Working Papers
EFMA Best PhD Paper Award, MFA Outstanding Paper Award
Abstract: How do lenders improve contract enforcement when institutions are weak? To increase pledgeability of farmers' output, a large agribusiness lender in Brazil constructs grain storage silos. Once deposited in the warehouse, grain can be seized by the lender. Warehouse access also permits a new credit contract, repayable in grain. This contract transfers the ownership of grain to the lender, restraining the borrower from diverting the proceeds. The improved collateralization increases debt capacity and lowers interest rates. The effects are stronger for municipalities with weaker courts and financially-constrained borrowers. Results resonate with credit by commodity traders to producers and custodian lending. R&R Review of Financial Studies (2nd round)
Abstract: Abstract We exploit a variation in organizational hierarchy induced by a reorganization plan implemented in roughly 2,000 bank branches in India, to investigate how organizational hierarchy affects the allocation of credit. We find that increased hierarchization of a branch induces credit rationing, reduces the performance on loans, and generates standardization in loan contracts. Additionally, we find that hierarchical structures perform better in environments characterized by a high degree of corruption, highlighting the benefits of hierarchies in restraining rent-seeking activities. Overall, our results are consistent with the view that valuable information may be lost in hierarchical structures.
Unemployment Insurance, Strategic Unemployment and Firm-Worker Collusion (with Bernardus van Doornik and David Schoenherr)
Abstract: To contain moral hazard effects on labor supply, a key feature in the design of unemployment insurance (UI) programs is to make benefits contingent on layoff. Using the universe of formal labor contracts in Brazil and a sharp discontinuity in the application of an unexpected UI reform, we find that workers are more likely to be laid off when they are eligible for UI benefits. Such strategic unemployment accounts for twelve percent of unemployment inflow around the eligibility threshold. Firms and workers collude to time unemployment inflow and outflow with eligibility for UI benefits, explaining at least 20 percent of strategic unemployment inflow. Firms seem to benefit from collusion by paying lower equilibrium wages.
Work in Progress
Organizational Design of Risk Management (with Rajesh Chandy, Ahmed Tahoun, and Vikrant Vig) Vertical Integration and Input Specificity (with Dimas Fazio and Thiago Silva) Firm Risk and Firm-Worker Selection (with Bernardus van Doornik and David Schoenherr) Propagation of Shocks and Network Fragility (with Dimas Fazio and Thiago Silva)
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