Globalization and the Skilled City - Journal of Urban Economics, Vol. 107, 2018, pp 1-30. [paper]
Abstract: The location of economic activity both across and within countries has undergone dramatic shifts over the last five decades. Three key trends stand out. First, cross-country inequality has declined as many developing countries have grown rapidly. Second, economic geography within countries has instead grown more unequal in both the developed and the developing world. Third, within-country spatial disparities have grown mainly because of the disproportionate success of skilled cities. In this paper, I develop a model that jointly explains these patterns as a consequence of deepening international economic integration. My model explains the faster population and output growth of skilled cities, as well as their tendency to increase their initial skill advantage. Consistent with the evidence, my theory predicts a non-monotonic path of urban growth in developed countries. The model predicts a future shift in worldwide urban hierarchies as some developing-world cities overtake unskilled cities in industrialized countries along global supply chains.
Male-biased Demand Shocks and Women's Labor Force Participation: Evidence from Large Oil Field Discoveries - Economica, Vol. 88 (349), 2021, pp 167-188. (with Stephan E. Maurer) [paper]
Abstract: Do male-biased labour demand shocks affect women’s labour market outcomes? To study this question,we examine large oil field discoveries in the southern USA from 1900 to 1940. We find that oil wealth hasan overall positive effect on female labour force participation that is driven by single women. While oildiscoveries increase demand for male labour and raise male wages, they do not drive women out of thetradable goods sector or the labour force. Our findings suggest that the absence of any crowding out effectsof oil wealth can be explained by compensating forces such as demand effects within the tradable sector, orby income effects that lead to growth in the non-tradable sector
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Cities, Heterogeneous Firms and Trade (with Jan Bakker, Alvaro Garcia, Nico Voigtlaender and Yang Yang) [paper] Reject & Resubmit, Quarterly Journal of Economics
Abstract: We document a novel stylized fact: Using data for several countries, we show that export activity is disproportionately concentrated in larger cities – even more so than overall economic activity. We account for this fact by marrying elements of international trade and economic geography. We extend a standard Quantitative Spatial Economics (QSE) model to include heterogeneous firms that engage in selection along two margins: entry into cities of heterogeneous productivity and entry into exporting. The model allows us to study the implications of trade policy for within-country economic geography and of geographic policies for international trade. Our model delivers novel predictions for the bi-directional interactions between trade and urban dynamics: On the one hand, trade liberalization shifts employment towards larger cities and on the other hand, liberalizing land use increases international trade integration. We structurally estimate the model using data for the universe of Chinese and French manufacturing firms. We find that the effects of effects of trade liberalization and of urban policies are quantitatively different from those predicted by trade models that ignore economic geography, and by economic geography models that omit international trade (both of which are nested in our framework).
The Short and Long Run Dynamics of the Great Gatsby Curve (with Diego Battiston, Stephan E. Maurer and Jose V. Rodriguez Mora) [paper]
Abstract: The strong evidence in support of the Great Gatsby Curve (i.e. the negative cross-sectional relationship between intergenerational mobility and inequality) seems to beat odds with the fact that large increases in inequality in the US have not resulted in decreases in mobility. We solve this puzzle by measuring, for the first time, a dynamic version of the “Great Gatsby Curve” that relates changes in inequality to changes in intergenerational income mobility. We find that across US counties and during the last century the relationship is weak and unstable over relatively short intervals oftwo decades, but negative and significant over a longer period of almost a century. The historical record suggests that if the large increase of inequality observed in theUS does not reverse, this may result in substantially lower socioeconomic mobility in the long term, even if mobility has not decreased yet. We complement our analysis with a study of the relationship between income inequality and the intergenerational mobility of education finding a stable dynamic correlation over the short run, suggesting that the process of human capital accumulation is a significant driver of the empirical relationship between inequality and intergenerational income mobility.
Trade Liberalization and Economic Development: Evidence from China's WTO Accession (with Wenya Cheng) [paper]
Abstract: We study the effect of improvements in foreign market access brought by China’s WTO accession on Chinese local economies. We exploit cross-city variation in these improvements stemming from initial differences in sectoral specialization and exogenous cross-industry differences in US trade liberalization that originate from the elimination of the threat of a return to Smoot-Hawley tariffs for Chinese imports. We find that Chinese cities that experience greater improvement in their access to US markets following WTO accession exhibit faster population, output and employment growth as well as increased investment and FDI inflows. The benefits of WTO membership for Chinese local economies are augmented by significant local spillovers. These spillovers operate both from the tradable to the nontradable sector and within the tradable sector. Within the tradable sector, spillovers are transmitted primarily via labor market linkages. We find important local demand linkages from the tradable to the nontradable sector. Most local service sectors benefit from trade liberalization. In particular, our evidence suggests that increased investment demand caused by trade liberalization drives financial sector growth. We find little effect of trade liberalization on local wages. Alongside our results on population and employment, this indicates that local labor supply elasticities are high in our setting. Our findings can be explained by a Lewis model of urbanization that combines geographic mobility with an abundant reserve of labor.
Financial Crises and Political Attitudes (with Liang Bai and Philipp Hamelmann)