Hello! Welcome to my website!
I am an Assistant Professor at the Economics department of Southern Illinois University, Carbondale.
My fields of interest are International Trade, Development Economics, and Applied Microeconomics. My research mostly focuses on the effect of trade, technologies and infrastructure expansion on spatial distribution of economic activities, manufacturing growth, structural transformation, employment, wages, and welfare in low income countries.
Publications
Gains from market integration: Welfare effects of new rural roads in Ethiopia (Journal of Development Economics
Volume 168, May 2024, 103252) WP version: ruralroads_welfare
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Abstract: This paper estimates the welfare gains from the construction of rural roads that connect agricultural villages to market centers. I take theoretical predictions from Ricardian trade models to a rich high spatial resolution micro data on agricultural production from Ethiopia, which coincides with a period of extensive rural road construction. I estimate that this road construction resulted in an approximately 13% increase in real agricultural income, on average, and show that this increase is attributed to the mechanisms suggested in the Ricardian trade model: the prices of villages’ comparative advantage crops increased, and villages reallocated land for these crops following decreases in trade costs.
Market Integration and Separability of Production and Consumption Decisions in Farm Households (Journal of Development Economics Volume 158, September 2022, 102939) WP version: manuscript_3rdrev1
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Abstract: I study to what extent farm household’s production decisions are dictated by their consumption preferences – widely known as the separability hypothesis–and explore how this is related to market integration. My empirical approach is derived from a theoretical insight that if household production decision is independent of its consumption preferences, the household’s tastes for different crops should not affect household land allocation across the crops, and the extent to which the crop tastes affect land allocation depends on the level of trade costs. I implement this test using a very rich household panel data on production and consumption from Ethiopia, which coincide with a period of massive rural road construction. I estimate household crop tastes from their preference function and show that these tastes significantly affect household land allocation across crops. This effect significantly decreases with proximity to markets and with improvement in market integration due to construction of new rural roads.
The pass-through of international commodity price shocks to producers’ welfare: Evidence from Ethiopian coffee farmers (World Bank Economic Review Vol. 36, No. 2 MAY 2022 Page: 305-328) Other version: https://openknowledge.worldbank.org/entities/publication/7a38dbf8-cba1-5fb7-93fe-e4199d82287c
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Abstract: International commodity price shocks may have large impacts on producers in developing countries. In this paper, I use unique household panel data from Ethiopia to show that a decrease in international coffee price has strong pass-through to the consumption of households that rely on coffee production as a main source of livelihood. It also results in decreases in on-farm labor supply (particularly male labor supply) and induces reallocation of labor towards non-coffee fields, but has negligible effect on off-farm labor supply. The decline in consumption has significant consequences on child malnutrition. I find that children born in coffee-producing households during low coffee price periods have lower weight-to-age and weight-to-height z-scores than their peers born in non-coffee households.
Risk aversion and gender gaps in technology adoption by smallholder farmers: Evidence from Ethiopia (Journal of Development Studies Volume 58, 2022 – Issue 9 Pages 1668-1692) WP version: risk_aversion_and_gender_gap
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Abstract: Adoption of chemical fertilizers is a high-risk and high-return investment option for smallholder agricultural households that heavily rely on rainfall. I document a persistent gap of above 10% in adoption of chemical fertilizer between male- and female-headed smallholder farmers in Ethiopia. This gender gap remains after accounting for household characteristics, access to complementary farm inputs, access to credit, soil quality, and crop selection. Using historical variability of rainfall at district level as a measure of a district’s risk of crop failure, I find strong evidence that the gender gap in fertilizer adoption increases with the level of risk in the district. I explore the role of two competing hypotheses to explain this observation: gender difference in risk aversion and differential access to consumption smoothing by male- and female-headed households. I find strong evidence that both these factors play significant roles but gender difference in risk aversion plays the dominant role. This is consistent with a bulk of lab and field experimental studies that find evidences that women tend to be more risk averse than men.
How Efficient Are the Ethiopian Microfinance Institutions in Extending Financial Services to the Poor? A Comparison with the Commercial Banks with Wassie Berhanu (Journal of African Economies Volume 22, Issue 1, January 2013, Pages 112–135)
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Abstract: This article investigates the efficiency of microfinance institutions (MFIs) in extending financial services to the poor by comparing their cost efficiency with that of commercial banks (CBs). Using an unbalanced panel data of fourteen MFIs and seven CBs for 2001–08 in Ethiopia, a stochastic frontier model is estimated in which heterogeneities (in the working environments and nature of businesses) between MFIs and CBs are controlled for in the cost function. The result indicates that the MFIs are, on average, 33.5% less efficient compared with the CBs mainly due to their smaller size, focus on outreach and reliance on non-commercial sources of funds such as donations. In fact, the largest MFIs are found to have cost efficiency scores that are comparable with that of the most efficient banks. Despite the wide efficiency gap, there is a strong evidence of convergence.
Import trade liberalization and structural transformation: Evidence from China ( World Bank Economic Review, April 2025 )
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Abstract: As part of the negotiation process to join WTO, China’s average tariff rate on imports decreased from over 40% in 1992 to about 15% in 2000. I study how the tariff cuts fueled structural transformation leveraging spatial variation in exposure to the tariff cut across Chinese counties due to sectoral variations in the level of tariff cuts and variation in the industrial composition of the counties’ economies. Using input-output linkage across industries, I find that tariff cuts in upstream industries significantly reduced measured input costs in counties that specialized in downstream industries. The decreases in measured input costs significantly increased employment in the manufacturing sector and shrunk employment in the agricultural sector between 1990-2000. Falsification exercises regressing changes in sectoral shares of employment between 1982-1990 on changes in measured input costs between 1990-2000 show null effect. I find little evidence of adverse import competition effect from the tariff decreases.
Trade shock and structural transformation: Evidence from the phase-out of multifiber arrangement (Review of International Economics, October 2025)
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Abstract: I study the effect of the phase-out of MFA quota on textile and clothing trade on local economic growth and structural change in China. Leveraging data on spatial variation in the degree of specialization of counties in textile and clothing industries, I find that the MFA quota removal contributed significantly to local economic growth and structural change using both official statistics and night-time light as measures. Output and employment expanded in the secondary and tertiary sectors and shrank in the primary sector in textile counties, relative to nontextile counties.
Working Papers
Firm Capacity Underutilization and the Measurement of Productivity (with Margaret McMillan) R&R
Abstract: When estimating a production function, economists usually assume that firms fully employ all their available inputs. Contrary to this assumption, we document that underemployment of quasi-fixed inputs or low capacity utilization rates (CUR) is common across firms, especially in poor countries. Low CURs are correlated with supply-side constraints such as shortages of material inputs and electricity, and demand constraints. We show that when firms underemploy their quasi-fixed inputs, the assumptions behind standard production function estimation techniques-such as the control function approach-are invalid, and these techniques produce biased estimates of TFP. We demonstrate this using unique panel data from Ethiopia with information on actual and full capacity input demand. We find that measures of TFP that do not account for CUR considerably underestimate ‘true’ productivity when CUR is low but not when CUR is high. This leads to an exaggeration of the TFP gap between rich and poor countries.
https://www.nber.org/papers/w34279
“Buy Tractors and Keep the Children in School”: Agricultural Mechanization, Teenage Labor Supply, and High School Enrollment (with Jianfeng Wu)
Abstract: This study examines how subsidies for agricultural machinery impact high school enrollment among teenagers. We propose a model in which a subsidy to labor-saving agricultural machines could either increase teenage labor supply due to reduced adult wages or decrease teenage labor if farm profits increase significantly. Using rollout of a subsidy program across Chinese counties, we find that the subsidy led to more mechanization, higher farm profits, decreased teenage employment, and increased high school enrollment for 15-19-year-olds. Similar results were observed using global data from over 170 countries since 1980, indicating that the findings are broadly applicable.
Agricultural Mechanization and Structural Change: Evidence from China
Abstract: I study how agricultural mechanization causes structural transformation using county-level panel data with a unique measure of agricultural mechanization from China. To address the endogeneity of agricultural mechanization, I use fluctuations in the international crop prices and the share of the crops in counties’ agricultural revenue to construct exogenous source of variation to returns on and adoption of mechanization. I find that agricultural mechanization is an important driver of structural change. Counties that adopted mechanization at a faster rate experienced shrinks in the shares of agriculture in GDP and employment while the shares of manufacturing in GDP and employment increased, with no significant effect on the service sector’s shares. Agricultural mechanization not only caused significant emigration of labor force out of the counties but also led to expansion of the manufacturing sector within the counties. The reallocation of labor from agriculture to manufacturing due to agricultural mechanization led to 7% aggregate productivity growth between 2000 and 2010.
Gains from trade boom, public goods provision and regional inequality (with Huiqing Li & AKM Mahbub Morshed)
Abstract: Recent empirical evidence from high income countries shows that areas that are more exposed to import competition from developing countries experienced significant decline in their tax bases and quality of public goods. In this paper, we study the other side of this story and examine whether the gains from trade boom led to increased public goods provision in the context of China. We find that prefectures in China that were more exposed to trade liberalization gained more in government revenues and expenditures, and that the increased expenditures were used to finance the provision of more public goods and services including education, health and paved roads within the prefectures. As a result, between prefecture inequalities in government revenues, expenditures and public goods provision increased dramatically between 2000 and 2013. Our results suggest a novel mechanism through which trade widens regional inequality — by creating between-region inequality in government revenues and public goods provision.
Selected works in Progress
Heterogeneous migration responses to trade policy (with Jianfeng Wu)
Abstract: We document that the migration and sectoral reallocation in response to trade liberalization in China is driven by the youth, particularly those who just joined the labor market in 2002. To explain the strong age heterogeneity, we develop and estimate a migration model where workers face uncertainty about income at destination locations and have CRRA utility. Migration responds to both expected income differences and income risk differences across locations. We estimate migration elasticities with respect to these income moments and recover age-specific risk-aversion parameters. Older cohorts exhibit significantly higher risk aversion than younger ones, leading to steeply rising estimated migration costs with age, which accounts for the observed sharp decline in migration rates across age groups. Counterfactual analysis imposing uniform risk aversion across cohorts yield migration costs that are essentially flat with age.
Market Failures and within-farm resource misallocation
When household production decisions are constrained by thier consumption needs due to failure in product and/or input markets, resources such as land and labor are suboptimally allocated within farm. In this paper, I quantify the magnitude of productivity dispersion and resource misallocation within farm household, and the resulting household and aggregate level losses in productivity.
The Effects of Refugee Camps on Children of Host Communities: Evidence from Ethiopia (with Caglar Ozden)
Over three-quarters of refugees in the world are hosted in low and middle income countries with limited resources and infrastructure to support the refugees. We study the effects of hosting refugees on the host communities in Ethiopia, which is one of the poorest countries and the second largest host of refugees in Africa. We find that under-5 children with higher exposure to refugee camps have lower weight-to-age and weight-to-height z-scores. However, higher refugee exposure is also associated with increased school enrollment and higher grade-to-age ratio for school-age cohorts. The negative health effect is attributed to higher likelihood of contacting infectious diseases such as diarrhea and lower probability of receiving vaccinations whereas the positive effect on education is attributed to children in host community benefiting from increased school supply by NGOs for the refugee children. Our results are remarkably robust across a series of identification and measurement approaches.
How large is the productivity loss from misallocation?
Abstract: This paper compares the productivity loss from product and input market distortions across countries and examines how it is influenced by trade using firm-level data from over 70 countries. Three main results emerge. First, productivity loss from misallocation significantly varies across countries and is strongly negatively correlated with GDP per capita. Misallocation could explain about a quarter of cross-country variation in manufacturing productivity. Second, trade openness reduces the productivity loss from misallocation via reducing between-firm dispersion in markup (or TFPR). Third, the productivity loss from a counterfactual import ban significantly differs across countries and is larger in countries with underdeveloped manufacturing sector than countries such as China.
Ethnic Heterogeneity and Domestic Trade Frictions
Abstract: Ethnic heterogeneity is associated with conflict, lower provision of public goods, and economic underdevelopment in many contexts. In this paper, I use spatial variation in prices of crops within and across ethnic borders in Ethiopia and show that: (i) ethnic borders explain significant fraction of spatial price variation conditional on road distance and spatial productivity gaps, and (ii) shocks to agricultural production have significantly weaker effect on prices across ethnic borders than within ethnic borders, conditional on road distance. I explore the role of two competing explanations–language barrier and inter-ethnic tensions, and find that both play important roles but the latter tends to have stronger effect.
Hundanol A. Kebede 