Worker productivity often depends on privately owned, portable inputs that workers finance themselves. When liquidity constraints bind, investment in these inputs may be inefficiently low, depressing both worker earnings and firm profits. I study whether firm subsidies that enable acquisition of worker-owned capital can raise productivity while remaining privately profitable for the firm. I partner with a large home-services platform firm in India where workers travel to customer homes to complete service jobs. In this setting, efficient last-mile connectivity is a key input for worker productivity, making a scooter essential worker-owned capital. I implement a randomized experiment in which workers receive subsidies toward scooter loan down payments. The subsidy increases scooter adoption by 32 percentage points. Administrative data show large increases in jobs completed and earnings. Treated workers travel farther, accept more lucrative early-morning and late-evening jobs, and deliver quality improvements. The firm recovers the subsidy within 18-29 weeks through increased revenue share and reduced attrition, subsequently scaling the program to additional cities. A complementary discrete-choice experiment shows demand for this worker-owned capital is more responsive to reducing upfront payment requirements than to lowering overall prices, consistent with liquidity constraints as the primary barrier. The results demonstrate that enabling investment in worker-owned capital can be both productivity-enhancing and privately optimal for firms while benefiting workers.

Coverage: World Bank Blog Post

Funding: Gender Growth and Labor Markets IZA Bonn, Center for Effective Global Action

Cash-back subsidy programs require households to pay full price for the subsidized good and be reimbursed later, thus creating liquidity hurdles. We exploit India’s LPG subsidy program, where the net-of-subsidy price is fixed while the over-the-counter price varies quasi-exogenously, to identify the causal effect of liquidity constraints. For low-asset households, a 1% increase in the over-the-counter price (with net price unchanged) reduces LPG purchases by 1.5% of the mean. Survey evidence shows substitution towards polluting solid fuels and worse child health. Transfer programs that neglect seemingly minor liquidity frictions may reduce essential consumption and under-deliver on welfare goals.

Submitted.

Abstract: Cities in developing countries are critical engines of growth but face heightened vulnerability to climate change, particularly from increasingly frequent extreme rainfall events. Rapid urban expansion has often outpaced infrastructure investment, raising concerns that extreme weather events could exacerbate existing inequalities. We study how urban workers adapt to extreme rainfall using high-frequency labor market data from a location-based platform in Delhi.  Using over four million daily-level job data, we find that earnings fall by 4 percent on rain shock days, driven by declines in labor supply rather than customer demand. Workers partially smooth income losses through intertemporal substitution but exhibit no spatial adaptation. The effects are highly unequal: workers in peripheral, poorer neighborhoods experience income losses three times larger than those in wealthier areas. Infrastructure quality, particularly drainage and metro connectivity, is positively associated with neighborhood resilience. Our findings suggest that without deliberate adaptation, climate change will reinforce existing spatial inequalities and limit the economic potential of developing cities.

Draft available on request.

We study the role of learning-by-doing in technology adoption by manufacturing firms. We conducted a randomized controlled trial in a cluster of garment manufacturing firms in India that primarily use an outdated sewing technology (“umbrella sewing machine”). Modern machines are faster, less noisier and energy-efficient, but still their adoption has been very low in this cluster. In our intervention, we provided a free trial of a modern sewing machine to treatment firms. This free trial is not provided to firms in the control group. Our preliminary estimates suggest more than 20 percentage point higher adoption of modern machines among the firms in the treatment group. We track beliefs, product upgrading, productivity, profits, labor reorganization, willingness to buy more machines over multiple rounds of surveys to understand the mechanisms and other outcomes. Our design aims to isolate the role of pessimistic or inaccurate priors in suppressing experimentation, and tests whether low-cost belief correction - through hands-on trials - can increase take-up of new technology among manufacturing firms. The endline survey is expected to complete in December 2025.

External Collaborators: Small Industries Development Bank of India (SIDBI), Foundation for MSME Clusters (FMC)

Funding: The Weiss Fund, Center for Effective Global Action, Michigan State University, SurveyCTO

AEA Registry 

Analysis stage.