India's Industrial Disputes Act (IDA) requires large manufacturing plants to pay substantial costs if they wish to shrink their workforce. Since the early 2000s, these large plants have dramatically increased their use of contract workers who are not subject to these regulatory constraints. Between 2000 and 2015, the contract labor share in non‐managerial employment nearly doubled at establishments with more than 100 workers (from 21 to 40 percentage points), while it only increased from 14 to 17 percentage points at establishments with less than 50 workers. Over the same period, the thickness of the right tail of the establishment size distribution in formal Indian manufacturing plants increased, the average product of labor at large plants declined, the job creation rate for large plants increased, and the probability that large plants introduced new products rose. We argue that these changes were caused by the increased adoption of contract labor. In a model of establishment growth subject to firing costs, we show that easing access to contract labor increased TFP in Indian manufacturing by 7.3% since the early 2000s, occurring all through a one‐time reduction in misallocation between large and small plants with negligible change in the long‐run growth rate.

Real estate agents typically charge a 6 percent commission, regardless of the price of the house sold. As a consequence, the commission fee from selling a house will differ dramatically across cities depending on the average price of housing, although the effort necessary to match buyers and sellers may not be that different. We use a simple economic model to show that if barriers to entry are low, the entry of real estate agents in cities with high housing prices is socially inefficient. Consistent with our model, we find that when the average price of land in a city increases, (1) the fraction of real estate brokers in a city increases, (2) the productivity of an average real estate agent (houses sold per hour worked) falls, and (3) the real wage of a typical real estate agent remains unchanged. We cannot completely rule out the alternative explanation that these results reflect unmeasured differences in the quality of broker services. However, we present evidence that as the average price of housing in a city increases, there is only a small increase in the amount of time a buyer spends searching for a house, and the average time a house for sale stays on the market falls.

Relative cross-border retail prices, in a common currency, comove closely with the nominal exchange rate. Using product-level prices and wholesale costs from a grocery chain operating in the United States and Canada, we decompose this variation into relative costs and markup components. The high correlation of nominal and real exchange rates is driven mainly by changes in relative costs. National borders segment markets. Retail prices respond to changes in costs in neighboring stores within the same country but not across the border. Prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries.