Research
I study how economies adjust when institutional capacity is limited. My work develops the concept of adaptive misallocation: when environments that sustain coordination or rebuilding are weak, decentralised substitution alters the equilibrium path of reallocation and generates persistent efficiency losses. I combine experimental variation, large-scale administrative data, and allocation frameworks to identify how constraints propagate through equilibrium outcomes.
Publications & Working Papers
Maha Rehman, “Reallocation without Recovery”
Maha Rehman, “The Allocation of Monitoring”
Maha Rehman, “Equilibrium Compliance under Transitory Visibility”
Maha Rehman, “Adaptive Frontline”
Maha Rehman, “Industrial Reorganisation and Adaptive Misallocation after Disasters”
Published: March 2025 | Links: Paper | VoxDev
Abstract
Large natural disasters impose severe disruptions on firms, particularly in environments where formal insurance coverage and post-disaster transfers are incomplete. This paper documents how firms reorganise production following the 2005 Pakistan earthquake and asks whether such adaptation improves long-run efficiency or instead generates persistent distortions. Using a difference-in-differences design on a nationally representative panel of manufacturing firms, I document a non-monotonic pattern of adjustment across the production structure. Firms with intermediate capital–labour ratios experience the largest and most persistent declines in sales, while both labour-intensive and highly capital-intensive firms display greater resilience. Firms respond through intensive short-run adjustment: extending operating hours, reallocating labour towards skilled workers, increasing reliance on privately provisioned backup inputs, and diversifying markets. These responses stabilise output but do not induce innovation, indicating a reorganisation of production towards short-run stabilisation rather than long-run productivity growth. To interpret these patterns, the paper develops a model of adaptive misallocation in which firms facing incomplete insurance over-invest in self-protective inputs. These privately optimal responses divert resources away from productivity-enhancing investment and generate persistent distortions in firm behaviour. The results show that disasters reshape production not only through capital destruction, but through expectation-driven misallocation under incomplete insurance.Work in Progress
Maha Rehman, “Non-Market Inputs and Private Substitution under Incomplete Provision”
All papers are solo-authored unless noted otherwise.