Treb Allen - Department of Economics

Treb AllenHome Address:Office Address:412 Orange St. Department of EconomicsNew Haven, CT 06511Yale UniversityNew Haven, CT 06520-8268Telephone: (952) 913-7967E-mail:Web Page:Full Name:treb.allen@yale.eduhttp://pantheon.yale.edu/~dwa6David West Allen IIICitizenship: USAFields of Concentration:International TradeDevelopment EconomicsDesired Teaching:International TradeDevelopment EconomicsApplied MicroeconomicsComprehensive Exams Completed:May 2009 (Oral) International Trade, Development Economics (with distinction)May 2008 (Written) Microeconomics, Macroeconomics (with distinction)Dissertation Title:Essays in Trade and Development EconomicsCommittee:Professor Costas ArkolakisProfessor David AtkinProfessor Penny GoldbergProfessor Mark RosenzweigProfessor Christopher UdryEducation:Ph.D., Economics, Yale University, Expected May 2012M.Phil., Economics, Yale University, May 2010M.A., Economics, Yale University, May 2009B.A., Political Economy (with honors), Williams College (Magna Cum Laude),May 20061

Fellowships, Honors and Awards:FREIT-EIIT Paper Prize (for “Information Frictions in Trade”), 2011Carl Arvid Anderson Prize Fellowship, 2011Sasakawa Research Grant, 2011Robert Evenson Travel Fellowship, 2011Ryoichi Sasakawa Young Leaders Fellowship, 2010-2011National Science Foundation Graduate Research Fellowship, 2007-2010Yale University Economic Growth Center Prize, 2007-2011Yale University Doctoral Fellowship, 2007-2011Phi Beta Kappa, 2006Williams Class of 1945 World Fellowship, 2005Teaching Experience:Yale University Teaching FellowInternational Trade, Fall 2010Economics Ph.D. “Math Camp,” Summer 2009Behavioral Economics, Summer 2009Williams College Teaching AssistantIntroductory Macroeconomics, Spring 2006Global Political Economy, Spring 2006Public Finance, Center for Development Economics, Fall 2005Research Experience:Research Assistant, Costas Arkolakis, Yale University, 2009-2011Field Consultant, Innovations for Poverty Action, Mexico, 2008Research Assistant, Justine Hastings, NBER, 2007Research Assistant, Chris Udry, Economic Growth Center, Yale University,2006-2007Research Intern, National Science Foundation Research Experience forUndergraduates, Andrew Young School of Policy Studies, 2004Working Papers:“Information Frictions in Trade” (Job Market Paper).“Optimal (Partial) Group Liability in Microfinance Lending.”“The Value of Freedom: Fertility Decisions and the Escape from Slavery.”“Inviting Husbands in Women-only Solidarity Groups: Evidence from SouthernMexico” (with Beatriz Armendáriz, Dean Karlan, and Sendhil Mullainathan).2

Research Statement:My research interests span the fields of economic development and international trade,with a focus on the intersection of the two fields. I am particularly interested in the roleinformation plays in market interactions in developing countries. My research is guidedclosely by economic theory and combines structural analysis with reduced formtechniques.Information Frictions in Trade (Job market paper)The standard assumption in trade models with perfect competition is that arbitrageensures price differences across space arise solely from costs associated with transportinggoods. Recent empirical work, however, suggests that price variation is also affected bythe cost of acquiring information about prices elsewhere (“information frictions”).Despite recognizing that information frictions exist, we currently lack a theoreticalunderstanding of how they affect trade.In my job market paper, I contribute to the understanding of how information frictionsaffect trade in three ways. First, I develop a trade model that explicitly incorporates theprocess producers undergo to acquire information about market conditions elsewhere.Second, using a data set I assemble on regional agricultural trade flows in the Philippines,I show that observed trade patterns and price dispersion cannot be explained by standardtrade models but are consistent with my model incorporating information frictions.Finally, I structurally estimate the model to quantitatively assess the relative importanceof information frictions and transportation costs.To introduce information frictions, I embed a search process into a many-region trademodel with heterogeneous producers. Producers sequentially search potential destinationsin order to discover market prices and determine where to sell their produce. Because thefixed cost of search comprises a smaller proportion of total revenue the greater thequantity produced, larger producers will search more intensively and on average sell todestinations with higher prices. I prove the existence and uniqueness of the equilibrium ofthe model for a large set of preferences and show that it yields a succinct equationgoverning bilateral trade flows.The introduction of information frictions yields three important implications for tradeflows and prices. First, price arbitrage opportunities remain in equilibrium. Second,bilateral trade flows differ from the standard gravity equation. Third, information andtransportation frictions affect bilateral trade flows differently, allowing the two tradecosts to be disentangled empirically.In the second part of the paper, I empirically evaluate the model using a comprehensivedata set I assemble on the universe of domestic shipments of agricultural commodities inthe Philippines from 1995-2009. I show that (1) observed patterns of trade and prices areinconsistent with the no-arbitrage equilibrium condition of standard models; (2) thestandard gravity model exhibits substantial bias in predicting how trade flows respond toidiosyncratic changes in prices; (3) estimated transportation costs are half as large as4

those implied by complete information models and more consistent with observed freightcosts; (4) the vast majority of the “gravity” relationship (93 percent) between trade flowsand distance can be attributed to information frictions rather than transportation costs;and (5) counterfactual exercises indicate reductions in information frictions reduceinequality whereas reductions in transportation costs increase inequality.The final part of the paper extends the basic model to incorporate intermediary traderswho purchase produce from farmers and then sell the produce to other regions. While thepredictions regarding regional trade flows remain qualitatively unchanged, the extensionallows me to directly examine the search process undertaken by farmers. Using a data setof more than two million individual farmer sales, I show that reductions in the cost ofsearch owing to the introduction of mobile phones induce smaller farmers to search fortraders, as predicted by the model.Optimal (Partial) Group Liability in Microfinance LendingIn this paper, I examine what the optimal joint liability contract is in microfinancelending when lenders do not observe the realized investment returns of borrowers. Idevelop a simple model that incorporates partial group liability, where borrowers arepenalized if their group members default but are not held responsible for the entirety ofthe failed loan. The model clearly illustrates the trade-off of group liability lending:while higher levels of group liability increase the willingness for group members to covereach other's bad returns, when liability becomes too high, borrowers find it optimal tostrategically default. The model implies the existence of an optimal partial liability thatmaximizes transfers between group members while avoiding strategic default. Twoextensions of the basic model incorporating household structure and group size,respectively, are shown to be able to estimate the prevalence of strategic default even inthe presence of correlated returns to borrowing. Using administrative data from a largemicrofinance institution in Mexico, structural estimates suggest high but variable returnsto borrowing and variation across loan officers in de facto group liability. Exploiting thisvariation in group liability, I demonstrate an empirical U-shaped relationship betweengroup liability and default rates, as predicted by the model. Structural estimates and outof-sampleregressions suggest that moving from full group liability to 75% liability couldsubstantially reduce the incidence of default in microfinance lending.The Value of Freedom: Fertility Decisions and the Escape from SlaveryIn this paper, I examine the extent to which enslaved mothers in the U.S. antebellumsouth reduced their fertility in hopes of facilitating escape. Escaping from slavery withyoung children was extraordinarily difficult, so the possibility of escape providedincentives for women to reduce their fertility. A simple model demonstrates that motherswill prefer to have fewer children the greater the distance to freedom, whereas ownersprefer the opposite. Exploiting the Fugitive Slave Law of 1850 (which increased thedistance to freedom) and the particularity of U.S. geography, a strong negativerelationship between fertility and distance to freedom is demonstrated. This negativecorrelation is stronger on larger plantations, but disappears if the father of the child iswhite. The result is robust to controlling for the difficulty of the route and a similarcorrelation is not present for white children or for slave children born prior to the5

Fugitive Slave Law. Estimates suggest that fertility fell on average by 8.7 percent foreach additional 100 miles to freedom. Since the probability of escape was remote, thislarge reduction in fertility suggests the value of freedom is substantial; in particular, Iestimate that the value of freedom is at least 27 times greater than the average value of achild born in slavery.Ongoing ResearchIn two ongoing projects, I examine the effect of economic integration on individualbehavior in developing countries. The first project (with David Atkin and Sabrin Beg)examines how reductions in trade costs affect the responsiveness of local prices toproductivity shocks and how these changes affect risk sharing arrangements. We findevidence that transfers between farmers and non-farmers become more responsive toagricultural productivity shocks as economic integration increases, suggesting thatopenness to trade increases individual’s reliance on risk sharing networks. The secondproject examines the effect of reductions in information frictions on farmer-traderbargaining. I find evidence that farmers producing less perishable crops benefiteddisproportionately more from the introduction of mobile phones, suggesting that morepatient farmers have greater bargaining power.6