Research

WORKING PAPERS


Financial Security, Climate Shocks and Social Cohesion, with Theresa Beltramo, Florence Nimoh, Matthew OBrien

We examine the link between financial security and social cohesion, in a low-income setting where cohesion is crucial: the integration of refugees into ultra-poor host communities in the developing world. We first generate an exogenous shock to financial security by implementing a field experiment of a large cash transfer and employment support program. Increasing financial security of both refugees and hosts leads to higher levels of trust, new friendships with out-groups, a greater willingness to share resources with out-groups and a stronger sense of belonging for refugees (our overall social integration index increased by 0.74 standard deviations relative to the control group). We then exploit a negative shock to financial security in the form of a climate event: two years later, a category three tropical cyclone caused damage to some houses and crops. Consistent with a causal interpretation of the relationship between financial security and social cohesion, participants who experienced even a moderate reduction in their financial security reported a disproportionately large weakening of social cohesion (by 0.23 standard deviations). Levels of trust and willingness to share resources persisted for those not affected by the cyclone. Taken together, these findings suggest that individuals can shift between cooperative and competitive mindsets in response to their experiences. On the one hand, providing social protection to both refugees and low-income host community members can lead to more cooperative attitudes and behaviors, thus promoting socioeconomic  integration. However, these gains are fragile and easily undone when individuals are exposed to negative climate shocks that make scarcity top of mind again.


        Zero Sum Thinking and the Roots of U.S. Political Divides, with Sahil Chinoy, Nathan Nunn and Stefanie Stantcheva,  Vox, Resubmitted American Economic Review

We examine the causes and consequences of an important cultural and psychological trait: the extent to which one views the world in zero-sum terms -- i.e., that benefits to one person or group tend to come at the cost of others. We implement a survey among approximately 15,000 individuals living in the United States that measures zero-sum thinking, political and policy views, and a rich set of characteristics about their ancestry. We find that a more zero-sum view is strongly correlated with several policy views about the importance of government, the value of redistributive policies, the impact of immigration, and one's political orientation. We find that zero-sum thinking can be explained by experiences of an individual's ancestors (parents and grandparents), including the amount of intergenerational upward mobility they experienced, the degree of economic hardship they suffered, whether they immigrated to the United States or were exposed to more immigrants, and whether they had experiences with enslavement. These findings underscore the importance of psychological traits, and how they are transmitted inter-generationally, in explaining current political divides in the United States. 

Forced Displacement and Human Capital, with Giorgio Chiovelli, Stelios Michalopolous and Elias Papaioannou ; VoxDev, R&R Quarterly Journal of Economics

We study the impact of conflict-driven displacement on human capital accumulation and occupational shifts. We focus on the Mozambican civil war (1977 − 1992), during which millions of civilians fled to the countryside, to cities, and to refugee camps in neighboring countries. We reconstruct the movements of the entire Mozambican population during this period to examine the consequences of multiple displacement trajectories in a unified setting. First, we describe the educational outcomes of the universe of individuals displaced during their school-going age. Second, we identify the age at move and implement a movers design to estimate exposure effects, focusing on moves occurring in high-conflict areas. We find that children who were still in their primary school-going years experienced strong and positive displacement effects on schooling. Third, we compare children of families separated during the war, using children who stayed behind as a counterfactual to each child’s displacement trajectory. Displacement is associated with increases in educational investments and shifts out of agricultural employment, with the largest effects experienced by rural-born children escaping to urban areas. The children who stayed behind do not report lower levels of schooling compared to their respective cohorts in their districts of birth. Fourth, we unpack the mechanisms into place-based and uprootedness effects. Fifth, we conduct a survey in Mozambique’s largest northern city, whose population doubled during the civil war: those displaced to the city have significantly higher education than their siblings in the countryside, and have converged to the levels of schooling of the non-mover urban-born individuals. However, those displaced exhibit significantly lower social/civic capital and have worse mental health, even three decades after the war ended. Our findings demonstrate that displacement shocks can stimulate human capital investments and break ties with subsistence agriculture. However, this comes at the cost of enduring social and psychological traumas. 


Identity, Media and Consumer Behavior,  with Mattia Nardotto , Vox Eu, Resubmitted Review of Economic Studies

This paper examines how national identity affects day-to-day economic behavior. We exploit the Brexit referendum as a shock to the salience of identity and measure its impact on consumer choices in the UK, between British and EU grocery products. Drawing from a unique panel dataset with 12 million shoppers, we find that the referendum is associated with an increase in consumption of UK products (6%) and a reduction in demand for EU products (13%). Changes in consumption are driven by identity being top of mind: consumption of UK products increases up to 14% during intense media discussions on Brexit, particularly during discussions on the politics of regaining sovereignty relative to the economic or social issues associated with Brexit. These findings underscore the importance of national identity in shaping routine economic decisions, and the mediating role that political events and the media can play by keeping identity top of mind. 


Price Norms and Consumer Behavior, with Pedro Bordalo, Mattia Nardotto and Matthew O'Brien

We examine how consumers' decisions are shaped by their past experiences. Using a large scale experiment that exogenously varied prices in all stores of a large retailer, we generate individual level variation in the history of prices faced by consumers for both durable and non-durable goods. We find that choices at given prices depend on the prices of similar goods the consumer experienced in the past: the consumer is more likely to buy at a given price if it is lower than prices seen previously. Several robust patterns help shed light on consumers' expectations and valuation processes:  first, demand is inelastic for moderate departures from the (individual-specific) average past price but is highly elastic for large price movements. Second, demand is more inelastic for consumers who have experienced larger price volatility. The findings are in line with a model where consumers compare current prices to a price norm retrieved from memory and pay attention only when the difference is large or surprising. The norm is more flexible the higher the historical volatility, suggesting that both price stickiness and price flexibility can arise in equilibrium.



PUBLICATIONS


      Journal of Development Economics

Youth unemployment remains extremely high throughout the developing world, at times coexisting with unmet demand for labor and high job turnover. We examine one possible explanation for this: spatial mismatches between jobs and job seekers combined with high search costs can lead young job seekers to have overly optimistic beliefs about their employment prospects. As a result, job seekers under-search but also hold out for better jobs. Through a field experiment we find that reducing search costs leads job seekers to search more intensively and to adjust their beliefs in line with their search experience. When jobs fail to materialize immediately, job seekers who searched the most become more impatient, they lower their reservation wage and they settle for low-paying jobs closer to home. This does not increase their likelihood of being employed, since nearby jobs are also scarce, which raises the possibility that available information moved them to the wrong choice. These findings underscore the importance and complexity of the interaction between search costs and beliefs, and how they can lead to spatial and occupational mistargeting in the job search.  


     Management Science

We examine the complementarity between access to mobile savings accounts and improved financial management skills on the performance of female-led microenterprises in Mozambique. This combined support is associated with a large increase in both short and long-term firm profits and in financial security for the microentrepreneur. This allowed female-headed microenterprises to close the gender profit gap in performance relative to their male counterparts. The main drivers of improved business performance are improved financial management practices (bookkeeping), an increase in accessible savings, and reduced transfers to friends and relatives.  


      The Review of Economic Studies

 We study the effects of European immigration to the United States during the Age of Mass Migration (1850–1920) on economic prosperity. Exploiting cross-county variation in immigration that arises from the interaction of fluctuations in aggregate immigrant flows and of the gradual expansion of the railway network, we find that counties with more historical immigration have higher income, less poverty, less unemployment, higher rates of urbanization, and greater educational attainment today. The long-run effects seem to capture the persistence of short-run benefits, including greater industrialization, increased agricultural productivity, and more innovation.


4. Corruption,Trade Costs and Gains from Tariff Liberalization: Evidence from Southern Africa (2016), 

       American Economic Review,

This paper exploits quasi-experimental variation in tariffs in southern Africa to estimate trade elasticities. Traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate. Trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities. In contexts of pervasive corruption, even small bribes can significantly reduce tariffs, making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms’ import behavior. The tariff liberalization scheme is however still associated with improved incentives to accurately report quantities of imported goods, and with a significant reduction in bribe transfers from importers to public officials.


       Journal of Economic Behavior and Organization

This paper tests two specific mechanisms through which individuals can form expectations about returns to investments in education: recognition for schooling performance, and exposure to successful students through family or social networks. Using a regression discontinuity design, we study the impact of two fellowship programs recognizing educational performance in secondary schools in India. We find that the fellowship award is associated with a sig-nificant increase in the perceived value of education, by both increasing the perceived mean of earnings (0.74 SD) and decreasing the perceived variance in earnings (1.03 SD) associated with additional years of schooling. The effects spill over only selectively to social and family networks. Peers exposed to successful students do not update their beliefs but parents of fellows report higher perceived returns to education. Peers of fellows are however more informed about fellowship opportunities and report a higher intention to apply for the fellowship, thus contributing to the persistence of the potential impact of the fellowship across different cohorts.


       Review of Economics and Statistics

We provide new evidence on consumer demand for ethical products from experiments conducted in a U.S. grocery store chain. We find that sales of the two most popular coffees rose by almost 10% when they carried a Fair Trade label as compared to a generic placebo label. Demand for the higher priced coffee remained steady when its price was raised by 8%, but demand for the lower priced coffee was elastic: a 9% price increase led to a 30% decline in sales. While consumers attach value to ethical sourcing, there is significant heterogeneity in willingness to pay for it.


       Journal of International Economics

This paper investigates how corruption affects firm behavior. Using an original and unusually rich dataset on bribe payments at ports matched to firm-level data, we observe how firms adapt to different types of corruption by adjusting their transport strategies. Our results suggest that firms respond to the price effects of corruption, organizing production in a way that increases or decreases demand for the public service.


This chapter critically surveys recent advances in the methodology of measuring corruption in the field. The issue of measurement is central in the corruption literature, and the choice of method can significantly influence our thinking about the determinants, the mechanics, and the impact of corruption on the economy. We provide a conceptual categorization of different methods of measuring corruption ranging from surveys to direct observation of bribe payments in the field, while discussing the methodological and conceptual advantages and disadvantages of each method. Finally, we highlight areas of complementarity across methods and discuss avenues for future research.


How corruption affects firm-level trade costs remains an important though relatively unexplored line of inquiry in the trade literature. Corruption can increase trade costs if it represents an additional tax firms have to pay to clear goods across borders, or it can decrease trade costs if it allows firms to circumvent cumbersome bureaucratic procedures or reduce clearing times. This chapter discusses novel evidence from corruption patterns in two ports in Southern Africa, to shed light on the determinants and on the implications for international trade of corruption in transport networks. 




POLICY PAPERS


Transport Infrastructure and Firm Performance: Evidence from Southern Africa

Transport Costs and Firm Behavior (2011), eds Olivier Cadot, Ana M. Fernandes, Julien Gourdon and Aaditya Mattoo in "Where to spend the next million? Applying impact evaluation to trade assistance", CEPR, Center for Economic Policy Research

Reviving Trade Routes: Evidence from the Maputo Corridor, with Olivier Hartman and Charles Kunaka, World Bank (peer reviewed)