Research

Published Papers

1. God is in the Rain: The Impact of Rainfall-Induced Early Social Distancing on Covid-19 Outbreaks (with Dr. Ajay Shenoy, Guanghong Xu, Rolly Kapoor, Haedong Rho, and Kinpritma Sangha), Journal of Health Economics, 2021

2. Government Expenditure in India: Composition and Multipliers (with Dr. Ashima Goyal), Journal of Quantitative Economics (Springer Publications), 2018

Working Papers

1. Information about Climate Transition Risk and Bank Lending [Job Market Paper] (SSRN link)

Abstract: I provide novel empirical evidence for the positive impact of banks' industry specialization on their pricing of borrowers' climate transition risk. This impact varies across geographies and different types of transition risk. I also show that banks under-react to a global shock relevant for energy-intensive firms, which leads to lower lending rates for browner firms, especially during periods of high aggregate financial stress. Interpreting banks' industry specialization as a source of heterogeneity in costs of private information acquisition and given the under-reaction to the global shock, I build a theoretical model with competitive lending, costly information acquisition, and non-Bayesian belief updates by banks about borrowers' transition risk. Specialized banks can better distinguish between differently exposed borrowers relative to non-specialized banks. When banks under-react to public information about transition risk, the optimal level of private information acquisition increases, but interest rate differentials between more and less exposed borrowers decline in favor of more exposed borrowers. This effect is more pronounced during periods of poor borrower quality, as in financial stress periods. These results imply that to reduce green firms' financing costs, it is crucial to lower banks' cost of acquiring information about firms' climate change exposure through standardized firm-level disclosures and comprehensive climate-stress testing guidelines, even when there is high-quality public information and communication about decarbonization.

2. How much is a formal job worth? Evidence from Mexico (with Dr. Brenda Samaniego de la Parra) [Updated draft forthcoming]

Abstract: We estimate the value of a formal job in Mexico. For the median household, the value is MXN\$610 pesos (\$34 USD) or 14 percent of the median monthly wage and just above firms' formalization cost. This valuation encompasses the various social benefits available to formal employees, differences in job stability and career prospects, and any other attributes that make a formal job desirable. We obtain this estimate using a partial equilibrium model of joint labor supply with informal and formal contracts and search frictions estimated using simulated method of moments. We validate our structural estimates for the value of a formal job using an employer-employee-household matched panel dataset and exogenous variation in access to a formal job from over 300,000 work-site inspections. Model and reduced-form approach yield consistent estimates for the changes in labor supply and wages of a spouse after their partner receives a formal job offer. We find substantial heterogeneity in the value of formal employment across income deciles.

Work in Progress

1. How climate-awake are financial markets? (with Dr. Galina Hale and Dr. Anirban Sanyal)

Abstract: Climate risks are now acknowledged by policymakers, financial market practitioners, and academics as a potentially material threat to financial markets and financial stability. As physical manifestations of climate change become more apparent, shall we expect massive asset repricing and financial destabilization? The answer to this question crucially depends on whether climate risks are properly priced-in already in different asset classes. Climate-related events are unique in that they are drawn from a distribution that shifts and becomes more disperse over time, making belief formation a crucial component of asset pricing. We simulate the response of asset prices to climate disasters using the rare events asset pricing framework based on Gabaix (2012) to quantify "fully priced in'' response in various structures of subjective belief formation. We survey the empirical literature on the pricing of physical climate risk in equity and fixed income markets to evaluate whether the estimates imply fully priced-in response across different belief formation structures.

2. Disaster rebuilding costs and climate adaptation and mitigation: Are we building back better? (with Dr. Galina Hale and Dr. Ted Liu)

Abstract: This project determines the effect of financial constraints faced by households in adapting to climate change. Incorporating FEMA National Household Preparedness Surveys, we show that financial vulnerability significantly influences disaster preparedness. This effect is further exacerbated by the lack of access to high-quality information about resilient infrastructure. We combine the county-level risk exposure to climate-related disasters, household preparedness surveys with data on disaster declarations, infrastructure recovery after disasters, household income and financial distress information, and agency data on hazard mitigation grants and post-disaster assistance programs. Preliminary results indicate that despite similar disaster histories, economically disadvantaged communities receive fewer public resources for risk mitigation. These findings reveal a need for developing targeted policies that tie public assistance programs for risk mitigation with effective communication about information on climate adaptation strategies, enhancing long-term resilience.

3. Large disasters and changes in climate risk perceptions: Evidence from the United States

Abstract: This paper examines the nature of belief updates about individuals' exposure to damages from climate change. I use the Yale Climate Beliefs survey (aggregated at the county-level) on beliefs about the potential damages from climate risk and evaluate how the survey responses change at the county level after a 'billion-dollar' disaster in the state. Controlling for county demographics, income, educational attainment levels, political affiliation, and long-term temperature and precipitation anomalies, I find evidence for prior conformity. In counties with a high average risk perception, a state-level large disaster is associated with a higher risk perception. However, the post-disaster beliefs are still strongly anchored to those recorded a decade before the disaster occurred. The relevance of large disasters in subjective expectation formation is further indicated by the evidence that monetary damages from crop and property loss are not strongly associated with belief updates. These results highlight the information channels that individuals pay attention to while forming expectations about climate change, which has important implications for household adaptation to climate risks.

4. Currency Risk and Global Banks (with Dr. Grace Weishi Gu and Dr. Isha Agarwal)

5. Climate Risks and Credit Allocation (with Dr. Galina Hale, Dr. Grace Weishi Gu, and Jinhong Wu)

6. Political Misallocation of Electricity in India (with Dr. Meera Mahadevan and Dr. Ajay Shenoy)