Research

Working Papers

1. Regulatory Spillover and Consumer Welfare: The Case of Pharmaceutical Market Exclusivity Policy (with Yang Zhang) [Link To Draft] (Submitted)

Abstract: This paper studies strategic spillovers of regulations intended for one particular market to other related markets and their implications for new product introduction and consumer welfare. We study the US pharmaceutical market, where market exclusivity is granted to the first over-the-counter drug, independent of patents for prescription drugs. Our paper shows that, due to the interplay of incentives in the prescription and the over-the-counter markets, the status-quo exclusivity policy reduces consumer welfare, as it causes many firms to delay entry into the over-the-counter market until prescription drug patents expire. In the counterfactual world, eliminating the exclusivity provision incentivizes firms to release the over-the-counter version earlier. However, it weakens firms’ incentives to make risky investments in R&D. An alternative policy that ties the over-the-counter drug exclusivity provision to prescription drug patent expiry dates preserves firms' R&D incentives while eliminating strategic incentives to delay, enhancing access to drugs and consumer welfare.

2. Unhealthy Food, Regulations, and Consumer Welfare: The US Microwaveable Popcorn Market (with Christoph Bauner, Nadia Streletskaya, and Emily Wang) [Link To Draft] (Submitted)

Abstract: This paper studies welfare implications of policies implemented to regulate consumption of unhealthy food items by focusing on the trans-fat content of a product. Trans-fat is a primary cause of deaths related to heart attack and obesity in the U.S, and partially hydrogenated oil (PHO) is identified as a key ingredient contributing towards the trans-fat content of food items. Use of partially-hydrogenated oil as an ingredient however, may enhance taste, may add texture to food items and also decreases cost of production by providing longer storability and shelf-stability for products. To study the welfare implications of different policy regulations, we estimate a model of demand and supply using Nielsen retail scanner datasets, and recover consumer preferences as well as marginal cost of production. We then evaluate welfare effects of banning the use of PHO leading to a ban on trans-fat in the market for microwaveable popcorn and compare it with an alternative proposal that imposes a tax on products that contain trans-fat. Our results suggest that, a trans-fat ban leads to around 25% drop in consumer welfare compared to the status-quo. We find that a high level (35%) of ad-valorem tax can also achieve close to zero trans-fat in the food chain (as ensured by the ban of PHO) while having similar welfare consequences as a ban. Lower taxes, for example a tax of 10%, however, can still lead to a significant reduction of trans-fat consumption (around 48%) while the associated consumer welfare is reduced by a smaller magnitude.

3. Welfare Consequences of Trade Associations: The Case of Chilean Fish Export Industry (with Tom Eisenberg, Manuel Estay)
[Link To Draft]

This paper examines the welfare consequences of the existence of a trade association by considering the Chilean fish exporting industry. Trade associations can improve welfare by enforcing quality standards, sharing information among firms, and facilitating market entry. However, they may encourage collusion and negatively affect non-member firms. We estimate a structural model of the Chilean fish exporting industry and show that the product quality effects are strongly positive. We reject the hypothesis that firms within the association engage in the collusive activity. In counterfactual simulations with Chile and the US, we find the trade association mutually beneficial, increasing consumer and producer surplus.

4. Price Control and Access to Drugs: The Case of India's Malarial Market (with Chirantan Chatterjee) [Link To Draft]

Abstract: This article investigates the effects of drug price-control policy on access to drugs and consumer welfare. We focus on regional markets for malarial drugs in India. Governments in developing and underdeveloped countries implement price controls to make drugs affordable and improve consumer welfare. However, gains from lower prices due to price control have little meaning if, firms stop selling those drugs in response to price control, and drugs are not available for purchase in local markets. In order to characterize the trade-off between availability and affordability on consumer welfare, we estimate a structural model of Indian malarial market where firms make endogenous product offering decisions across regions. We use a unique dataset that features detailed region level information. Our estimates reveal that even in a poor region, lower prices lead to lower consumer welfare, as costs of making a drug available in a regional market are high enough to induce exit of products in response to lower prices. We characterize the optimal price control level that balances the trade-off and maximizes consumer welfare.

5. Tax on polluting input or on pollution generated: Policy alternatives (with Santosh Sahu, Prantik Bagchi, Ram Sewak Dubey) (Submitted)

Abstract: In this paper, we examine alternative tax policies aimed at the abatement of pollution keeping in view the firm size heterogeneity. The production technology employs two inputs (including a polluting one) and is the standard Cobb-Douglas function. Industrial production generates pollution which is quantified as an increasing and either concave or convex function of the amount of polluting input used. We show that imposing a tax on the polluting input yields lower pollution compared to a tax on the quantum of pollution in the small and medium scale industries when the function quantifying pollution is assumed to be a convex function. This is in contrast to the large scale industries where tax on pollution generates lower pollution in a similar setting.


6. Water for Sale (with Sheetal Sekhri)
[Draft available on Request]

Abstract: With over a billion people lacking access to clean drinking water and freshwater reserves of groundwater dwindling rapidly, informal water markets have become an important source of resource allocation in the developing world. We study these informal markets in Rajasthan India using in-depth buyers, sellers, and transactions data we collected. Utilizing this data, we structurally estimate the demand for drinking water allowing consumer heterogeneity to obtain price elasticities. This enables us to quantify the consumer welfare gains generated by such markets. We find that these markets disproportionately benefit the poor households and the households where women spend longer time collecting water indicating that a ban on extraction affecting the supply would largely affect the welfare of these households. Using our estimates, we are able to recover the ‘valuation of time’ of women in the household. We then use our structural estimates to study how firms compete in these informal markets. We implement a test of collusion and find evidence of caste-based collusion in these markets. Our simulations indicate that government entry in water distribution may lead to heterogeneous effects on consumer welfare as market prices may go up in response to government entry for wealthier consumers.

7. Spillover Effects in Complementary Markets: A Study of the Indian Cellphone and Wireless Service Markets (with Chirantan Chatterjee, and Ying Fan)
[Draft Coming Soon]


8. Public Insurance, Reimbursement Design and Access to Health-Care in India (with Sisir Debnath, and Tarun Jain)
[Draft Coming Soon]

Abstract: Our article studies the design of reimbursement rates in the context of a large-scale publicly funded health insurance program in India by exploring its effects on the quality of care, diagnostic facilities provided by the hospitals and welfare of the patients. Under this insurance program implemented in the state of Andhra Pradesh, close to 40 million eligible households get free treatment from hospitals, and the hospitals are reimbursed by the government. The level of reimbursement is the key decision variable for the government. Setting the level too low implies that not enough private hospitals will participate, and the program will have capacity shortfalls and potentially lower quality. Setting the level too high implies that the fiscal burden will be high, which might be unsustainable in the future. To study this problem, we gather a unique and novel dataset that records the universe of claims made by the patients in the state of Andhra-Pradesh. Our data covers patient characteristics as well as details of diagnosis for each patient. Additionally, we collect detailed data on hospital characteristics, including provision of hospital facilities, quality of care as well as entry and exit of hospitals over time. We build a structural model and estimate the underlying incentives for patient's choice of hospital, hospitals' decision to participate in the insurance program as well as the provision of quality of care conditional on participation. Given the parameter estimates, in our counterfactual exercise, we vary the reimbursement rates, simulate hospitals' decisions to participate and provision of quality, and compute corresponding patient welfare. Our preliminary estimates suggest that adopting an alternative reimbursement policy that varies in urban and rural markets may save the Government up to 15% of its cost without compromising the access and quality of health care.

Publications

1. From Courts to Markets: New Evidence on Enforcement of Pharmaceutical Bans in India (with Chirantan Chatterjee and Manuel Estay)

[Social Science & Medicine (2019) (Link)]

2. Welfare effects of public procurement of medicines: Evidence from Ecuador (with Jerónimo Callejas)

[Link To Draft] [Link to published version] (International Journal of Industrial Organization (March, 2021))