Research

 
Recent Working Papers
  • Firms and Labor in Times of Violence: Evidence from the Mexican Drug War, 2018, link to slides, paper

Violence in Mexico has reached unprecedented levels in recent times. After the government crackdown on drug cartels, nation-wide homicides almost tripled between 2006 and 2010. Using longitudinal plant-level data and information on plants' detailed product portfolios and technology, this paper studies the impact of violent conflict on firms, exploiting this period of heightened violence in Mexico – commonly referred to as the Mexican Drug War. The empirical strategy uses time and spatial variation in violence across Mexican cities and an instrumental variable strategy relying on the triggers of the Drug War against potential endogeneity of violence surge. It controls for observable and unobservable differences across cities and firms as well as for product-specific business cycles. The results show significant negative impact of the surge in violence on plants' output, product scope, employment and capacity utilization. Violence is felt across all plants as a negative blue-collar labor supply shock, leading to significant decline in skill-premium. The effect of violence outbreak on output and plants' survival likelihood is very heterogenous, increasing with reliance on local demand, local sourcing and with intensity of female employment. The estimates show that the Drug War accounted for sizable portion of the aggregate decline in manufacturing employment over 2007-2010 in Mexico.


  • Globalization, Gender and the Family, 2017, with W. 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 W. Keller, first version March 2015, link to current paper , online appendix, slides, NBER Working Paper # 22315.

    This paper examines the role of international trade in causing job polarization, the phenomenon in which employment for high- and low-wage occupations increases but mid-wage occupations decline. With employer-employee matched data on virtually all workers and firms in Denmark between 1999 and 2009, we use instrumental-variables techniques and a quasi-natural experiment to show that import competition is a major cause of job polarization, independent from technical change and offshoring. Import competition explains a sizable amount of the job polarization that we documented for Denmark over the 2000s. At the worker level we find that import competition mostly affects workers performing manual tasks regardless of how routine intensive the tasks are. Many mid-skill workers are pushed by import competition into low-wage service jobs while others move into high-wage jobs.  The direction of movement, up or down, turns on the skill focus of workers' education. Manufacturing-specific vocational training slows down the process of mid-wage employment loss. Workers with vocational training for a service occupation can avoid moving into low-wage service jobs, and among them workers with information-technology education are far more likely to move into high-wage jobs than other workers.

    related: "Globalisation and polarisation in the wake of Brexit", VOX column, July 5, 2016, with Wolfgang Keller.
    http://voxeu.org/article/globalisation-and-polarisation-wake-brexit



Recent Publications

  • Utar, Hale, "Workers beneath the Floodgates: Impact of Low-Wage Import Competition and Workers' Adjustment", forthcoming at the Review of Economics and Statistics, link to  paper (October 2017), online appendix, slides  

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. 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-natural 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. Adjustment costs are concentrated among workers with manufacturing specific education and occupation, establishing the importance of specific human capital in trade adjustment costs. The study provides evidence of skill upgrading at the individual level as workers re-build lost human capital through education.

  • Bond, Eric, James Tybout and Hale Utar (2015). "Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries",   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
  • Utar, Hale, (2014). "When the Floodgates Open: Northern Firms' Response to Removal of Trade Quotas on Chinese Goods", American Economic Journal: Applied Economics, Vol 6(4), pp.226-250.   link to wp, paper, appendix, slides, data
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
  • Utar, Hale and Luis Torres-Ruiz, (2013).  "International Competition and Industrial Evolution: Evidence from the Impact of Chinese Competition on  Mexican Maquiladoras"Journal of Development Economics, 2013, Vol 105, pp.267-287.                 link to wppaper, slides
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
  •  Utar, Hale (2017). "Characteristics of International Trade Intermediaries and Their Location in the Supply Chain",  Globalization: Strategies and Effects,  eds. C. Kowalczyk and B.J. Christensen, Springer-Verlag Berlin Heidelberg, March 2017.     link to paper, slides

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



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.