How manufacturing firms respond to energy subsidy reforms? An impact assessment of the Iranian Energy Subsidy Reform
[Revise & Resubmit from Energy Economics]
with Zahra Zarepour
Energy prices increased several folds due to the 2010 Iranian Energy Subsidy Reform. This study assesses the impact of the reform on the performance of manufacturing firms using a detailed micro-panel dataset at the 4-digit ISIC level for the period 2009 to 2013. Since the reform universally affected all firms, the analysis relies on a quasi-experimental framework implementing first an explorative before-after design with structural fixed-effects and second a difference-in-difference analysis exploiting energy dependence. the subsidy removal caused a shrinkage in output and manufacturing value-added of at least 3 and 7%, respectively. This results in a deterioration of profits by nearly 9%. Manufacturing firms have been affected through three channels: increasing costs of direct energy inputs, pass-through costs for inputs from upstream firms and an energy-price-induced demand contraction. To successfully implement an energy subsidy reform while maintaining growth in the manufacturing sector, not only the direct but also the indirect, pass-through effects have to be considered since capital or technology-led responses to mitigate negative repercussions in the short-run are unlikely at large scale. The results can inform expected energy reforms to mitigate climate change.
Long-term impacts of an early childhood shock on human capital: Evidence from the 1999 economic crisis in Ecuador
[Revise & Resubmit from Health Economics]
with Jimena Pacheco
This paper provides evidence on the lasting effects of the 1999 economic crisis in Ecuador on human capital formation. We show for the population at large that the negative repercussions are still observable more than 10 years after macroeconomic recovery. Taking advantage of micro-level data collected in 2012 and 2014, we assess long-term impacts on health and education. Despite purging the data of cohort, age, time and geography fixed effects, we find that after 14-16 years the affected cohorts report height-for-age Z-scores that are 0.07 standard deviations lower and have 0.18 fewer years of schooling compared to those who were not exposed to the crisis. Girls and urban children are most adversely affected. The persistence of the negative effects points to the existence of a poverty trap suggesting that policy interventions should be extended beyond macroeconomic recovery to also counteract such long-term consequences with possible lessons for dealing with COVID-19.
Experiential marketing of clean drinking water: Experimental evidence for Kenya and Rwanda
[Under Review with Review of Development Economics]
with Rachel Howell and Kinsuk Mani Sinha
To date limited work investigates why and how consumers in emerging markets make consumption decisions. With the rise in demand for clean drinking water in sub-Sahara Africa, a field experiment was conducted on non-consumers of two socially oriented drinking water companies providing low cost re-usable bottled drinking water in Kenya and Rwanda. Non-consumers were randomly divided into two groups to address whether the provision of purchase-related information and exposure to a physical experience (free sample) increase purchase. For both countries, information motivated purchase (49% for Kenya, 67% for Rwanda) but purchase was even higher among those who received the free sample (67% for Kenya, 78% for Rwanda, p-value<5%). Similarly, planned future purchase and the purchase frequency were significantly increased in the treatment group. The results suggest that similar to consumers in developed markets, emerging market consumers may not only consume on the basis of price, but rather having an experience with a product can minimize purchase risk.