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"Immigrants’ Skills and Capital Deepening: Evidence from Chile," with Carlos Madeira (Central Bank of Chile and BIS Office for the Americas) [Job Market Paper]
"Immigrants’ Skills and Capital Deepening: Evidence from Chile," with Carlos Madeira (Central Bank of Chile and BIS Office for the Americas) [Job Market Paper]
Capital deepening is a key driver of firms' productivity and overall economic growth. We study the effect of migration on firms' capital deepening, leveraging a massive influx of immigrant workers with varying skill sets in Chile between 2015 and 2019. We adopt a theoretical framework that allows for capital-skill complementarity and differences in productivity between native and immigrant workers, and we empirically test the effect of an increase in the supply of skilled and unskilled immigrant workers on firms' capital intensity. Identification relies on the shift-share instrument approach to estimate firms' exposure to immigration shocks. We use unique employer-employee data that allow us to match worker characteristics, including country of origin and education level, to balance sheet data from firms' tax returns, providing highly detailed information about the labor composition and capital in the firm that is not available in other contexts. Our findings show that a 1 p.p. increase in the proportion of skilled immigrants relative to total skilled workers in the firm raises firms' capital per worker by 1 to 3%, highlighting strong complementarities between skilled immigrants and capital. The impact of skilled labor on capital deepening is nonlinear and declines as firms' immigrant concentration increases. This nonlinear relationship is driven by the imperfect substitutability between immigrants and native workers within the same skill group. Understanding the relationship between migration and capital deepening is important to understanding the effects of migration more broadly, as it has implications for the effect of migration on productivity and inequality in the receiving country.
Award: Cornia Student Prize, best paper presented by a junior scholar at SITES-GLO conference 2024
Working Papers
Working Papers
"Migration Shocks and Housing Outcomes: Evidence from Italy"
The number of international migrants continues to rise in developed and develop- ing regions. Migration represents an important poverty-alleviation strategy and, in some cases, life-saving for individuals fleeing persecution, violence, and conflicts. For this reason, understanding the effects of immigration on the receiving countries and informing policymaking has become crucial. This work evaluates the impact of migration shocks on local housing prices and rents in Italy. My empirical strategy takes advantage of the geographical and annual variation in immigrants influx. Combining municipality-level housing data with information on foreign residents and using an Instrumental Variable approach, I show that the inflow positively affected prices and rents. The average annual growth rate of immigrants between 2010-2020 was 3.5%. Accordingly, my estimates predict a 0.11 and 0.14 percent annual increase in housing prices and rents following this shock. The results are robust to two different instrument specifications and the addition of different controls.
"British Intra-Elite Conflict and the East India Company," with Sebastian Galiani, Ivan Lopez Cruz and Gustavo Torrens [Draft coming soon]
We study the effects on a metropolis and its colony of an exclusive trading company that monopolizes the foreign trade of the colony, employing Great Britain, India, and the East Indian Company as the central historical case. At the theoretical level, we show that that an exclusive trading company has incentives to implement the equivalent of an export tax on colonial exports; that such a tax improves (deteriorates) the terms of trade of the metropolis when the metropolis and the colonial economies are rival (complementary); and that the change in the terms of trade produces winners and losers in the metropolis. We also show that the impacts that these changes in the terms of trade have on the metropolis’ GDP as well as on its functional income distribution influence the political support for the exclusive trading company in the metropolis. The analysis helps explaining the rise and dismantling of the East India Company, with the British Industrial Revolution playing the key role. More generally, the paper suggests that colonial policy might be particularly burdensome for the colony when it has a rival economy with the metropolis, a situation often overlooked because most of the New World colonies were complementary to their metropolises.
"Migration Shocks, Capital-skill Complementarity and Inequality in Chile," with Carlos Madeira (work in progress)
This paper investigates the impact of immigration on wage inequality in Chile, focusing on the interplay between immigrants' skills and capital accumulation at the firm level. Using rich administrative data from Chile, we analyze how the influx of skilled and unskilled immigrant labor affects wages through the lens of capital-skill complementarity. Specifically, we explore whether increased capital intensity within firms amplifies wage disparities by disproportionately benefiting skilled workers, thereby exacerbating wage inequality. This mechanism highlights a critical channel through which immigration influences wages in the receiving economy, with implications for both labor market dynamics and income distribution. Our analysis is particularly relevant in the context of recent waves of immigration to Chile, which have coincided with heightened political and social unrest.
Other Research Papers
Other Research Papers
“Enhancing private and public risk-sharing: lessons from the literature and reflections on the Covid-19 crisis”, with Jacopo Cimadomo and Esther Gordo Mora, 2023, The Cambridge Handbook of European Monetary, Economic and Financial Integration, chapter 22 [link]
This article surveys the literature on consumption risk sharing, focusing on the findings for the euro area and for the United States, but also presenting evidence for other countries. The literature examined found that risk sharing is higher in more mature federations, such as the United States, than in the euro area. The papers surveyed suggest that state/country-specific output shocks are primarily smoothed out through the capital and credit channel, whereas the fiscal channel as a minor role, especially in the euro area. Overall, about 70% of shocks is smoothed in the United States while just 40% in the euro area. At the same time, our analysis of the response to the COVID-19 crisis indicates that risk sharing in the euro area has been more resilient than it was during the global financial crisis of 2008-09. Overall, our results point to the need for further improvements to the private and public risk- sharing channels in the euro area to ensure more effective cushioning against asymmetric shocks and to boost progress towards the completion of European Monetary Union (EMU).
“Do public wages in the Euro Area explain private wages development? An empirical analysis”, with Maria Grazia Attinasi and Francesco Berardini, 2019, ECB Working Paper Series N.2231 [link]
This paper investigates the relationship between public and private wages in the five largest euro area countries for the period 1997-2017. The analysis shows that there exists a positive and significant response of private wages to a public wage shock. This effect is found to be temporary and to differ across countries (positive and significant in France, Spain, Italy and non-significant in Germany and the Netherlands). Interestingly, the response of private wages is found to be asymmetric: a positive and statistically significant response is found in case of a positive shock to public wages, while no statistically significant effects are detected in case of a cut to public wages. As the public wage containment policies adopted during the sovereign debt crisis are expected to be gradually lifted in several euro area countries, the findings of this paper suggest that knock-on effects on private sector wages cannot be excluded in the years to come.
“Fiscal Activism in the Euro Area and in Other Advanced Economies: New Evidence”, with Maria Grazia Attinasi and Beatrice Pierluigi, 2019, ECB Working Paper Series N.2344 [link]
We review the determinants of the discretionary fiscal policy action of governments in the euro area and in other advanced economies during the past 20 years. This is done by estimating fiscal reaction functions using dynamic panel techniques and country-by-country estimates. The results suggest that, on average, discretionary fiscal policy did not deliver economic stabilisation: during good economic times (positive output gaps) it has been on average pro-cyclical both in the euro area and in the other regions. However, the loosening bias during good times has been countered by the presence of efficient public institutions, higher long term interest rates and higher debt-to-GDP ratios. Overall, as a result of various counterbalancing forces, fiscal activism has not been a major feature of policy making in the euro area, nor in other advanced economies during the past 20 years.
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