“Resource Misallocation and Learning-by-Doing”
This paper investigates a trade-off between static and dynamic optimality conditions for resource allocation across firms in the presence of learning-by-doing (LBD). The standard static efficiency requires firms to have the same marginal revenue products (MRP) within each sector. In contrast, I show theoretically that dynamic efficiency condition implies dispersion in the MRP across firms when productivity growth is endogenous due to LBD. I then compare the implications of the dynamic and static models quantitatively using firm-level panel data from Indonesia. I show that firms’ productivity growth is consistent with LBD, whereby small and younger firms have lower productivity, but higher productivity growth compared to larger and older firms. I simulate the dynamic model and find that aggregate productivity is higher in the long run when we allow for some dispersion in MRP.
“Characterising Tax-Evading Firms: Evidence from Mongolia”
Understanding which firms evade taxes is important for developing economies who are trying to broaden their tax base and ensure equitable compliance. In this paper I characterise tax-evading firms using a Mongolian government program, which incentivises consumers to report their purchases. I find that as in other countries, this consumer monitoring increases firms’ reported sales and tax liabilities. I then study the firms that reported an abnormally large growth in their sales in the year that the program was launched, which suggests that those firms had previously been evading more taxes. I find that tax evasion was particularly prevalent among smaller firms, and conditional on firm size it was more common among older firms. My findings also suggest that tax evasion was more common in the capital city.
“Cultural Persistence and Firm Productivity: Evidence from 15th Century Chinese Immigration to Indonesia” (with Quoc-Anh Do, Kieu-Trang Nguen, and Dana Kassem)