Publications

We present a model of digital advertising with three key features: (1) advertisers can reach consumers on and off a platform, (2) additional data enhances the value of advertiser–consumer matches, and (3) the allocation of advertisements follows an auction-like mechanism. We contrast data-augmented auctions, which leverage the platform’s data advantage to improve match quality, with managed-campaign mechanisms that automate match formation and price-setting. The platform-optimal mechanism is a managed campaign that conditions the on-platform prices for sponsored products on the off-platform prices set by all advertisers. This mechanism yields the efficient on-platform allocation but inefficiently high off-platform product prices. It attains the vertical integration profit for the platform and the advertisers, and it increases off-platform product prices while decreasing consumer surplus, relative to data-augmented auctions.

We construct a new dataset to show that successful entrants in the consumer food sector build market share by adding new customers. Entrants reach new customers by entering more geographical markets, placing their product in more stores in these markets, and, for a positively selected subset of firms, advertising directly to customers. These activities are costly and are associated with persistent increases in quantities, but there are no differences in markups between new and mature markets. This confirms a central role for marketing and advertising in overcoming demand-side frictions that slow firm growth.

How does emigration of highly educated citizens of low-income countries to high-income countries affect the economies of the origin countries? The direct effect is “brain drain”—a decrease in the country’s human capital stock. However, there may also be indirect “brain gain” effects. This review summarizes evidence that uses causal inference methods to reveal mechanisms that may lead to brain drain, gain, or circulation. Collectively, the weight of the evidence suggests that migration opportunities often increase human capital stock in origin countries and produce downstream beneficial effects through remittances; foreign direct investment and trade linkages; transfers of knowledge, technology and norms; and return migration. We discuss conditions under which benefits from skilled migration may outweigh costs and also describe potential research paths to inform policy.

Heise et al. (2021) develop a model-based empirical measure—sellers per shipment (SPS)—to characterize how firms organize supply chains in response to a quality control problem. High SPS indicates spot-market purchasing with costly inspections, while low SPS suggests long-term relationships where buyers pay an incentive premium to prevent cheating. Here, we document intuitive variation in US importers' SPS across sectors and show that shipping characteristics such as average price, quantity shipped, and shipment frequency are in each sector consistent with the model of sourcing developed in Heise et al. (2021), providing further confidence in the measure.

Market-based environmental regulations are seldom used in low-income countries, where pollution is highest but state capacity is often low. We collaborated with the Gujarat Pollution Control Board (GPCB) to design and experimentally evaluate the world’s first particulate-matter emissions market, which covered industrial plants in a large Indian city. There are three main findings. First, the market functioned well. Treatment plants, randomly assigned to the emissions market, traded permits to become significant net sellers or buyers. After trading, treatment plants held enough permits to cover their emissions 99% of the time, compared with just 66% compliance with standards under the command-and-control status quo. Second, treatment plants reduced pollution emissions, relative to control plants, by 20%–30%. Third, the market reduced abatement costs by an estimated 11%, holding constant emissions. This cost-savings estimate is based on plant-specific marginal cost curves that we estimate from the universe of bids to buy and sell permits in the market. The combination of pollution reductions and low costs imply that the emissions market has mortality benefits that exceed its costs by at least 25 times.

What are the welfare gains from upgrading electric vehicle infrastructure? This paper develops a model of electric vehicle charging location decisions incorporating the transportation network structure, allocation of travel, and the effect on electric vehicle demand. We estimate the model with rich data on vehicle registrations, road segments, cell phone tracks, and charging locations and characteristics. We examine a counterfactual that adds level 3 (direct current fast) chargers optimally in the Connecticut transportation network. We find that adding chargers yields significant time savings and consumer welfare gains, while electric vehicle market shares are only modestly affected.

We quantify how pollution affects aggregate productivity and welfare in spatial equilibrium. We show that skilled workers in China emigrate away from polluted cities. These patterns are evident under various empirical specifications, such as when instrumenting for pollution using upwind power plants, or thermal inversions. Pollution changes the spatial distribution of skilled and unskilled workers, and wage returns by location. We quantify the loss in aggregate productivity due to this re-sorting by estimating a spatial equilibrium model. Counterfactual simulations show that reducing pollution increases productivity through spatial re-sorting by approximately as much as the direct health benefits of clean air.

We exploit a unique event to study the extent to which popular attitudes towards trade are driven by economic fundamentals. In 2007, Costa Rica put a free trade agreement (FTA) to a national referendum. With a single question on the ballot, 59% of Costa Rican adult citizens cast a vote on whether they wanted an FTA with the U.S. to be ratified or not. We merge disaggregated referendum results, which break new ground on anonymity-compatible voting data, with employer–employee, customs, and firm-to-firm transactions data, and data on household composition and expenditures. We document that a firm’s exposure to the FTA, directly and via input–output linkages, significantly influences the voting behaviour of its employees. This effect dominates that of sector-level exposure and is greater for voters aligned with pro-FTA political candidates. We also show that citizens considered the expected decrease in consumer prices when exercising their vote. Overall, economic factors explain 7% of the variation in voting patterns, which cannot be accounted for by non-economic factors such as political ideology, and played a pivotal role in this vote.

We test whether payments for ecosystem services (PES) can curb the highly polluting practice of crop residue burning in India. Standard PES contracts pay participants after verification that they met a proenvironment condition (clearing fields without burning). We randomize paying a portion of the money up front and unconditionally to address liquidity constraints and farmer distrust, which may undermine the standard contract's effectiveness. Incorporating partial up-front payment into the contract increases compliance by 10 percentage points, which is corroborated by satellite-based burning measurements. The cost per life saved is $3,600–$5,400. The standard PES contract has no effect on burning.

We conduct a systematic re-analysis of intervention-based studies that promote hygienic latrines and evaluate via experimental methods. We impose systematic inclusion criteria to identify such studies and compile their microdata to harmonize outcome measures, covariates, and estimands across studies. We then re-analyze their data to report metrics that are consistently defined and measured across studies. We compare the relative effectiveness of different classes of interventions implemented in overlapping ways across four countries: community-level demand encouragement, sanitation subsidies, product information campaigns, and microcredit to finance product purchases. In the sample of studies meeting our inclusion criteria, interventions that offer financial benefits generally outperform information and education campaigns in increasing adoption of improved sanitation. Contrary to a policy concern about sustainability, financial incentives do not undermine usage of adopted latrines. Effects vary by share of women in the household, in both positive and negative directions, and differ little by poverty status.

Welfare depends on the quantity, quality, and range of goods consumed. We use trade data, which report the quantities and prices of the individual goods that countries exchange, to learn about how the gains from trade and growth break down into these different margins. Our general equilibrium model, in which both quality and quantity contribute to consumption and to production, captures (i) how prices increase with importer and exporter per capita income, (ii) how the range of goods traded rises with importer and exporter size, and (iii) how products traveling longer distances have higher prices. Our framework can deliver a standard gravity formulation for total trade flows and for the gains from trade. We find that growth in the extensive margin contributes to about half of overall gains. Quality plays a larger role in the welfare gains from international trade than from economic growth due to selection.

We study reputation dynamics within the household in a setting where women regularly receive transfers from their husbands for household purchases. We propose a signaling model in which wives try to maintain a good reputation in the eyes of their husbands to receive high transfers. This leads them to (i) avoid risky purchases (goods with unknown returns) and (ii) knowingly overuse low-return goods to hide bad purchase decisions—we call this the intrahousehold sunk cost effect. We present supportive evidence for the model from a series of experiments with married couples in rural Malawi.

We fully solve a sorting problem with heterogeneous firms and multiple heterogeneous workers whose skills are imperfect substitutes. We show that optimal sorting, which we call mixed and countermonotonic, is comprised of two regions. In the first region, mediocre firms sort with mediocre workers and coworkers such that the output losses are equal across all these teams (mixing). In the second region, a high-skill worker sorts with low-skill coworkers and a high-productivity firm (countermonotonicity). We characterize the equilibrium wages and firm values. Quantitatively, our model can generate the dispersion of earnings within and across US firms.

We consider risk sharing in rural China during its rapid economic transformation from the late 1980s through the late 2000s. We document an erosion of consumption insurance against both household-level idiosyncratic and village-level aggregate income shocks, and show that this decline is related to observable economic changes: the shift out of agriculture, the decline of publicly owned Township-and-Village Enterprises, and increased migrant work. Further evidence suggests that as these changes took place at the village level, higher levels of government failed to offset these effects through the tax-and-transfer system, leaving households more exposed to both idiosyncratic and village-aggregate risk.

This paper estimates the consumer surplus from using alternative payment methods. We use evidence from Uber rides in Mexico, where riders have the option to use cash or cards to pay for rides. We design and conduct three large-scale field experiments, which involved approximately 400,000 riders. We also build a structural model which, disciplined by our new experimental data, allows us to estimate the loss of private benefits for riders when a ban on cash payments is implemented. We find that Uber riders who use cash as means of payment either sometimes or exclusively suffer an average loss of approximately 40–50% of their total trip expenditures paid in cash before the ban. The magnitude of these estimates reflects the intensity with which cash is used in the application, the shape of the demand curve for Uber rides, and the imperfect substitutability across means of payments. Welfare losses fall mostly on the least-advantaged households, who rely more heavily on the cash payment option.