Investments in worker health and production: Evidence from Vietnam

In manufacturing industries, occupational health and safety measures ensure better working conditions for employees, which may influence their productivity. We study the impact of investments undertaken by small and medium enterprises in Vietnam in mitigating indoor pollution (including air quality improvements, heat and noise protection as well as lighting) on firm-level gross output and value added. We find that the amount invested by the firm in health has a significant positive effect on both outcomes. Given historically poor working conditions in Vietnam, policy implications relate to incentivizing and enabling firms to undertake such investments, on both moral and economic grounds.     

Regulatory Protection and Opportunistic Bankruptcy*

We document controlling shareholder (insider) opportunism in an insolvency regime that uses an accounting rule to determine bankruptcy eligibility. Our study sheds light on managerial incentives induced by weak investor protection laws. Using unique data on bankrupt firms from an emerging market, consistent with our prediction, we show insiders intentionally manage earnings downward to understate firm net worth so as to be able to file for bankruptcy. Downward pre-bankruptcy earnings management is associated with more payments to insiders and weaker performance, post-filing. A battery of tests suggests our results cannot be fully explained as an artifact of financial distress. Rather, they are consistent with insiders exploiting weak investor protection to extract private benefits at the expense of lenders and outside shareholders. Our study serves as a cautionary tale for all insolvency regimes that use a balance sheet test in an environment with weak creditor protection.     

Resource availability in the social cloud: An economics perspective

Social cloud has emerged as a case of sharing economy, where socially connected agents share their computing resources within the community. This paper considers the social cloud as an endogenous resource-sharing network, where agents are involved in closeness-based conditional resource sharing. This study focuses on (1) the impact of agents' decisions of link addition and deletion on their own local and global resource availability as well as on others' global resource availability (as spillover effects), (2) the role of agents' closeness in determining spillover effects, (3) agents' link addition behavior, and (4) stability and efficiency of the social cloud. The findings include the following: (i) Agents' decision of link addition (deletion) increases (decreases) their local resource availability. However, these observations do not hold in the case of global resource availability. (ii) In a connected network, agents experience either a positive or a negative spillover effect and there is no case with no spillover effects. Agents observe no spillover effects if and only if the network is disconnected with three or more components. Furthermore, an agent experiences negative spillover if there is no change in its closeness. Although an increase in the closeness of agents is necessary to experience positive spillover effects, the condition is not sufficient. (iii) We study the relation between agents' distance from each other, and their local as well as global resource availabilities. We prove that the local resource availability of an agent from another agent increases with decrease in the distance between them and that maximum local resource availability is obtained from the agent with the least closeness. Using these results, we discuss which agent to add a link to, so as to maximize the local resource availability. We discuss why such results are difficult to establish for global resource availability. However, in a two-diameter network, we show that for an agent, link formation always increases the global resource availability. (iv) We also study resource-sharing network formation and its efficiency in a strategic setting. We prove the existence of a pairwise stable network. Furthermore, we provide a set of conditions for a few prominent network structures (star, complete, wheel, and bipartite networks) to be pairwise stable. We show that the “connected in pairs, otherwise disconnected” network is better than a connected network, in terms of social welfare.