Research
Research
Working Papers
The Labor Market Impact of Artificial Intelligence: Local vs. Aggregate Effect [Draft] [IMF Working Paper]
Abstract: How does Artificial Intelligence (AI) affect local and aggregate labor markets? I show that US commuting zones with higher AI adoption experienced stronger declines in employment and wage. The distributional impact is similar as routine-biased technological change. However, local estimates only identify relative effects and may differ from aggregate effects. To infer the latter, I quantify a general equilibrium multi-region model with technology adoption disciplined by local estimates. Depending on AI cost savings, one firm adopting AI out of every thousand changes the employment-to-population ratio by -0.20 to 0.15 percentage points and wage by -0.8 to 1.0 percent.
Rethinking College Financing: Wealth, College Majors, and Macroeconomic Consequences [Draft]
Abstract: This paper studies the aggregate and distributional implications of college subsidies expansion by explicitly considering college major choice in general equilibrium. First, I empirically document that majors chosen by poorer students exhibit higher initial earnings, lower earnings growth, and lower earnings risk. I then build a heterogeneous agent life-cycle model calibrated to the U.S. economy. My calibration suggests that majors currently chosen by poorer students also have lower non-pecuniary values. Quantitatively, lower earnings risk drives poorer students' major choice. Expansion in college subsidies is not sufficient to induce poorer students to switch into the majors originally taken by the rich. Keeping the total subsidies spent equalized across experiments, I find that college subsidies conditional on majors currently chosen by the poor (e.g.: STEM, Health, Education) generate higher average welfare gains than unconditional or conditional subsidies on majors currently chosen by the rich.
Do Industrial Policies Increase Trade Competitiveness? (with Sandra Baquie, Florence Jaumotte, Jaden Kim, Yucheng Lu, Rafael Machado Parente, Samuel Pienknagura) [Draft] [IMF Working Paper]
Abstract: Industrial policies (IPs) are on the rise. The most common motive for pursuing IPs is to boost strategic competitiveness of the targeted products. Leveraging a novel database of industrial policies and using the local projection difference-in-differences approach, this paper examines the dynamic relationship between IPs and trade competitiveness. Our results point to a nuanced picture. On average, products targeted by IPs experience a larger increase in competitiveness than non-targeted ones. However, there is substantial heterogeneity across different types of product and policy instruments. The average effect is driven by initially competitive products. Turning to policy instruments, domestic subsidies are associated with short-term improvements in trade competitiveness, whereas export incentives are linked to medium-term improvements in competitiveness. Finally, we focus on three widely discussed value chains—solar photo-voltaic, wind turbines, and electric vehicles—and present suggestive evidence that IPs can have spillover effects on non-targeted products through value chain linkages. Our findings for these three value chains suggest that IPs targeting upstream products are associated with larger improvements in the RCA of products using these upstream products relative to IPs targeting products at the same value chain stage.
Industrial Policies and Firm Performance: A Nuanced Relationship (with Rafael Machado Parente, Samuel Pienknagura, Sandra Baquie, Florence Jaumotte, Jaden Kim) [Draft] [IMF Working Paper] [SUREF Policy Brief]
Abstract: We empirically assess the relationship between industrial policies (IPs) and firm performance, showing it varies by instrument, firm and industry characteristics, value chain position, and time horizon. Consistent with the trade literature, IPs reducing trade barriers are linked to medium-term improvements in firm performance. Subsidies discriminating against foreign interests are linked to short-term improvements in value added (VA), productivity and payroll, which fade or turn negative in the medium-term. Export incentives are linked to weaker performance in the short-term followed by medium-term gains. These relationships are stronger for young and financially constrained firms. Industry distortions also matter—IPs are linked to stronger improvements in VA, capital and payroll when distortions are high. Finally, we find cross-sectoral spillovers: protective IPs targeting upstream sectors are associated with improved outcomes in downstream firms, while those targeting downstream sectors correlate with weaker upstream performance.
Shaping Innovation: Can Industrial Policies Boost Patent Applications? (with Sandra Baquie, Florence Jaumotte, Jaden Kim, Rafael Machado Parente, Samuel Pienknagura) [Draft] [IMF Working Paper]
Abstract: This paper presents a global empirical analysis of how industrial policies (IPs) affect patent applications, with an instrumental-variable strategy that addresses selection in policy targeting by leveraging retaliatory dynamics. On average, IPs do not increase domestic patent applications over a four-year period, except when they target sectors with potential distortions or externalities, such as infant industries or low-carbon technologies. However, IPs temporarily boost foreign patent filings within the same timeframe, consistent with strategic front-loading by foreign inventors seeking to secure technology protection, and perhaps market access, in the IP-targeted sector. This link between foreign patent applications and IPs is stronger for export-oriented policies compared to domestic subsidies, for IPs targeting innovation-central sectors, and in emerging markets and developing economies.
Industrial Policy Since the Great Financial Crisis (with Simon Evenett, Adam Jakubik, Jaden Kim, Fernando Martin, Samual Pienknagura, Michele Ruta, Sandra Baquie, Rafael Machado Parente) [IMF Working Paper]
Abstract: This paper extends the New Industrial Policy Observatory (NIPO) dataset from 2009 to 2023 by employing large language model techniques to identify policy motivations. We document widespread industrial policy adoption across advanced and emerging market economies since the Great Financial Crisis, which was implemented primarily through subsidies and trade restrictions. We identify a structural break around 2020, characterized by accelerated policy activity and the emergence of “new industrial policies” motivated by supply chain resilience, national security, and geopolitical concerns, in addition to policies focused on competitiveness and climate objectives, which were already prevalent in previous years. Policies have targeted dual-use and various advanced technology sectors, as well as their upstream inputs, such as critical raw materials and minerals. We find that geopolitical risk and tit-for-tat retaliation have played a greater role in driving industrial policy after 2020, and that this support extends beyond existing sectors of comparative advantage.
The Path of Structural Transformation in a Globalized World (with Qinzhuo Gong) [Draft Available Upon Request, New Draft Soon]
Policy Work/Book Chapter
Industrial Policies and Firm Performance: A Nuanced Relationship (December 2025). SUREF Policy Brief No. 1323. The European Monetary and Policy Forum. [Link]
Note 2: Making European Reforms a Success on the Ground (October 2025). Regional Economic Outlook for Europe October 2025, International Monetary Fund. [Link]
Italy: 2025 Article IV Consultation Staff Report (July 2025). IMF Country Report No. 2025/201, International Monetary Fund. [Link] [PDF Version]
Industrial Policies: Handle with Care (2025). IMF Staff Discussion Notes No. 2025/002, International Monetary Fund. [Link] [PDF Version] [CEPR eBook Chapter]
Is the Impact of AI Different from IT? IMF Research Perspectives (May 2024), International Monetary Fund. [Link] [PDF Version]
Retail Fintech Payments: Facts, Benefits, Challenges and Policies, in Managing the Development of Digital Marketplaces in Asia (2021), Asian Development Bank. [Link] [PDF Version]