Research

Working Papers

Why Businesses Fail: Underadoption of Improved Practices by Brazilian Micro-Enterprises [Draft]

Micro-firms in low and middle income countries often have low profitability and do not grow over time. Several business training programs have tried to increase their productivity through improved management and business practices, with limited success. We run a field experiment with micro-entrepreneurs in Brazil (N = 742) to shed light on the constraints that lead to the under-adoption of improved business practices. We randomly offer entrepreneurs micro-incentives, which include reminders, deadlines and small monetary payments, to implement record keeping or marketing for three consecutive months, following a business training program. Our intervention is designed to have a significant impact on firms' decisions only in the presence of behavioral biases. Compared to traditional business training, micro-incentives significantly increase adoption of marketing (13.2 p.p.) and record keeping (19.2 p.p.), with positive effects on firm survival and investment over four months. Additional survey evidence is consistent with biases, such as inattention, time inconsistency and information avoidance, inhibiting the adoption of improved practices. Taken together, our results show that behavioral biases have a significant impact on firms' managerial decisions.

Failures of Contingent Reasoning in Annuitization Decisions (with Erzo F. P. Luttmer and Dmitry Taubinsky) [Draft] Revise and Resubmit, American Economic Journal: Microeconomics

This paper studies psychological biases in take-up of annuities, using an incentivized experiment with a probability-based sample (N = 3,038). Choosing an annuity was payoff-maximizing in the experiment at all prices, but take-up was incomplete and price elastic. Reformulating decisions as insurance against a “bad” outcome rather than insurance against “longevity risk” did not increase take-up. Instead, we find substantial failures of contingent reasoning: participants underappreciated how annuitization mitigated the need for less-efficient means of saving for retirement. Increasing the salience of the interaction with savings decisions, or eliminating the need to think through this interaction altogether, substantially increased annuity take-up.

Selected Work in Progress

Finding the Perfect Hire: Screening Strategies and Job Match Quality (with Pedro Pires and Ben Scuderi)

This paper examines how companies make recruitment decisions and how these decisions align with post-hiring productivity. We use a novel dataset that links proprietary data from a hiring platform in Brazil covering over 20 million job applications with matched employer-employee labor market data. We begin by analyzing how offer decisions relate to applicant characteristics assessing implicit weights placed on, for example, education, past experience, and demographics. We then evaluate how well firm offers predict post-hiring outcomes, including turnover, tenure, and salary growth. We then use machine learning models to directly predict productivity based on job applicant hiring characteristics. We identify possible inefficiencies in hiring practices by comparing firms’ actual offer decisions to our predictions from machine learning models. Finally, we investigate when these divergences occur, first exploring which characteristics correlate with them the most. We then discuss mechanisms such as stereotyping, discrimination, and complexity in decision-making.

Signaling Creativity: How Idea Contests Shape Employee Trajectories (with Pedro Pires)

This study examines the impact of firm-level innovation contests on employee outcomes, using novel data from a large company in Brazil linked to an employer-employee matched dataset. In innovation contests, workers propose changes to current firm practices. Ideas are then evaluated internally by a panel of specialists. We explore whether these contests allow workers in non-creative roles to signal creativity and how idea submission and acceptance influence career trajectories, including promotions, salary growth, and transitions to more creative roles within the firm.

How Recruiters Make Decisions: Unpacking the Drivers of Discrimination (with Pedro Pires)

Occupational Choices of Micro-Entrepreneurs: Evidence from Mozambique (with Catia Batista)