In this paper, we argue that distinguishing temporary migration from permanent migration is important for estimating the welfare effects of migration frictions. This is because workers migrating temporarily leave their families behind, and thus economic conditions both at origin and destination matter for the destination choice and household welfare of temporary migrants. To shed light on spatial and aggregate implications of temporary migration, we develop and quantify a quantitative spatial general equilibrium trade model that allows for permanent and temporary migration. Estimates suggest that relative to permanent migration, temporary migration matters 1.3 times more for average welfare and 5 times more for the welfare of poorest 10 percent districts. We also find that shutting down temporary migration increases spatial inequality by 23 percent and reduces average productivity in tradable sectors by 30 percent. Finally, ignoring temporary migration results in overestimating average loss from redistributive policies and underestimating the gains to poorest locations.y.
Trade cost, intermediate-inputs and firm productivity (work in progress)
In this paper, I study the effect of reduction in internal trade cost on a firm’s decision to make or purchase intermediate inputs, its productivity, and sales using a highway construction project in India. I first show that “make-or-buy” is an important margin of firm heterogeneity, and firm’s choice of how much intermediate input it purchases from external suppliers is a function of input market access for the firm. Further, firms with better access to input suppliers are more productive and have higher sales. I then use a road construction program from India, the Golden Quadrilateral project (GQ), to show that firms along GQ faced lower input prices, purchased more inputs from external suppliers (along extensive as well as intensive margin), saw higher productivity and sales growth relative to firms located elsewhere. I argue that approximately two-thirds of differential productivity gains and two-fifths of differential sales growth resulting from GQ can be attributed to improved input market access.