Surviving Competition: Neighborhood Shops vs. Convenience Chains

Review of Economic Studies

REStud Online Appendix

IDB Working Paper (with Online Appendix)

Hundreds of millions of microenterprises in emerging economies face increased competition from the entry and expansion of large firms that offer similar products. This paper studies how one of the world's most prevalent microenterprises, neighborhood shops, confront competition from convenience chains (e.g., 7-Eleven) in Mexico. To address the endogeneity in time and location of chains' store openings, I pair two-way fixed effects with a novel instrument that, at the neighborhood level, shifts the profitability of chains but not of shops. An expansion from zero to the average number of chain stores in a neighborhood reduces the number of shops by 16%. Consistent with the theoretical framework, this reduction is not driven by an increase in shop exit but by a decrease in shop entry. Shops retain their sales of fresh products and 96% of their customers, but customers visit shops less often and spend less on non-fresh and packed goods. I present evidence consistent with shops surviving by exploiting comparative advantages stemming from being small and owner-operated, such as lower agency costs, building relationships with the community, and offering informal credit. 

Awards: Best Paper - Citibanamex Premio de Economia 2022

Grandmothers and the Gender Gap in the Mexican Labor Market 

Journal of Development Economics

This paper estimates the effect of childcare availability on parents' employment probability using the timing of death of grandmothers--the primary childcare providers in Mexico--as identifying variation. I use a triple-difference to disentangle the effect of coinhabiting grandmothers' deaths due to their impact on childcare from their effects due to alternative mechanisms. Through their impact on childcare availability, grandmothers' deaths reduce mothers' employment rate by 12 percentage points (27 percent) and do not affect fathers' employment rate. The negative effect on mothers' employment is smaller where public daycare is more available, or private daycare or schools are more affordable. 

Press Coverage: The Economist, Financial Times, VoxDev Podcast, VoxLACEA, El Financiero Bloomberg (Mexico), Reforma (Mexico), Il Post (Italy), El Norte (Mexico), Caracol Radio (Colombia), El Sol de la Laguna (Mexico), Primicias (Ecuador), El Pais (Uruguay) 

Awards: Honorable Mention - Citibanamex Premio de Economia 2018