Essays on Firms in Developing Countries

In this dissertation, I study the behavior and the factors that impact the performance of firms in developing countries. Chapter 1 and 3 investigate the determinants of patterns of trade in Myanmar, a country which over the past decade has been undergoing an extraordinary transition, from military control and diplomatic isolation to political and economic liberalization. Chapter 2 studies how firms upgrade the quality of their output to increase sales abroad. Specifically, in Chapter 1, I investigate the hypothesis that if matching frictions in international trade are important, a seller’s ability to connect with buyers could explain a substantial part of exporters heterogeneity in size. I do so in Myanmar’s bean export market. Despite beans having all the attributes of a commodity, there is significant transaction price dispersion across both exporters and foreign buyers. Empirical patterns are consistent with foreign buyers facing search costs to find exporters. I estimate a model of search and auctions, where foreign buyers first search for a set of exporters, and then run a competitive bidding process between exporters within that set. In the model, exporters are described by two parameters: a visibility parameter that impacts their likelihood of being found by foreign buyers and a cost parameter that drives the level of their price quotes and thus their market share with each foreign buyer. Visibility explains an important part of the firm size distribution. On the buyer side, searching for an additional exporter has an estimated cost of about $2,000. Moving to a centralized market would lead to a five percent decrease in transaction prices. Chapter 2 looks at the relationship between firms’ output quality and their organizational structure. Using data on the production and transaction chain that makes up Peruvian fishmeal manufacturing, we establish three results. First, firms integrate existing suppliers when the quality premium rises for exogenous reasons. Second, suppliers change their behavior to better maintain input quality when vertically integrated. Third, firms produce a higher share of high-quality output when supplier availability constraints shift them into using integrated suppliers. Overall, our results indicate that quality upgrading is an important motive for integrating suppliers facing a quantity-quality trade-off, as classical theories of the firm predict. Chapter 3 quantifies the impact of import license liberalization in Myanmar’s unique political economy environment. By contrast to previous literature on the issue, we find that liberalization did not lead to substantial entry in the sectors populated by firms connected to the party in power. We document two facts that rationalize these findings. First, connected firms tend to import products subject to important economies of scale, which provide opportunities for rent-seeking and act as a “natural” barrier to entry for small firms. Second, we show that a subset of the products liberalized de jure were not liberalized de facto. Products not liberalized de facto are more likely to be sectors where connected firms are present and where economies of scale are less important. This last result suggests that institutional arrangements were made to protect connected firms in the sectors where they faced higher potential competition

Language barriers in multinationals and knowledge transfers

We study communication frictions within multinationals (MNCs), hypothesizing that language barriers reduce management knowledge transfers within the organization. A distinct feature of such MNCs is a three-tier hierarchy: foreign managers (FMs) supervise domestic managers (DMs) who supervise production workers. Tailored surveys from our setting – MNCs in Myanmar – reveal that language barriers impede interactions between FMs and DMs. A first experimental protocol offers DMs free English courses and confirms that lowering communications costs increases their interactions with FMs. A second experimental protocol that asks human-resource managers at domestic firms to rate hypothetical resumes reveals that multinational experience and, specifically, DM-FM interactions are valued in the domestic labor market. Together, these results suggest that reducing language barriers can improve transfers of management knowledge, an interpretation supported by improvements in soft skills among treatment DMs in the first experiment. A model in which communication within MNCs is non-contractible – a realistic feature of workplace life – reveals that the experimental results are consistent with underinvestment in language training and provide a rationale for policy intervention

COVID-19 vaccine acceptance and hesitancy in low- and middle-income countries

Widespread acceptance of COVID-19 vaccines is crucial for achieving sufficient immunization coverage to end the global pandemic, yet few studies have investigated COVID-19 vaccination attitudes in lower-income countries, where large-scale vaccination is just beginning. We analyze COVID-19 vaccine acceptance across 15 survey samples covering 10 low- and middle-income countries (LMICs) in Asia, Africa and South America, Russia (an upper-middle-income country) and the United States, including a total of 44,260 individuals. We find considerably higher willingness to take a COVID-19 vaccine in our LMIC samples (mean 80.3%; median 78%; range 30.1 percentage points) compared with the United States (mean 64.6%) and Russia (mean 30.4%). Vaccine acceptance in LMICs is primarily explained by an interest in personal protection against COVID-19, while concern about side effects is the most common reason for hesitancy. Health workers are the most trusted sources of guidance about COVID-19 vaccines. Evidence from this sample of LMICs suggests that prioritizing vaccine distribution to the Global South should yield high returns in advancing global immunization coverage. Vaccination campaigns should focus on translating the high levels of stated acceptance into actual uptake. Messages highlighting vaccine efficacy and safety, delivered by healthcare workers, could be effective for addressing any remaining hesitancy in the analyzed LMICs.Publisher PDFPeer reviewe

Could the economic cost outpace the health impact of COVID-19 in Africa?

The policy response to the COVID-19 crisis in African countries should not only factor in their weak health capacity, but also the extreme economic vulnerability of its population

Vertical integration, supplier behavior, and quality upgrading among exporters

This paper studies the relationship between a firm s organizational structure and output quality. The setting is a large manufacturing sector in Peru where plants produce a vertically differentiated but otherwise homogeneous product for export: fishmeal. We link customs data to plant level data on each shipment s quality grade, transaction level data on supplies, and GPS measures of supplier (fishing boat) behavior.We start by documenting a robust association between the quality grade of a firm s exports and the share of its inputs that comes from vertically integrated suppliers at the time of production. To understand the source of this relationship, we first show that classical theories of the firm predict that, in incomplete contracts settings, owning productive assets upstream may help a subset of downstream manufacturers attempting to produce high quality output to incentivize quality-effort from the assets operators. This explanation finds empirical support: in a given supplier-plant pair, the supplier delivers higher quality inputs (fresher fish) when integrated, and does so comparatively more during periods when (i) the plant aims to produce high quality output, and/or (ii) exogenous variation in upstream production (plankton) conditions makes quality-effort more costly. Finally, we show that firms source more of their inputs from integrated suppliers when faced with firm-specific shocks to demand for high quality exports. These results document an overlooked motivation for vertical integration and that strategic changes in organizational structure help manufacturers in developing countries achieve export success

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This paper studies the relationship between a firm s organizational structure and output quality. Thesetting is a large manufacturing sector in Peru where plants produce a vertically differentiated but otherwise homogeneous product for export: fishmeal. We link customs data to plant level data on each shipment s quality grade, transaction level data on supplies, and GPS measures of supplier (fishing boat) behavior.We start by documenting a robust association between the quality grade of a firm s exports and the share of its inputs that comes from vertically integrated suppliers at the time of production. To understand the source of this relationship, we first show that classical theories of the firm predict that, in incomplete contracts settings, owning productive assets upstream may help a subset of downstream manufacturers attempting to produce high quality output to incentivize quality-effort from the assets operators. This explanation finds empirical support: in a given supplier-plant pair, the supplier delivers higher quality inputs (fresher fish) when integrated, and does so comparatively more during periods when (i) the plant aims to produce high quality output, and/or (ii) exogenous variation in upstream production (plankton) conditions makes quality-effort more costly. Finally, we show that firms source more of their inputs from integrated suppliers when faced with firm-specific shocks to demand for high quality exports. These results document an overlooked motivation for vertical integration and that strategic changes in organizational structure help manufacturers in developing countries achieve export success