Markets, Externalities, and the Dynamic Gains of Openness
Inflows of foreign knowledge are the key for developing countries to catch up with the world technology frontier. In this paper, I construct a simple tractable model to analyze (a) the incentives of foreign firms to bring their know-how to a developing country and (b) the incentives of domestic firms to invest in their own know-how, given the exposure to foreign ideas and competition. The model embeds two diffusion mechanisms typically considered separately in the literature: externalities and markets. The dynamic gains of openness can be substantial under either mechanism, but their relative ...
Of Cities and Slums
The emergence of slums is a common feature in a country's path towards urbanization, structural transformation and development. Based on salient micro and macro evidence of Brazilian labor, housing and education markets, we construct a simple model to examine the conditions for slums to emerge. We then use the model to examine whether slums are barriers or stepping stones for lower skilled households and for the development of the country as a whole. We calibrate our model to explore the dynamic interaction between skill formation, income inequality and structural transformation with the rise ...
Openness and the Optimal Taxation of Foreign Know-How
Developing countries frequently offer tax incentives and even subsidize the entry and operation of foreign firms. I examine the optimality of such policies in an economy where growth is driven by entrepreneurial know-how, a skill that is continuously updated on the basis of the productive ideas implemented in the country. Openness allows foreign ideas to disseminate inside a country and can foster the country's domestic accumulation of know- how. With externalities, however, laissez-faire openness is suboptimal and can be growth-and even welfare-reducing. I examine the gains from openness ...
Occupation Mobility, Human Capital and the Aggregate Consequences of Task-Biased Innovations
We construct a dynamic general equilibrium model with occupation mobility, human capital accumulation and endogenous assignment of workers to tasks to quantitatively assess the aggregate impact of automation and other task-biased technological innovations. We extend recent quantitative general equilibrium Roy models to a setting with dynamic occupational choices and human capital accumulation. We provide a set of conditions for the problem of workers to be written in recursive form and provide a sharp characterization for the optimal mobility of individual workers and for the aggregate supply ...
Natural Resources and Global Misallocation
Are production factors allocated efficiently across countries? To differentiate misallocation from factor intensity differences, we provide a new methodology to estimate output shares of natural resources based solely on current rent flows data. With this methodology, we construct a new dataset of estimates for the output shares of natural resources for a large panel of countries. In sharp contrast with Caselli and Feyrer (2007), we find a significant and persistent degree of misallocation of physical capital. We also find a remarkable movement toward efficiency during last 35 years, ...
Student Loans and Repayment: Theory, Evidence and Policy
Rising costs of and returns to college have led to sizeable increases in the demand for student loans in many countries. In the U.S., student loan default rates have also risen for recent cohorts as labor market uncertainty and debt levels have increased. We discuss these trends as well as recent evidence on the extent to which students are able to obtain enough credit for college and the extent to which they are able to repay their student debts after. We then discuss optimal student credit arrangements that balance three important objectives: (i) providing credit for students to access ...
In the U.S. Hispanic Labor Force, Women Surpass Men in Multiple Ways
In the U.S., female Hispanic workers surpass male counterparts in education and in high-paying jobs.
The Composition of Long-term Unemployment Is Changing toward Older Workers
The Great Recession has been officially over for more than six years, but the rate of long-term unemployment (26 weeks or longer) remains elevated. Two age groups have been hurt the most: those 25-44 and, even more so, those 55 and older.
Many Countries Sink or Swim on Commodity Prices—and on Orders from China
The ups and downs of commodity prices can have a huge impact on the economies of the producing nations (emerging, as well as developed). Increasingly, these economies are susceptible to the needs of a single buyer: China.
Shifting Times: The Evolution of the American Workplace
We explore the substantial shifts in the American labor force and workplace over almost 70 years, showing that the identity, education, race and occupations of the average American worker have all been changing. We document big changes in the types of jobs being done by American workers and on the assignment of jobs across workers with different educational levels and other characteristics. Regardless of how much more challenging labor markets become for everyone, the aggregate productivity is higher when the country takes advantage of the talent of all the demographic groups and not just a ...