Working papers

Local Shocks and Internal Migration: The Disparate Effects of Robots and Chinese imports in the US
with Andrés Sarto (New York University) and Marco Tabellini (Harvard Business School)
Featured in Harvard Business School Working Knowledge

Migration has long been considered one of the key mechanisms through which labor markets adjust to economic shocks. In this paper, we analyze the migration response of American workers to two of the most important shocks that hit US manufacturing since the late 1990s – Chinese import competition and the introduction of industrial robots. Exploiting plausibly exogenous variation in exposure across US local labor markets over time, we show that robots caused a sizable reduction in population size, while Chinese imports did not. We rationalize these results in two steps. First, we provide evidence that negative employment spillovers outside manufacturing, caused by robots but not by Chinese imports, are an important mechanism for the different migration responses triggered by the two shocks. Next, we present a model where workers are geographically mobile and compete with either machines or foreign labor in the completion of tasks. The model highlights that two key dimensions along which the shocks differ – the cost savings they provide and the degree of complementarity between directly and indirectly exposed industries – can explain their disparate employment effects outside manufacturing and, in turn, the differential migration response.

Publications

Robots and Reshoring: Evidence from Mexican Labor Markets
Journal of International Economics, 2020, Volume 127, 103384. Data and Code
Winner of Best Paper Award at Spring Meeting of Young Economists 2019

Robots in advanced economies have the potential to reduce employment in offshoring countries by fueling reshoring. Using robots instead of humans for production may lower the relative cost of domestic production and, in turn, reduce demand for imports from offshoring countries. I analyze the impact of robots on employment in an offshoring country, using data from Mexican local labor markets between 1990 and 2015. Recent literature estimates the effect of robots on local employment by regressing the change in employment on exposure to domestic robots in local labor markets. I construct a similar measure of exposure to foreign robots, based on the initial geographic distribution of export-producing employment across industries, industry-level robot adoption in the US, and a US industry's initial reliance on Mexican imports. To purge results from endogeneity, I use robot adoption in the rest of the world and an index of offshoring as instruments for robot adoption in the US and the share of Mexican imports, respectively. Using these instruments, I show that US robots have a sizeable negative impact on employment in Mexico. This negative effect is stronger for men than for women, and strongest for low-educated machine operators in the manufacturing sector. Consistently with reshoring as a mechanism, I find that the employment effect is mirrored in similarly large reductions in Mexican exports and export-producing plants.

A Lockdown Index to Assess the Economic Impact of the Coronavirus
with Andrea Ghistletta (Basel) and Kurt Schmidheiny (Basel)
Swiss Journal of Economics and Statistics, 2020, Volume 156(11). Data and code
Featured in SRF (Swiss Radio and Television; French | Italian), handelszeitung.ch, 20minuten.ch, summary on oekonomenstimme.org

Like most countries, the Swiss government adopted drastic measures to stop the spread of the coronavirus. These measures were aimed at avoiding close physical proximity between people. The adverse economic consequences of this lockdown policy became immediately apparent, with almost two million workers, or more than every third worker in Switzerland, being put on short-time work within only six weeks after the policy's implementation. In an attempt to promptly assess the heterogeneous consequences of this lockdown policy, we computed a lockdown index. This index is based on an occupation's dependence on physical proximity to other people and corrected for certain essential sectors being exempt from this policy. We find that on average, 31% of jobs in Switzerland have been potentially restricted by the lockdown policy. This average masks considerable heterogeneity along many dimensions, with the strongest effects for the large industries hospitality, construction, as well as arts and entertainment. With respect to the regional variation, we find the strongest effects for the cantons of Obwalden, Uri, Appenzell Innerrhoden, and Valais. Moreover, low- and middle-income individuals are considerably more restricted than high-income ones. We do not find meaningful differences between men and women or urban and rural areas. Finally, we test the explanatory power of the lockdown index for short-time work and unemployment increases by canton and industry until the end of April 2020, and find that it can explain up to 58% of these short-term employment outcomes.