Jorge A. Alvarez

I am an economist in the North American Division of the Western Hemisphere Department at the International Monetary Fund. Prior to this position, I worked in the Development Macroeconomics division of the Research Department. My current research focuses on capital and labor misallocation, informality, inequality, structural transformation and gaps in productivity and wages across sectors and firms.

PhD Economics, Princeton University

BA Economics, Harvard University

Email: jalvarez@imf.org

Research Publications

"The Agricultural Wage Gap: Evidence from Brazilian Micro-data", forthcoming, American Economic Journal: Macroeconomics.

A key feature of developing economies is that wages in agriculture are below those of other sectors. Using Brazilian household surveys and administrative panel data, I use information on workers who switch sectors and workers with multiple jobs to assess the role of worker composition in explaining this gap. The evidence is consistent with the presence of significant inter-sector sorting in Brazil. A calibrated sorting model can account for the wage gap level observed as well as its decline as the economy transitioned out of agriculture.

“Firms and the Decline in Earnings Inequality in Brazil” with Felipe Benguria, Christian Moser and Niklas Engbom. American Economic Journal: Macroeconomics, 2018, 10(1), pp. 149-89.

We document a large decrease in earnings inequality in Brazil between 1996 and 2012. Using administrative linked employer-employee data, we fit high-dimensional worker and firm fixed effects models to understand the sources of this decrease. Firm effects account for 40 percent of the total decrease and worker effects for 29 percent. Changes in observable worker and firm characteristics contributed little to these trends. Instead, the decrease is primarily due to a compression of returns to these characteristics, particularly a declining firm productivity pay premium. Our results shed light on potential drivers of earnings inequality dynamics.

“Made in Mexico: Energy Reform and Manufacturing Growth” with Fabian Valencia. Energy Economics 55 (2016): 253-265.

This paper assesses the real effects of the energy reform in Mexico by looking at its impact on manufacturing output through changes in energy prices. Using sub-sector and state-level manufacturing output data, along with past variation in energy prices, we find electricity prices––relative to oil and gas––to be more important in the manufacturing process, with a one standard deviation reduction in electricity prices leading to a 2.8 percent increase in manufacturing output. Our estimated elasticities together with plausible reductions in electricity tariffs derived from the energy reform, could increase manufacturing output by up to 3.6 percent, and overall real GDP by 0.6 percent. Larger reductions are possible over the long run if increased efficiency in the sector leads electricity prices to converge to U.S. levels. Moreover, including the impact of lower electricity tariffs on the services sector, could lead to significantly larger effects on GDP. Accounting for endogeneity of unit labor costs in a panel VAR setting leads to an additional indirect channel which amplifies the impact of electricity prices on output.

Policy contributions

Internal Trade in Canada: Case for Liberalization , Canada Selected Issues Paper Ch. 3, IMF, 2019.

Canada: 2019 Article IV Staff Report, IMF, 2019.

Formality and Equity: Labor Market Challenges in Mexico, Mexico Special Issues Paper, Ch. 1, IMF, 2018.

Mexico 2018: Article IV Staff Report, IMF, 2018.

Economic Gains From Gender Inclusion : New Mechanisms, New Evidence, Staff Discussion Notes No. 18/06, IMF, 2018.

A Closer Look at Productivity in Canada, Selected Issues Paper, Ch. 3, IMF, 2018.

Canada: 2018 Article IV Staff Report, IMF, 2018.

Made in Mexico: Energy Reform and Manufacturing Output , chapter in Power Play: Energy and Manufacturing in North America. Edited by Roberto Cardarelli and Lusinyan, Lusine, IMF, 2016.

Research in progress

"Informality Distortions and Aggregate Productivity: The Case of Mexico" with Cian Ruane.

Using a collection of employment surveys and firm-level micro-datasets, we assess the role of distortions arising from labor regulation and their interaction with informality. After documenting the prevalence of informal firms in Mexico, the high share of informal employment that exists within formal firms, and the wage, size, and productivity structure of the formal and informal sectors, we construct and estimate a model of heterogeneous firms and endogenous informality to study the micro and macro impacts from different sets of regulatory distortions in Mexico.

"Internal Trade in Canada: Case for Liberalization" with Ivo Krznar and Trevor Tombe.

This paper assesses the costs of internal trade barriers and proposes policies to improve internal trade. Estimates suggest that complete liberalization of internal trade in goods can increase GDP per capita by about 4 percent and reallocate employment towards provinces that experience large productivity gains from trade. The positive impact highlights the need for federal, provincial and territorial governments to work together to reduce internal trade barriers. There is significant scope to build on the new Canadian Free Trade Agreement to more explicitly identify key trade restrictions, resolve differences, and agree on cooperative solutions

"Structural Transformation and The Rise in Female Labor Force Participation Across the World"

There are large differences in labor force participation between men and women, with men outnumbering women over three-to-one in some countries. These gaps have declined significantly during the last half-century in most of the world. At the same time, most economies have transitioned out of male-dominated agriculture into to the more gender-equal services sector. Using both micro and macro data from a set of developed and developing economies, this paper studies the connection between structural transformation, the rise of services, and the rise of female labor force participation (FLFP). A robust relationship between structural transformation and female participation emerges within countries and sub-national regions over time. A calibrated structural transformation model with barriers to FLFP can account for both cross-sectional and time-variation in participation gaps. The model suggests large potential welfare and output gains from decreasing gender discrimination and other barriers to FLFP in gender unequal countries.

"Crop Selection and International Differences in Aggregate Agricultural Productivity" with Claudia Berg.

A large share of cross-country differences in productivity is explained by differences in agricultural productivity. Using a combination of sub-national agricultural statistics and geospatial datasets on crop-specific potential yields, we study the main drivers of this variation from a macroeconomic perspective. We find that differences in geographically-induced crop-specific comparative advantages can explain a substantial share of the variation in yields across the world. Data reveal substantial gaps between potential and observed yields in most countries. When decomposing these within country gaps, we find that crop selection gaps are on average larger than those induced by input usage alone. The results highlight the importance of understanding the interaction of geography and crop selection drivers in assessing aggregate agricultural productivity differences.

"State Reform and China's Productivity Deceleration: Firm-level evidence" with Tuo Chen and Grace Bin Li.

This paper documents total factor productivity (TFP) growth in Chinese manufacturing from 1998 to 2013 using both aggregate and firm-level data. We find that TFP growth is positive from 1998 to 2011 and then turned flat and even negative. This pattern is not driven by changes in sub-sectoral composition. A careful comparison between state-owned enterprises (SOEs) and private firms reveals that TFP deceleration among SOEs was a major contributor to the aggregate TFP growth reversal.