Working Papers

Do Minimum Wage Increases Cause Financial Stress to Small Businesses? Evidence from 15 Million Establishments (with Sudheer Chava and Alex Oettl)

(Coming Soon)

-- AFA 2019 (Scheduled), Workshop on Workforce Development Initiatives 2018

The Dark Side of Technological Progress? Impact of E-Commerce on Employees at Brick-and-Mortar Retailers (with Sudheer Chava, Alex Oettl, and Linghang Zeng)

Using an employer-employee payroll dataset for approximately 2.6 million retail workers, we analyze the impact of the staggered rollout of a major e-commerce retailer's fulfillment centers on the income and employment of workers at geographically proximate brick-and-mortar retail stores. We find that the establishment of an e-commerce fulfillment center in a county has a negative effect on the income of retail workers in that county and in neighboring counties within 100 miles. Wages of hourly workers, especially part-time hourly workers, decrease significantly. This decrease is driven by a drop in the number of hours worked. We observe a U-shaped pattern in which both young and old workers experience a sharper decrease in wage income. Consequently, in these counties, there is a decrease in credit scores and an increase in delinquency for retail workers that have higher prior credit utilization. Using sales and employment data for 3.2 million stores, we find that retail stores in counties around fulfillment centers experience a reduction in sales and in their number of employees. Further, there is a decrease in entry and an increase in exits for stores in the retail sector, with small and young retail stores exiting at a higher rate. Our robustness tests show that our results are unlikely to be driven by prevailing local economic conditions. Overall, our results highlight the extent to which a dramatic increase in e-commerce retail sales can have some adverse consequences for workers at traditional brick-and-mortar stores.

-- Midwest Finance Association 2018 (Invited Session), ABFER 2018, CICF 2018 (Scheduled), EFA 2018 (Scheduled), NBER SI 2018, IT & Digitization (Scheduled), NFA 2018 (Scheduled), Summer Finance Conference, ISB (2018)

Worker Mobility, and Firm Leverage: Evidence from State Health Mandates (with S Lakshmi Naaraayanan)

We study how changes in intra-firm bargaining through mandated health insurance provision affects financing decisions of firms. We use staggered adoption of state health mandates which significantly reduced worker mobility through the provision of better health insurance coverage by firms to their employees. The resulting worker ‘job-lock’ allow firms to increase financial leverage by lowering operating costs. Consistent with this, we show that following the adoption of high-cost mandates, job turnover among workers reduces significantly, specifically for workers with employer-sponsored health insurance. Further, we find stronger effects among firms that significantly benefit more from this job-lock and subsequently respond by increasing their debt ratios. These effects are stronger for a) firms with small labor pool, b) financially constrained firms and c) firms that operate in industries with higher job mobility. Our results are robust to geographic regression discontinuity design where we focus on firms located in counties adjacent to state borders. Overall, our results are consistent with greater operational flexibility allowing firms to raise financial leverage through an increase in intra-firm bargaining power.

-- SFS Cavalcade-Asia Pacific 2017 , AFA PhD Poster Session 2018, Midwest Finance Association 2018, Asian Finance Association 2018 (Scheduled), Financial Management Association 2018 (Scheduled)

Financial Constraints and Trade Credit as a Strategic Tool: Evidence from Small-Scale Reservation Reforms in India (Internet Appendix)

How financial constraints affect incumbent supplier firms choice of extending more trade credit vis-`a-vis offering price discounts when facing an increased threat of entry by competitors? Threatened incumbent supplier firms may extend more trade credit, ex-ante, to defend their market power, or they may reduce prices or both. I test these predictions by exploiting plausibly exogenous, staggered removals of product level entry barriers for Indian manufacturing firms, and find that an average incumbent supplier firm extends 11% more trade credit and lowers price by 8.6% with an increased threat of entry. Interestingly, firms with deeper pockets offer longer terms on trade credit, while constrained firms rely on price discounts. Also, I find that financially constrained customers to take credit offers while unconstrained customers take price discounts. I further confirm my results using various proxies of financial constraints and policy changes in the country that improved access to finance. Thus emphasize the role of trade credit as a strategic tool to defend market power, when firms face financial constraints.

-- ABFER 2016, Pacific-Basin Finance Journal Best Paper Award at AsFA 2016, FIRS 2017, SFS Cavalcade 2017, CFEA 2017, Emerging Market Finance 2017


-- The Review of Financial Studies, 2016, 29(10): 2774-2813

Do Corporate Taxes Hinder Innovation? (with Abhiroop Mukherjee and Alminas Zaldokas)

-- The Journal of Financial Economics, 2017, 124(1): 195-221

--Cato Institute Research Briefs in Economic Policy No. 79