Maha Rehman

Research

Research Overview

I study how firms adapt to economic disruptions and crises in environments shaped by weak institutions, financial frictions, and infrastructural constraints. Broadly, I study the mechanisms through which shocks reshape resource allocation, behaviour, and productivity in developing economies.

Across two interrelated streams, I investigate:

  1. Adaptive misallocation — how shock-induced reallocations generate persistent inefficiencies at the firm level.
  2. Behavior and networks in crises — investigating how individual decisions and social structures interact to shape outcomes during public health and environmental shocks.

These projects are unified by a central question: how institutional constraints condition adaptation, often leading to inefficiency rather than enhanced productivity.

Methodologically, I combine experimental and quasi-experimental designs with tools from empirical industrial organization and applied theory. I use dense urban contexts as natural laboratories to unpack behavioral models, identify misaligned incentives, and test institutional reforms. This empirical foundation informs structural modeling and policy design, with the aim of generating scalable reforms that improve industrial productivity, strengthen public goods provision, and enhance state capacity—particularly in South Asia.

Fields: Development, Macro-Development, Industrial Organisation

Publications and Working Papers:

Misallocation and the Distributional Incidence of Natural and Technological Shocks:

Journal Link · Twitter Thread · Ungated Version . VoxDev Coverage

Abstract
This paper presents evidence on how firms adapted following the 2005 Pakistan earthquake, with a focus on the vulnerabilities that drove differential impacts and the role of minimal government aid expectations. Using a difference-in-differences methodology on a nationally representative panel of 390 firms, it explores three key dimensions: immediate disruption, short-term adaptation, and long-run resilience. The seismic shock damaged stock and reduced sales asymmetrically. Fragile intermediaries—firms with moderate capital-labour ratios—suffered the largest declines in output, while labour- and capital-intensive firms showed greater resilience. Firms prioritised skilled labour retention, reduced non-production roles, increased operational hours, and diversified across markets. There was no evidence of innovation. A theoretical model of adaptive misallocation formalises how over-investment in short-term resilience strategies—driven by policy uncertainty—diverts capital away from productivity, weakens public-private trust, and undermines long-run resilience.

Behaviour Change During Shocks and Crises:

Project Brief
I develop a general threshold model of adoption in dense, information-rich urban networks, where individual compliance depends on private incentives and socially mediated influences. I test the framework in a large-scale randomized controlled trial in Lahore during the COVID-19 pandemic, demonstrating that lowering adoption costs and reinforcing salience at central network nodes shifts equilibrium compliance. The analysis identifies generalisable mechanisms through which adoption thresholds evolve in high-density networked environments.

Project Brief
This paper extends my threshold model of adoption to vaccine uptake in high-density urban networks, where financial costs are minimal but behavioural frictions (misinformation, mistrust, logistical barriers) dominate. In a randomised trial, I tested whether iterative community engagement could recalibrate adoption thresholds. Mobilisation significantly increased uptake, but intensification produced no further gains, highlighting how behavioral frictions interact with network structure and why adaptive — rather than maximal — mobilisation is key.

Selected Work in Progress: