Fragmented Markets and the Proliferation of Small Firms: Evidence from Mom-and-Pop Shops in Mexico (Job Market Paper) joint with Daniel Ramos-Menchelli

Developing countries are characterized by the prevalence of small firms in the retail sector. We explain this phenomenon through a spatial model in which high transport costs lead to small effective market sizes and, consequently, to the proliferation of smaller and lower quality firms. We show that low costs of entry are key for this result. By obtaining a new, confidential panel of firm-level data surveying the universe of mom-and-pop shops in Mexico, we test the implications of our model. We exploit the deregulation of the Mexican gasoline market in 2017 as an exogenous shock on consumer transport costs. Where gas prices increased, the number of mom-and-pop shops differentially increased while their average size and quality fell. We give evidence of fragmentation and localized demand as the mechanism behind these effects. With our estimated model, we evaluate the welfare consequences of a licensing program in Mexico City which increased costs of entry for mom-and-pop shops. We show there are modest efficiency gains from having less stores in the market. 

 

Social Protection in the Developing World joint with Abhijit Banerjee, Rema Hanna, and Benjamin Olken. Prepared for the Journal of Economic Literature [Online Appendix]

Social protection programs have become increasingly widespread in low- and middle income countries, with their own distinct characteristics to match the environments in which they are operating. This paper reviews the growing literature on the design and impact of these programs. We review how to identify potential beneficiaries given the large informal sector, the design and implementation of redistribution and income support programs, and the challenges and potential of social insurance. We use our frameworks as a guide for consolidating and organizing the existing literature, and also to highlight areas and questions for future research.

 

Spillovers of private provision of healthcare on the public sector

How does the private provision of healthcare affect access and health outcomes in the public sector? In this project, I study the implications of expanding private clinic access by leveraging a regulation change in Mexico that exogenously led to a growth of pharmacy clinics in some places relative to others. I document a decrease in both the intensive (number of appointments) and extensive margin (number of users) in the public sector in places where more openings occurred. Contrary to concerns about lowered quality of care, I find no adverse effects on health outcomes.

 

OLDER RESEARCH 

Externalities of Environmental Regulation: New Evidence on the Impact of U.S. Lead Regulation on Mexican Children from Social Security Records

Cross-country externalities associated with environmental regulation have been at the core of policy debates regarding international agreements on toxic emissions. While the economics literature has greatly advanced on the effects of environmental regulation on the production side, research on the effect of this type of regulations on health across countries has just started. This study provides new evidence of the effects of strengthening the US lead regulation in 2009 on Mexican infants’ birth outcomes. Most lead production in North America comes from the recycling of used lead-acid batteries and after 2009 a sharp increase of US battery exports to Mexico was documented. Using this as background and a newly constructed birth outcomes dataset from hospitals belonging to the Mexican Institute of Social Security, I compare birth outcomes of newborn babies in areas close to battery recycling plants with those born slightly away before and after 2009. Relative to the most important previous study in the same context, the dataset allows me to (a) analyze complications arising for mothers, (b) analyze birth outcomes for same mothers by controlling for mother fixed effects, and (c) check for longer background trends before the regulation. My difference in differences estimation shows that birth weight decreased, and complications increased after 2009, but not before. I further show that the effects remain quantitatively similar after controlling for mothers, in particular mothers whose first baby had lower-than-median birth weight, suggesting that the negative health consequence is concentrated in more disadvantaged families. The findings add further evidence on cross-country health externalities of environmental regulations.