This paper analyzes the contribution of import competition to the divergence among US metropolitan areas over recent decades. I document that the sharp rise of imports of Chinese manufacturing goods had a significant effect on the spatial skill polarization and the divergence of wages and skill premium among American cities. The effects of the China shock on skill sorting and returns to skills were systematically different depending on the skill intensity of local services. Among highly educated cities, a higher exposure to import competition increases the college-educated workforce and the wages for skilled workers. The negative effects of the China shock concentrated in exposed regions with a low density of college-educated workers. The heterogeneous effects of import competition explain one third and one fourth of the variation of the spatial skill polarization and the divergence of skill premium, respectively. I show that the contribution of the trade shock operates through the reallocation of workers across sectors and cities. Using a novel measure of ‘labor market’ exposure to the China shock, I document that service industries expand when their local manufacturing sector faces import competition. High human capital regions exposed to the China shock undergo a faster transition from manufacturing to skill-intensive service industries.

 Revisiting Productivity Dynamics in Europe: A New Measure of Utilization-Adjusted TFP Growth (with D. Comin, T. Schmitz and A. Trigari)  [NBER WP 28008, CEPR 15402] [Data]

We compute new estimates for Total Factor Productivity (TFP) growth in five European countries and in the United States. Departing from standard methods, we account for positive profits and use firm surveys to proxy for unobserved changes in factor utilization. These novelties have a major impact in Europe, where our estimated TFP growth series are less volatile and less cyclical than the ones obtained with standard methods. Based on our approach, we provide annual industry-level and aggregate TFP series, as well as the first estimates of utilization-adjusted quarterly TFP growth in Europe.

World Investment Netwok Matrix  [Data]

This paper documents the construction of a novel investment network matrix at the sectoral and global level. This matrix provides information on client-supplier relationships for investment goods among 44 sectors and 67 countries. The matrix combines information on cross-country flows of investment goods obtained from the World Input Output Tables (WIOD) by the OECD as well as information collected in the Annual National Accounts on the different capital goods invested in by different sectors. Most investment goods are supplied by few investment hubs. Construction is the largest supplier of capital goods and has an eminently local character in each country. Non-construction capital goods are highly integrated globally, with EU countries importing about one third of these investment goods.

Propagation of sector-specific shocks within Spain and other countries (with M. Izquierdo, E. Moral-Benito and E. Prades) 

We explore the propagation of sector-specific shocks through the Spanish input-output network. First, we outline a theoretical framework borrowed from the networks literature that allows us to distinguish between downstream (from suppliers to customers) and upstream (from customers to suppliers) propagation depending on the nature of the shocks being considered, either supply- or demand-driven. Second, we compute industry-specific domestic multipliers and compare the propagation features of the Spanish production network with those of other countries using the National Input-Output Tables (NIOTs) for the year 2014. We provide a novel analysis of the effects of contemporaneous supply shocks affecting the same industry in different countries. We find that in that case, the effect on domestic GDP of supply shocks to some manufacturing industries increases significantly. We also find that the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) in the second half of 2018 and its propagation through input-output linkages might have had a larger aggregate impact in Germany than in Spain.

Policy work

Economic Consequences of a Trade Embargo between Russia and EU [Banco de España. Analytical Article 2/22 ]

A hypothetical interruption of energy commodity imports from Russia could significantly affect the Spanish economy. The difficulty of replacing these products in the short term would reduce the energy supply and compound the current inflationary episode, both of which would weigh on economic activity. However, since Spain is less energy dependent on Russia than other European economies, the effects on the Spanish economy would be notably smaller. Lastly, the impact would be amplified due to the shock propagating through global production chains, with a particularly marked effect on certain sectors of activity. The interruption of exports or imports of other goods would also adversely affect the European economies, although it would have a more limited impact than in the case of energy commodities.

A Production Network Model for the Spanish Economy: Application to the Impact of NGEU Funds (with A. Fernández and  E. Moral-Benito)   [Banco de España. Analytical Article 13/23 ]

This paper introduces a sectoral model for the Spanish economy that allows a better understanding of the propagation of sector-specific shocks taking into account different network interdependencies. In particular, the model features sector interactions along several dimensions in an open economy setting, either in the provision of intermediate inputs and capital goods or competing in the labour market. This framework is flexible enough to provide insights into the effect of several policy-relevant shocks, such as global value chain bottlenecks, increases in production costs in energy-intensive sectors or large public investment programmes. In order to illustrate the role of such sectoral interactions, we consider a sectorisation of Next Generation EU (NGEU) funds based on Spain’s Recovery, Transformation and Resilience Plan (RTRP) which will mobilize €69.5 bn in grants. According to our findings, the average impact over a 5-year horizon is 1.15% of GDP if we consider only the direct effect of the investment programmes and expenditure plans, but it increases to 1.75% if we take into account the increase in the productive capacity of certain sectors and its propagation through the production network. Moreover, the resulting expansion is particularly strong in sectors highly dependent on high-skilled labour, such as IT and professional services, which might lead to shortages of high-skilled workers, reducing the aggregate impact on GDP by 25%.


This article presents a price index for Spanish urban areas covering the period 2004-2020. By way of example, according to this index, the cost of living in the two largest cities (Madrid and Barcelona) in 2020 was nearly 20% higher than the average of other Spanish urban areas. Thus, while average private sector wages in Madrid and Barcelona were 45% higher than in other cities, this gap narrows to 21% when wages are adjusted to reflect purchasing power.