21st ERG call: The eight successful projects

Cognitive skills, such as intelligence, have always been deemed crucial to improve one’s employability and increase firm’s productivity. However, do employers value cognitive skills more than non-cognitive skills, such as motivation? To which extent these skills are predictive of future productivity? This will be the focus of the newly funded project by Orkin, Poswell, Hensel and Wheeler. Productivity is a subject undergoing intense study in economics and this last call certainly reflects this growing trend as other two funded projects investigate this realm. Whereas Manelici and Vasquez will assess how domestic firms’ productivity is affected by FDI and multinational firms’ entry in Costa Rica, Choudhary, Lemos and Van Reenen will undertake a rigorous empirical analysis of management-performance relationship in previously inaccessible provinces in Pakistan.

Globalization is currently under political attack. Examples include Brexit, the uncertain future of the Trans-Pacific Partnership (TPP) in the face of strong opposition in the United States, and the even more uncertain future of the Transatlantic Trade and Investment Partnership (TTIP). In this context, empirical research on the benefits and costs of international trade and other forms of globalization is critical in order to ensure that policy makers are well-informed regarding the implication of globalizing or anti-globalizing policy initiatives. In particular, there is a relative dearth of quality empirical research for low-income countries (as opposed to middle- or upper-income countries) given the historic lack of data available, as well as the higher attention and resources in industrialized countries. This policy concern is at the base of Frazer’s project on the impact of globalization on employment and wages focusing on the relationship between both importing and exporting and employment volatility in Rwanda.

Conversely, Bahndari’s project studies national frictions. How do citizens react to political connections when the rule of law is weak? Through a randomised controlled trial he will estimate the impact of political connections on trust in economic exchange in Senegal and, when exchange occurs, he will explore whether buyers prefer formal or informal contracts. It is a natural extension of De la Sierra’s PEDL-funded ethnic contracting paper to the topic of political connections  (see here).

Randomised controlled trials are nowadays considered as the gold standard in economics and are also the methodological nature of the last three PEDL-funded projects. Of these, two projects explore the supply side dynamics of the economy while one relates to microcredit and borrower behaviour.

How important is to have a good supplier for the success of a firm? In the first of these projects, Szeidl and Cai will try to shed some light on the role that the supply side of the economy plays on firm performance in China by randomly connecting firms with good or bad suppliers. In contrast, Tjernstrom and Lybbert’s project investigates the existence of a ‘market for lemons’, i.e. markets sell only low quality products since sellers are not able to signal high quality products to consumers, for agro-inputs in rural Kenya.

Finally, previous research on asset-collateralized loans shows that the latter attracts more borrower than standard loans without increasing defaults (Jack et al., 2016). Rao and Kremer will conduct an experiment to test the role of behavioural factors in the high take-up rates and subsequent high repayments observed for asset-collateralized loans.

Click on the links below if you want to have more details on the methodology applied and the potential policy implications of these eight new PEDL-funded projects.

 

Do Worker Non-cognitive Skills Affect Firm Outcomes?                                                                    Kate Orkin, Laura Poswell, Lukas Hensel and Laurel B. Wheeler

Management in Pakistan: Evidence from Sindh, Baluchistan and Khyber Paktunkhawa Provinces       Ali Choudhary, Renata Lemos and John Van Reenen

The Impact of FDI through the Production Network: Evidence from Costa Rica                                  Isabela Manelici and Jose P. Vasquez Carvajal

International Trade and Employment Volatility in Rwanda                                                                Garth Frazer

The Political Determinants of Economic Exchange                                                                            Abhit Bhandari

Suppliers                                                                                                                                        Adam Szeidl and Jing Cai

Baseline for an Information Intervention in the Agro-inputs Market in Kenya                                      Emilia Tjernström and Travis Lybbert

The Role of Loss Aversion in Take-up and Repayment of Financing Contracts                                  Gautam Rao and Michael Kremer