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.

Measuring TFP Growth: The Role of Profits, Adjustment Costs, and Capacity Utilization (with D. Comin, T. Schmitz and A. Trigari) [NBER WP 28008, CEPR 15402] [TFP Estimates]

We develop a new method for estimating industry-level and aggregate total factor productivity (TFP) growth. Our method accounts for profits and adjustment costs, and uses firm surveys to proxy for changes in factor utilization. Using it to compute TFP growth rates in the United States and in five European countries since the early 1990s, we obtain results that substantially differ from the ones obtained with standard methods (i.e., Solow growth accounting and the utilization-adjusted method of Basu, Fernald and Kimball, 2006). In every European country, our TFP series is less volatile and less cyclical than the standard ones, with striking differences during the Great Recession and Eurozone crisis. In the United States, our method indicates higher TFP growth overall and a more gradual productivity slowdown.


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.


Data

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.