Agglomeration, Trade and Selection

This paper studies how firm heterogeneity in terms of productivity affects the balance between agglomeration and dispersion forces in the presence of pecuniary externalities through a selection model of monopolistic competition with variable mark-ups. It shows that firm heterogeneity matters. However, whether it shifts the balance from agglomeration to dispersion or the other way round depends on its specific features along the two defining dimensions of diversity: 'richness' and 'evenness'. Accordingly, the role of firm heterogeneity in selection models of agglomeration cannot be fully understood without paying due attention to various moments of the underlying firm productivity distribution.agglomeration, trade, heterogeneity, selection, economic geography

Rethinking the effects of immigration on wages

This paper asks the following important question: what was the effect of surging immigration on average and individual wages of U.S.-born workers during the period 1990-2004? Building on section VI I of Borjas (2003) we emphasize the need for a general equilibrium approach to analyze this problem. The impact of immigrants on wages of US born workers can be evaluated only by accounting carefully for labor market and capital market interactions in production. Using such a general equilibrium approach we estimate that immigrants are imperfect substitutes for U.S.-born workers within the same education and experience group (because they choose different occupations and have different skills). Moreover, accounting for reasonable speed of adjustment of physical capital we show that most of the wage effects of immigration accrue to native workers already within a decade. These two facts, overlooked by the previous literature, imply a positive and significant effect of the 1990-2004 immigration on the average wage of U.S.-born workers overall, both in the short and in the long run. This positive average effect resulted from a positive effect on wages of all US-born workers with at least a high school degree and a small negative effect on wages of U.S born workers with no high school degree. --Immigration,Skill Complementarities,Average Wage,Wage Dispersion,Physical Capital Adjustment

Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring

We develop an endogenous growth model with R&D spillovers to study the long run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm’s production chain between a home upstream division and a foreign downstream one. While there is always a positive correlation between upstream bargaining weight and offshoring activities, there is an inverted U-shaped relationship between these and growth. Whether offshoring with incomplete contracts also increases consumption depends on firm heterogeneity. As for welfare, whereas with complete contracts an R&D subsidy is enough to solve the inefficiency due to R&D spillovers, with incomplete contracts a production subsidy is also needed.o¤shoring, heterogeneous �rms, incomplete contracts, industry dynamics

Immigration and National Wages: Clarifying the Theory and the Empirics

This paper estimates the effects of immigration on wages of native workers at the national U.S. level. Following Borjas (2003) we focus on national labor markets for workers of different skills and we enrich his methodology and refine previous estimates. We emphasize that a production function framework is needed to combine workers of different skills in order to evaluate the competition as well as cross-skill complementary effects of immigrants on wages. We also emphasize the importance (and estimate the value) of the elasticity of substitution between workers with at most a high school degree and those without one. Since the two groups turn out to be close substitutes, this strongly dilutes the effects of competition between immigrants and workers with no degree. We then estimate the substitutability between natives and immigrants and we find a small but significant degree of imperfect substitution which further decreases the competitive effect of immigrants. Finally, we account for the short run and long run adjustment of capital in response to immigration. Using our estimates and Census data we find that immigration (1990-2006) had small negative effects in the short run on native workers with no high school degree (-0.7%) and on average wages (-0.4%) while it had small positive effects on native workers with no high school degree (+0.3%) and on average native wages (+0.6%) in the long run. These results are perfectly in line with the estimated aggregate elasticities in the labor literature since Katz and Murphy (1992). We also find a wage effect of new immigrants on previous immigrants in the order of negative 6%.Less Educated Workers, Physical Capital Adjustment, Skill Complementarities and Wages

SMEs in Argentina: Who are the Exporters?

There exists a growing body of literature which looks at export decisions made by firms. Most studies focus on developed countries and do not explore whether different behavioral patterns prevail over the firm size distribution. This paper aims at filling this gap in the literature by analyzing the export behavior of a statistically representative sample of 192 Small and Medium-Size Enterprises (SMEs) in a developing country, Argentina, over the period 1996-1998. We find that the level of employment, sourcing from abroad, investment in product improvement and average productivity are associated with a higher probability of exporting. Training activities for employees are important to export outside of MERCOSUR.SME, Exports, Argentina

Integration, geography and the burden of history

This paper develops a simple two-region two-sector general equilibrium model of trade and migration where one monopolistically competitive sector generates local pecuniary externalities. The aim is to gain insight on the question whether economic integration can be expected to increase the differences in industrial structure between more and less developed regions. It is shown that a reduction in trade and/or migration costs weakens the lock-in effect of historical events while strengthening the role of expectations

A Geographic Approach to International Economics: “Strategic Trade Policy”?

This paper introduces a trade cost asymmetry into the Core-periphery model to investigate the location effects of protection. Trade costs arise from the active choice of governments. In the case of a country that can decide the level of barriers to imports without retaliation by the other country, unilateral protection is shown to attract firms and to increase the welfare of residents. Since all countries face a rational incentive to unilateral protection, non-cooperative behaviour may lead to an inefficient equilibrium with too much protection

The buyer margins of firms' exports

We use highly disaggregated firm-level export data from Costa Rica, Ecuador, and Uruguay over the period 2005-2008 to provide a precise characterization of firms' export margins, across products, destination countries, and crucially customers. We show that a firm's number of buyers and the distribution of sales across them systematically vary with the characteristics of its destination markets. While most firms serve only very few buyers abroad, the number of buyers and the skewness of sales across them increases with the size and the accessibility of destinations. We develop a simple model of selection with heterogeneous buyers and sellers consistent with these findings in which tougher competition induces a better alignment between consumers' ideal variants and firms' core competencies. This generates an additional channel through which tougher competition leads to higher productivity and higher welfare and hints at an additional source of gains from trade as long as freer trade fosters competition

The Labor Market Impact of Immigration in Western Germany in the 1990's

In this article we measure the effects of recent immigration on the Western German labor market looking at both wage and employment effects. Refining administrative data for the period 1987-2001 to account for ethnic German immigrants and immigrants from Eastern Germany, we find that the substantial immigration of the 1990's had very little adverse effects on native wages and on their employment levels. Instead, it had a sizable adverse employment effect as well as a small adverse wage effect on previous waves of immigrants. These asymmetric results are partly driven by a higher degree of substitution between old and new immigrants in the labor market. In a simple calculation we show that the largest aggregate effect of new immigration on natives and old immigrants comes from the increased costs of unemployment benefits to old immigrants. Those costs could be eliminated in a world of wage flexibility and no unemployment insurance in which immigration would not have any negative employment effect but only moderate wage effects.International Migration, Remittances