Poquillon.
In collaboration with Precision Development. Data collection complete.