We analyze firm turnover (i.e., entry and exit) and its consumer implications in a market characterized by asymmetric information. Using a census of agro-dealers in Tanzania's Morogoro Region, we document annual entry and exit rates of 34 and 18 percent, respectively. These rates are more than double those reported for micro-, small-, and medium-enterprises operating in non-agricultural sectors in similar low-income countries. Agro-dealer exit is more common in highly competitive markets and is not well predicted by observable agro-dealer characteristics. Motivated by these patterns, we develop a theoretical model of firm turnover under information asymmetries and test its predictions empirically. We find that farmers' beliefs about agricultural input quality improve following an agro-dealer's exit, consistent with our model's prediction that farmers believe exiting agro-dealers sold low-quality agricultural inputs. Moreover, farmers who regularly purchase agricultural inputs from the same agro-dealer expect new market entrants to provide lower-quality agricultural inputs. These findings suggest that agro-dealer turnover critically shapes farmers' technology adoption decisions. In markets with information asymmetries, repeated transactions with incumbents help farmers manage quality uncertainty.
Presentations:
This paper studies the unintended consequences of size-dependent formalization policies on firm behavior, focusing on a provision in Vietnam's Labor Code 2012. The policy requires firms with at least 10 formally contracted, paid employees to comply with additional labor regulations. I develop a profit maximization framework to show that such thresholds can distort labor and formality decisions by incentivizing firms to limit their size or shift towards non-compliant labor arrangements to circumvent compliance costs. Using panel data of micro-, small-, and medium-enterprises in Vietnam, I employ a difference-in-discontinuities approach to isolate the policy’s localized temporal effects. In contrast to the model’s prediction of firms “bunching” just below the threshold, McCrary density tests reveal no significant post-policy discontinuity in formal, paid employment. Instead, I find firms adjusted along alternative margins: those just below the threshold substituted toward unpaid labor while those just above registered with the government but continued to depend on informal employment. This study demonstrates how threshold-based policies can encourage hybrid compliance strategies without necessarily constraining firm size, raising broader questions about their effectiveness in fostering comprehensive firm formalization.
This research examines Mexican immigrants’ motivations for crossing into the US to evaluate whether macroeconomic conditions affect these motivations. Using a data set of 44,017 Mexican migrants from 2010 through September 2016 and controlling for personal factors, results indicate economic motivations are moderated by US macroeconomic conditions and in the expected way, i.e. the US unemployment rate (growth rate) is inversely (directly) associated with economic motivations to cross into the US and positively associated with non-economic (familial-based) motivations. Results also suggest that Mexican migrants coming to the US in the wake of the Great Recession (i.e. in 2010 and 2011) were much less likely to cross for economic reasons than those crossing in 2015 and 2016, while those crossing in 2013 and 2014 were more likely to cross for economic reasons. We suspect nationalistic rhetoric amplified by Trump’s campaign for US president may have crowded out economic motivations as immigrants expected the proposed anti-immigrant policies to reduce the availability of US economic opportunities. Similar support for macroeconomic “push” effects from the Mexican economy were not found. Additionally, economic and familial-based motivations for migrating appear to be substitutes and both respond to US macroeconomic conditions though in opposite ways.