Recent Working Papers
  • Globalization, Gender and the Family, 2016 (previously titled 'Marriage, Divorce, and Fertility: Life in the Face of Import Competition'), with Wolfgang Keller, slides, paper

    The recent halt of women's gains in labor force participation ended a decades-long process during which women would postpone marriage and having children until later and later in life. Not any longer. The age at which a Danish woman has her first child has virtually not changed since the early 2000s, for example. This paper examines the role of globalization for this structural break in the family-market work decision. Using Danish employer-employee matched data we find that rising import competition from China - which reduces labor market opportunities - has a statistically and economically significant impact on the family-market work balance in Denmark. Exposure to import competition reduces divorce rates, increases marriage rates, as well as leads to a greater number of children. Notwithstanding the fact that marriage and childbirth are decisions made by couples, we find these pro-family, pro-child effects to be gender biased in the sense that they mostly reflect changes in women's labor market and family work. Observable differences between jobs held by men and women do not fully account for this; our results are consistent with gender identity playing a role.

    • International Trade and Job Polarization: Evidence at the Worker Level, with Wolfgang Keller, first version March 2015, link to current paper (June 2016), online appendix, slides, NBER Working Paper # 22315.

    This paper examines international trade as a cause of job polarization, the employment increases for high- and low-wage occupations combined with declines for mid-wage occupations present in high-income countries. With employer-employee matched data on virtually all workers and firms in Denmark between 1999 and 2009 and using both instrumental-variables techniques and a quasi-natural experiment, we show that import competition is a major cause of job polarization. Import shock from China accounts for about 17 % of the economy-wide decline in mid-wage employment, and while it pushes many workers into low-wage service jobs, it also leads to movement from mid- into high-wage jobs. The paper documents much heterogeneity in terms of polarization among mid-skilled workers subject to import competition depending on the skill focus of their education. Among them, information-technology educated workers are about five times as likely as workers with manufacturing focus to move into high-wage employment, at the same time service focused mid-skills are not enough to protect workers from mid-wage losses.

    related: "Globalisation and polarisation in the wake of Brexit", VOX column, July 5, 2016, with Wolfgang Keller.

    • Workers beneath the Floodgates: Impact of Low-Wage Import Competition and Workers' Adjustment, first version June 2014, link to current paper (March 2017), online appendix, slides , CESIfo Working Papers # 6224   (second revise and resubmit at the Review of Economics and Statistics)

I analyze the impact of a low-wage trade shock on manufacturing workers in a high-wage country, Denmark, and how they adjust to the shock over a decade. The study illustrates the importance of specific human capital in trade adjustment and provides initial evidence of skill upgrading at the individual level as workers re-build lost human capital through education.
Employing employee-employer matched data for the period 1999 to 2010, I exploit the dismantling of import quotas on Chinese products in conjunction with China's accession to the WTO as a quasi-experiment and utilize within-industry heterogeneity in workers' exposure to this trade shock. Results show a negative and significant impact on workers' future earnings and employment trajectories, which stems mainly from shortened employment at the firm that was exposed to the competition shock and (as importantly) subsequent difficulty in maintaining stable employment. While the service sector is the main absorber of all types of workers displaced by the import shock, recovery from the shock in service sector jobs varies greatly across workers. Less-educated, but also skilled workers with manufacturing specific education and workers with occupations with a high industry-specific skill content at the exposed firms had the worst adjustment experience after displacement. The results imply that policies to facilitate workers' movement between sectors may not be enough to ease the distributional burden of globalization. For some, challenges remain even after transitioning to full-time jobs outside of manufacturing, as the loss of human capital specific to their former industry remains as an important hurdle to recovery.

Recent Publications

  • Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries,  with Rick Bond and Jim Tybout,  link to paper, wp, slides, data (International Economic Review, 2015, Vol 56(3), pp.695-722)

Relative to their counterparts in high-income regions, entrepreneurs in developing countries face less efficient financial markets, more volatile macroeconomic conditions, and higher entry costs. This paper develops a dynamic empirical model that links these features of the business environment to cross-firm productivity distributions, entrepreneurs’ welfare, and patterns of industrial evolution. Applied to panel data on Colombian apparel producers, the model yields econometric estimates of a credit market imperfection index, the sunk costs of creating a new business, and various technology parameters. Model-based counterfactual experiments suggest that improved intermediation could dramatically increase the return on assets for entrepreneurial households with modest wealth, and that the gains are particularly large when the macro environment is relatively volatile.

                                                                                                                   Lake Powell, 2011
  • When the Floodgates Open: Northern Firms' Response to Removal of Trade Quotas on Chinese Goods, link to wp, paper, appendix, slides, data (American Economic Journal: Applied Economics, 2014, Vol 6(4), pp.226-250.)

    Using the dismantling of the Multi-fibre Arrangement quotas on Chinese textile and clothing products in conjunction with China's accession to WTO, within firms adjustments to intensified low-wage competition is analyzed. Employing Danish employer-employee matched data supplemented with transaction-level data from between 1995 and 2007, the analysis shows a significant increase in skill and capital intensity associated with downsizing in response to heightened competition.

    Competition is found to negatively affect employment, value-added and intangible assets of the Danish firms, and firms are found to refocus their innovative efforts away from goods where China's competitive advantage becomes higher. The results show an important role of the distributional impact of low-wage competition within firms in restructuring the industry and support theories that indicate compositional changes in the scopes and operations of ``Northern'' firms in response to competition from ``South''.
                                                                                                                      Canyonlands, 2011
  • International Competition and Industrial Evolution: Evidence from the Impact of Chinese Competition on  Mexican Maquiladoras, with Luis Torres-Ruiz, July 2013, link to wppaper, slides, data (Journal of Development Economics, 2013, Vol 105, pp.267-287)
Effects of the competition between two South locations (Mexico and China) in the Northern market (U.S.) are analyzed. By employing a plant-level data set that covers the universe of Mexican export processing plants (maquiladoras) from 1990 to 2006 and relying on an instrumental variable strategy that exploits exogenous intensification of Chinese imports in the world in conjunction with the WTO accession of China, the empirical analysis reveals a substantial effect of intensified Chinese competition on maquiladoras.
In particular, competition from China has a negative and significant impact on employment and plant growth, both through the intensive and the extensive margin. As the negative impact is stronger on the most unskilled labor intensive sectors, it triggers significant sectoral reallocation towards higher value-added sectors. Suggestive evidence on industrial upgrading among maquiladoras in response to competition with China is also provided. Overall the results provide additional insight into the way low-wage competition shapes the evolution of industries.

                                                                                                      Isla Holbox, Mexico, 2011
  •  Characteristics of International Trade Intermediaries and Their Location in the Supply Chain,  link to paper, slides, (Globalization: Strategies and Effects, 2016, eds. C. Kowalczyk and B.J. Christensen, Springer-Verlag Berlin Heidelberg.

In this paper wholesale trade firms and their role in international trade are examined using transaction and firm level data-sets from Denmark for the period 1998-2006.
The analysis shows that export and import premia exist even among wholesale trade firms. Wholesale trade firms that export intermediate goods are found to employ more skill intensive employees and pay higher wages in comparison to other exporting wholesale trade firms. Additional systematic differences between wholesale trade intermediaries in intermediate goods markets versus in consumption goods markets are also documented. In particular, while in intermediate goods export wholesale trade firms' unit prices are found to be significantly higher than manufacturers’ unit prices of the same good, the opposite holds true for consumption goods export. The results suggest that theories highlighting the potential roles of intermediaries should take the intermediaries' location in the supply chain into account.

                                                                                       Kolding, Denmark, 2012

Work-in Progress:

  • Productivity and Reallocation during Conflicts: Evidence from Mexico
  • From Mass Production to Customer Orientation: the Evolution of Labor Intensive Manufacturing in High Income Regions -- The Case of Leineweber 
  • Firm Organization, Wages and the Supply Chain

Some Not-So Recent Working Papers

  •  Import Competition and Employment Dynamics, 2008,  link to paper, slides, data

In order to quantify the effect of foreign competition in domestic industries and to elucidate the cross-country differences that have been observed in response to intensified import competition, this paper presents and estimates an open industry model under monopolistic competition and aggregate uncertainty. It provides a novel method for rigorously characterizing how firms adjust to intensified import competition and aggregate shocks in a structural framework.

In the model, heterogeneous firms face competition both from outside the country through imports and from inside the country in the domestic market. Firms react to changes in the competitive environment through both hiring and firing on the intensive margin and entry and exit on the extensive margin. Plant-level panel data are used to estimate the model's parameters, including the sunk start-up costs faced by new firms, fixed per period costs, the stochastic process that governs firms' idiosyncratic productivity shocks, and the adjustment costs associated with changing employment levels. Then, with the estimates of the structural parameters, the model is used to characterize and quantify the effects of intensified import competition on job turnover patterns, productivity distributions, and entry and exit patterns of the firms. The model also characterizes the interactions among intensified import competition, labor market regulation and exchange rate regime. Thus it elucidates the cross-country, cross-industry differences that have been observed in response to heightened import competition. The model predicts the associated changes in aggregate productivity, employment, job flow patterns and mark-ups in the new long-run equilibrium as well as the nature of the transition process when openness changes, and the role of adjustment costs in shaping firms' behavior.

  • The Role of Foreign Technical and Professional Services in Learning By Exporting, 2010, link to paper, slides, data

Using data from the entire pool of manufacturing plants in Chile from 1990 to 1996, evidence found in this paper for a specific channel through which learning by exporting can happen: domestic exporters gain enhanced access to foreign technical and professional services by virtue of their presence in the foreign market and actively use it to acquire productivity improving capabilities. It is first shown that export experience may help firms to have foreign technical service market access. Using the propensity-score matching technique to control for self-selection firms are matched within narrowly defined industries. Using the difference in difference estimator that removes the effects of aggregate shocks, strong evidence is found for 'learning by exporting' but only among those that have access to foreign technical service markets.