Working Papers:

Economic Growth and the Evolution of Comparative Advantage in an Occupation-Based Network of Industries

Recent evidence suggests significant changes over time in the pattern of comparative advantage across countries and industries. What drives such dynamics remains an open question. A mechanism suggested by theoretical literature, but not yet brought to bear on this evidence, is learning-by-doing. In this paper I develop a quantitative model of trade and growth with the goal of characterizing the relationship between learning-by-doing and the dynamics of comparative advantage. The model features an occupational dimension to learning, which endogenously generates a particular network structure of inter-industry learning diffusion, based on occupational similarity. The model predicts that countries with comparative advantages in industries that are more central in this network will grow more in the aggregate. I use the model-implied dynamics of comparative advantage to quantitatively discipline the amount of occupational learning and the extent to which learning diffuses across industries. Compared to intra-industry learning, I find that cross-industry learning diffusion explains at least four times as much of the dynamics of comparative advantage, as well as forty percent of an industry’s contribution to aggregate growth.

Works in Progress:

Wait Your Turn: Sequential Episodes of Industrialization

Why have industrialization episodes across countries largely happened in sequence rather than simultaneously? In this paper I show how a simple model of growth, trade, and structural change can generate such a pattern, even without recourse to differences in countries’ policies or institutions. In the model, due to an agricultural subsistence requirement, consumers in poor countries largely demand agricultural goods, not industrial goods, and hence the total amount of industrialization among poor countries at any given time is determined in equilibrium by the amount of demand for industrial products from richer countries. Meanwhile, the industrial sector exhibits increasing returns to scale, and hence this limited amount of industrialization is not spread equally among poor countries; it is concentrated in only a subset of them at any given time. The only equilibrium in the model is for other poor countries to “wait their turn” − that is, wait until the currently industrializing countries become sufficiently wealthy themselves.

The Effects of Agricultural Productivity and Trade Openness on Industrialization: Labor Push vs. Comparative Advantage (with Martin Fiszbein)

Agricultural productivity has two opposing effects on industrialization that have been emphasized in previous literature.  On the one hand, higher agricultural productivity allows a location to feed its people with fewer agricultural workers, allowing more people to work in industry.  On the other hand, higher agricultural productivity in a location – and hence a higher comparative advantage in agriculture – induces extra demand for agricultural workers in that location and less demand for workers in industry. These two effects have been emphasized by previous literature in isolation from each other. In this paper, we develop a model of trade and structural change that simultaneously captures both effects, and we show how the relative magnitudes of these two effects in a particular location is a function of that location’s degree of trade openness.

The Gains from Industrial Diversification vs. Specialization: A Tale of Two Elasticities (with Ulrich Schetter)

Factor Endowments vs. Technology: A Quantitative Assessment (with Ulrich Schetter)