Research Papers


Work in Progress:




When good primary and secondary education is free, and at the university level, is heavily subsidized, and admissions are transparent and performance-based, one might expect there to be little gender bias in placement at the university level. Yet, the college major choice decisions of students vary considerably by gender. Using Turkish data, we examine what lies behind these differences. Two channels seem to dominate: performance differences by gender and differences in preferences across majors. We then estimate a state-of-the art model of preferences and run counter-factual simulations to evaluate the role of these two channels on the placement gender gap. Finally, we show that policy measures, such as giving women preference in STEM subjects, will not work as well as expected and show that more directed policies are needed. 



Why is India a laggard when it comes to manufacturing, especially the labor-intensive kind while doing much better in the technology sector? We classify states into good and bad states according to their size-adjusted entry rates in manufacturing on the grounds that states with high entry rates must be attractive to firms. We argue that Indian institutions create frictions to firm exit and adjustment, especially in labor-intensive manufacturing. We document this by showing that the data patterns and the way manufacturing firms in good versus bad states respond to these frictions are as predicted by theory. We then develop and estimate a dynamic heterogeneous firm model with entry, exit, and input (labor and capital) adjustment costs. Our estimates are sensible and our counterfactual exercises show that exit costs play a critical role in explaining India's lackadaisical performance in manufacturing production and exports.




  Recent Working Papers:



College admissions in many countries are based on a centrally administered test. Applicants invest a great deal of resources to improve their performance on the test, and there is growing concern about the large costs associated with these activities. We consider modifying such tests by introducing performance-disclosure policies that pool intervals of performance rankings, and investigate how such policies can improve students' welfare in a Pareto sense. Pooling affects the equilibrium allocation of students to colleges, which hurts some students and benefits others, but also affects the effort students exert. We characterize the Pareto frontier of Pareto improving policies, and also identify improvements that are robust to the distribution of college seats. We illustrate the potential applicability of our results with an empirical estimation that uses data on college admissions in Turkey. We nd that a policy that pools a large fraction of the lowest performing students leads to a Pareto improvement in a contest based on the estimated parameters. We then conduct a laboratory experiment based on the estimated parameters to examine the effect of such pooling on subjects' behavior. The findings generally support our theoretical predictions. Our work suggests that identifying and introducing Pareto improving performance-disclosure policies may be a feasible and practical way to improve college admissions based on centralized tests.



Free trade or preferential trade areas (PTAs) allow importers who belong to the area to export to each other while paying zero or preferential tariffs as long as Rules of Origin (ROOs) are met. Meeting them is costly not only in terms of production costs but also in terms of documentation costs. We ask if these fixed costs of documentation change over time with the experience of the firm in obtaining preferential tariffs. We explore this using a unique importer-exporter matched transaction-level customs data set on a group of Latin American countries. Our estimating equation is model-based and shows that these fixed costs depend on the history of preference utilization. Most of the effect comes from experience in the same product and same partner, with some spillover to other partners buying the same product. There is little learning from experience in other products and other partners. When considering products that have been under preferences for a while, some learning might have occurred prior to the start of our data. Using a natural experiment in Argentina, where some products were newly brought under preferences, we show that learning is indeed larger for such products. As facilitating preference use today also makes it easier to use preferences in the future, interventions early on in the life of the FTA to reduce such costs would be more effective. 


3. "Trade and Selection with Heterogeneous Firms and Perfect Competition" With Xue Bai, Hong Ma and Arpita Chatterjee. November, 2022, NBER Working paper 30650. Submitted for Publication.


This paper develops a new model with heterogeneous firms under perfect competition in a Heckscher-Ohlin-Samuelson setting. We show that trade need not make selection in the comparative advantage sector stricter as suggested by earlier work. Selection is driven by the capital intensity in entry costs relative to production costs. If trade raises (reduces) the wage rental ratio, and entry costs are more labor intensive than production costs in a sector, then the ratio of entry cost to production costs will rise (fall) and selection will become weaker (stricter) in this sector. Moreover, we show that the central theorems of the HOS model (as well as the standard generalizations using duality) carry over in our setting. 


4. "Winners and Losers from the US-China Trade War" With Huong Dang and Yingyan Zhao.  NBER Working Paper No 31922. (Submitted for Publication)


We investigate the phenomenon of trade re-allocations across countries as a result of the U.S.-China trade war. Using quarterly data on U.S. imports, we find evidence, as do others, of trade diversion in a range of industries and products, including products

not targeted by U.S. tariffs on China. We are however the first to ask what seems to drive these trade reallocation activities. First, we show that they seem to be driven by differences in comparative advantage across countries: countries with a greater revealed comparative advantage in a product benefit (in terms of exports to the U.S.) more from U.S. tariffs on China. Second, we show that there is evidence of spillovers to similar non-targeted products: products in similar industries (as defined by their HS codes) are also similarly affected. This is consistent with the colocation effects. Third, our findings also suggest that bystander countries with greater capital abundance are more heavily impacted in capital-intensive industries, suggesting that a higher proportion of more flexible or transferable assets provides flexibility to alter production to respond to new trade opportunities. Finally, we show that the countries that export more to the U.S. as a result of the tariffs on China also export more to other countries. This suggests that firms are entering these countries and once there, export not just to the U.S. but everywhere.



Recent Publications:


1. Taking PISA Seriously: How Accurate are Low Stakes Exams? (With S. Pelin Aykol and Jinwen Wang). Journal of Labor Research.  Springer, vol. 42(2), pages 184-243, June 2021. 


News coverage: https://www.k12dive.com/news/do-low-stakes-exams-yield-accurate-results-about-student-achievement/530911/ 


PISA is seen as the gold standard for evaluating educational outcomes worldwide. Yet, as it is a low-stakes exam, students may not take it seriously resulting in downward biased scores and inaccurate rankings. This paper provides a method to identify and account for non-serious behavior by leveraging information in computer-based assessments in PISA 2015. We show that this bias is large: a country can rise up to 15 places in rankings if its students took the exam seriously. We ask where the bias is coming from and show that around half of it comes from the proportion of non-serious students, while 36% comes from their ability, with the remaining coming from the extent of non-seriousness.


2. Hit or Miss? Test Taking Behavior in Multiple Choice Exams with S. Pelin Akyol and James Key. Annals of Economics and Statistics. Vol. 147, pp. 3--50. 2022.


We model and estimate the decision to answer questions in multiple choice tests with negative marking. Our focus is on the trade-off between precision and fairness. Negative marking reduces guessing, thereby increasing accuracy considerably. However, it reduces the expected score of the more risk averse, discriminating against them. Using data from the Turkish University Entrance Exam, we find that students' attitudes towards risk differ according to their gender and ability. Women and those with high ability are significantly more risk averse: nevertheless, the impact on scores of such differences is small, making a case for negative marking.



This paper develops a new model with heterogeneous firms under perfect competition in a Heckscher-Ohlin setting. We derive a novel prediction regarding the effect of minimum wages on selection, namely that a binding minimum wage will raise (or lower) TFP at the firm and industry level depending on whether the capital intensity of entry costs exceeds (falls short of) that of production. Exploiting rich regional variation in minimum wages across Chinese counties and using firm level production data, we find robust evidence in support of causal effects of minimum wages consistent with our theoretical predictions.


Using high quality administrative data on Greece we show that class size has a hump shaped effect on achievement. We do so both    nonparametrically and parametrically, while controlling for potential endogeneity and allowing for quantile effects. We then embed our estimates for this relationship in a dynamic structural model with costs of hiring and firing. We argue that the linear specification form used in past work may be why it found mixed results. Our work suggests that while discrete reductions in class size may have mixed effects, discrete increases are likely to have very negative effects while marginal changes in class size would have small negative effects. We find optimal class sizes around 27 in the absence of adjustment costs and achievement maximizing ones around 15, and firing costs much larger than hiring costs consistent with the presence of unions. Despite this, reducing firing costs actually reduces achievement. Reducing hiring costs raises achievement and reduces class size. We show that class size caps are costly, and more so for small schools, even when set at levels well above average.

5. Retaking in High Stakes Exams: Is Less More? NBER Working Paper No 21640.  International Economic Review. May, 2018, Volume 59, Issue 2, Pages 449-477.

Placement, both in university and in the civil service, according to performance in competitive exams is the norm in much of the world. Repeat taking of such exams is common despite the private and social costs it imposes. We develop and estimate a structural model of exam retaking using data from Turkey's university placement exam. We find that limiting retaking, though individually harmful given the equilibrium, actually increases expected welfare across the board. This result comes from a general equilibrium effect: retakers crowd the market and impose negative spillovers on others by raising acceptance cutoffs.

 

6. "Wheat or Strawberries? Intermediated Trade with Limited Contracting," (With Yelena Shevleva) NBER Working Paper No 20630. American Economic Journal: Microeconomics 2017, 9(3): 28–62. Featured in AEA website. https://www.aeaweb.org/research/wheat-or-strawberries-farmer-trade


Why do developing countries fail to specialize in products in which they appear to have a comparative advantage? We propose a model of trade with intermediation that explains how hold-up resulting from poor contracting environments can produce such an outcome. A temporary production subsidy, or a marketing board that commits to purchase from the producer ensure production of the intermediated good. We use the model to evaluate welfare implications of policies, and explain partial pass through of the consumer prices to the producer. 


7. "How You Export Matters: Export Mode, Learning, and Productivity in China," with Xue Bai and Hong Ma. NBER Working Paper No 21164. Journal of International Economics, Vol. 104, January 2017, Pages 122--137.


In this paper, we estimate a dynamic discrete choice model where firms choose their export status and mode, and recover not only the sunk and fixed costs of exporting in the presence of intermediary trading, but also differences in long run prospects of exporting using different export modes. We use matched production and customs data for China on a panel of firms to estimate a structural dynamic discrete choice model where firms choose their export status (export or not) and export modes (direct or indirect). Given their productivity levels, firms face a trade-off between indirect exporting, where they export through intermediaries, and exporting directly by themselves in terms of the per-unit revenue (intermediaries may take a cut), sunk and fixed export costs (it may be cheaper to export through an intermediary who already has the know how and a presence in the market), and learning-by-doing from exporting (you may learn more about the market and so get better demand shocks and/or productivity shocks by exporting directly). By allowing previous export status and export mode to affect the evolution of firm-level productivity and demand shocks we examine the potentially different learning-by-exporting effects from indirect and direct exporting. We also obtain estimates of different forms of sunk entry cost and fixed costs of exporting. Our preliminary results suggest that firms learn more from direct exporting than from indirect exporting. We also find that starting direct exporting requires significant start-up costs whereas starting indirect exporting is much cheaper. Moreover, climbing the export ladder by starting off as an indirect exporter and then transitioning into direct exporting is cheaper than exporting directly to begin with. We see this as a first step in our research agenda of examining the costs and benefits of restricting direct trading rights as was done by China prior to joining the WTO. 


8. Preferences, Selection, and Value Added: A Structural Approach 2014. With S. Pelin Akyol. NBER Working Paper No. 20013.  European Economic Review, vol. 91, January 2017, Pages 89--117.


This paper investigates two main questions: i) What do applicants take into consideration when choosing a high school? ii) To what extent do schools contribute to their students' academic success? To answer these questions, we model students' preferences and derive demand for each school by taking each student's feasible set of schools into account. We obtain average valuation placed on each school from market clearing conditions. Next, we investigate what drives these valuations by carefully controlling for endogeneity using a set of creative instruments suggested by our model. Finally, controlling for mean reversion bias, we look at each school's value-added. We find that students infer the quality of a school from its selectivity and past performance on the university entrance exam. However, the evidence on the value-added by schools shows that highly valued or selective schools do not have high value-added on their students' academic outcomes. 

9. "Better Luck Next Time: Learning Through Retaking''. With Veronica Frisancho, Sergey Lychagin, and Cemile Yavas. NBER Working Paper No 19663. Vol. 125, issue C, pages 120-135, Journal of Economic Behavior and Organization.

10. "Affirmative Action: One Size Does Not Fit All" (Formerly "Allocating Educational Opportunities via Contests.") 2013. With Alexander Tarasov. AEJ Micro, Vol. 8, No.2, May, 2016, pp. 215-252.

11. "Affirmative Action in Higher Education in India: Targeting, Catch Up, and Mismatch" with Verónica Frisancho Robles. Higher Education, Volume 71, Issue 5, pp 611-649. May, 2016. Springer.

12. "Firm Heterogeneity and Costly Trade: A New Estimation Strategy and Policy Experiments." With Ivan Cherkashin, Svetlana Demidova and Hiau Looi Kee. Journal of International Economics, Volume 96, Issue 1, pages 18-36, May 2015.


Resting Papers:


1. The Public-Private Partnership Proposal: A Buyback Boondoogle?


2. The Harvard Housing Lottery: Rationality and Reform with Susan Collins. 


3.  Menu Auctions with Demand Uncertainty with Torben Tranaes.


4. Crime and Young Men: The Role of Arrest, Criminal Experience and Heterogenity with Susumu Imai and Hajime Katayama.

5. Non-Parametrically Identifying Preferences with Strategic Reports: An Application to Turkish Undergraduate Admissions. With Roman Istomin and Sergey Lychagin.

6. "Upstream Export Restrictions and Downstream Firms: Evidence from China's Export Restrictions on Rate Earth Elements." With Hong Ma, Zhen Li and Zhi Li.