Preserving job matches during the COVID-19 pandemic: firm-level evidence on the role of government aid (submitted)
with M. Bennedsen, B. Larsen and I. Schmutte

Covered on: The Economist, VoxEU (coming soon)

[COVID Economics, Issue 27, 9 June 2020]

We analyze the impact of the COVID-19 pandemic and government policies on firms’ aid take-up, layoff and furlough decisions. We collect new survey data for 10,642 small, medium and large Danish firms, and match to government records of all aid-supported furloughed workers during the pandemic as well as administrative accounting data. This is the first representative sample of firms reporting the pandemic’s impact on their revenue and labor choices, showing a steep decline in revenue and a strong reported effect of labor aid take-up on lower job separations. Relative to a normal year, 30 percent more firms have experienced revenue declines. Comparing firms’ actual layoff and furlough decisions to their reported counterfactual decisions in the absence of aid, we estimate 81,000 fewer workers were laid off and 285,000 workers were furloughed. Our results suggest the aid policy was effective in preserving job matches at the start of the pandemic.

Note: an early draft was previously circulated under the title “The impact of public aid programs on distressed firms: Evidence from COVID-19 in Denmark”

Building a productive workforce: the role of management practices (R&R Management Science, minor revision requested)
with C. Cornwell and I. Schmutte

Covered on: IDE Inclusive Innovation, MIT Ideas made to matter
[project summary] [CEPR Discussion Paper]

While it is well established that management practices matter for productivity, the mechanisms behind this stylized fact are less well understood. In this paper, we explore how personnel management practices relate to actual HR outcomes and productivity. We match management practices data from the World Management Survey to AKM estimates of worker and firm fixed effects from ten years of Brazilian employment administrative data. We five key findings: first, consistent with the literature, we find that worker and manager fixed effects are positively correlated with TFP. Second, we find that better managed firms capture a higher share of total employment over time, consistent with a reallocation story. Third, we find evidence of positive recruitment: better managed firms hire a larger share of their new recruits from the top of the distribution of worker fixed effects. Fourth, we find suggestive evidence of better worker matching and retention from lower separation rates. Fifth, we decompose the variation of personnel management practices and find that promotion and retention practices show the strongest correlation with manager fixed effects.

The ties that bind: implicit contracts and the adoption of management technology in the firm
with R. Lemos

Covered on: World Bank’s Development Impact blog, The Economist, LSE Business Review, VoxDev

Awarded Accessit Best Paper at IOEA 2018.
[project website] [CEPR Discussion Paper]

We investigate how implicit contracts between firm managers and employees are linked to the adoption of productivity-enhancing organizational practices. We collect new data on ownership successions and show the first causal evidence that maintaining family control leads to lower adoption of managerial best practices. We use gender composition of the outgoing CEO’s children as identifying variation at the succession point. We explore firm “reputation costs” as a novel mechanism constraining investment in management, and build a new proxy using data on eponymy — firms named after the family name. We find suggestive evidence that implicit contracts matter for management adoption.

Measuring and explaining management in schools: New approaches using public data
with C. Leaver and R. Lemos

[CEPR Discussion Paper]

Why do some students learn more in some schools than others? One consideration receiving growing attention is school management. To study this, researchers need to be able to measure school management accurately and cheaply at scale, and also explain any observed relationship between school management and student learning. This paper introduces a new approach to measurement using existing public data, and applies it to build a management index covering 15,000 schools across 65 countries, and another index covering nearly all public schools in Brazil. Both indices show a strong, positive relationship between school management and student learning. The paper then develops a simple model that formalizes the intuition that strong management practices might be driving learning gains via incentive and selection effects among teachers, students and parents. The paper shows that the predictions of this model hold in public data for Latin America, and draws out implications for policy.

The capacity to be aggressive: structured management and profit shifting practices in the firm [draft available upon request]
with Kat Bilicka

This paper analyses the effect of firm’s organizational capacity — proxied by structured management practices — on tax planning behavior of multinational firms (MNEs). Management practices improve productivity and hence should increase taxable corporate income of firms. However, higher adoption of management practices may also enable tax planning. We show that subsidiaries of MNEs located in high tax countries report significantly lower profits and have higher incidence of bunching around zero returns on assets if they have higher levels of structured management. This is especially true for more tax aggressive MNEs. Using an event study design, we find that firms with more structured management are also more responsive to corporate tax rate changes. These responses are driven by more tax aggressive MNEs. These patterns are consistent with organizational capacity partially driving profit shifting behavior. We add a novel explanation for why some firms are more likely to engage in aggressive tax planning, with implications for the cost-benefit analysis of government-funded management upgrading projects.

School management and productivity in the public sector: evidence from India
with R. Lemos and K. Muralidharan

This paper uses two new datasets to study management and productivity in primary schools in India. We report four main sets of results. First, management quality in public schools is low on average, but there is meaningful variation across public schools that is correlated with both independent measures of teaching practice, as well as measures of student value added. Second, we find higher management scores in private schools, and this advantage is mainly driven by differences in people management (as opposed to operations management). Third, we find that the private school advantage over public schools in student value-added is largely accounted for by differences in people management practices. Fourth, we find that the private-school advantage in measures of people management is consistent with independent measures of personnel policy. Specifically, private school teacher pay is positively correlated with measures of teacher value-added, and private schools are more likely to retain teachers with higher value-addition and let go teachers with lower value-addition. Neither pattern is seen in public schools.


Family firms, female leadership and management in Denmark
with M. Bennedsen and M. Tsoutsoura

We have collect data on management structures of almost 5000 firms in Denmark, mirroring the US Census Management and Organizational Practices Survey. In this project, we match the MOPS Denmark data to family history, production and employee roster datasets to build a unique database to explore new patterns. One key question to explore circles around issues of gender in management styles and productivity. For example, do female CEOs have different management styles and what impact does this have on productivity and workers?


Where the money goes: school management and resource allocation in Brazil
with R Lemos

Teachers account for one of the largest chunks of expenditures of public school systems, and teachers are also one of the key inputs into the education production function. Public school systems are often constrained in wage-setting and cannot actively implement incentive-pay schemes. So what works in improving teacher performance in public schools? We explore a change in the funding formula for public schools in Brazil that mandates an exogenously set share of resources that must be used in the teacher wage bill of school systems. This change affected Brazil’s municipalities differently as some received different amounts of funds, and chose to spend their funds in different ways. In this paper, we first provide a long-term look at 20 years of data and document how teacher salaries, number of teachers employed and student-teacher ratios have changed over time in Brazilian municipalities. Secondly, we employ an event study to document how different municipalities responded to the funding change and explore the characteristics that may help explain the heterogeneity in resource usage as well as student outcomes. We propose that management practices across different school systems explains part of the superior/inferior ability of school systems to effectively use and distribute the increase in resources they experienced after the funding formula change.


Developing management: an expanded evaluation tool for developing countries (RISE Working Paper 7) [project website] [slides]
with R. Lemos

Coverage: World Bank blog

There is striking evidence showing a large tail of badly managed schools and hospitals in developing countries across several management areas such as operations management, performance monitoring, target setting and people management. But where exactly, along the process of setting their management structures, are these organizations failing? This paper presents new evidence from an expanded survey tool based on the World Management Survey instrument. We collect detailed data using face-to-face interviews in settings where weak management practices prevail and observe more variation in the left tail of the distribution. Using this data, we explore three main “activities” within each management area: (1) process implementation, (2) process usage, (3) process monitoring efficiency and frequency. We have collected data with schools in India and Mexico and are working with teams surveying schools in Colombia and hospitals in China and India.