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Working Paper
Diversification and specialization of U.S. states
Koech, Janet; Wynne, Mark A. (2016-09-01)
This paper documents the evolution of the international relationships of individual U.S. states along three dimensions: trade, migration, and finance. We examine how specialized or diversified state economies differ in terms of the products they export and with whom they trade, the origins of the immigrants who live in the state, and the origins of the foreign banks operating in the state. We show that states that are diversified along one of these dimensions are often quite specialized along others. New York is?perhaps, not surprisingly?the most diversified state in terms of global linkages.
Globalization Institute Working Papers , Paper 284

Working Paper
The Geography of Wealth: Shocks, Mobility and Precautionary Savings
Dvorkin, Maximiliano; Greaney, Brian (2026-08-17)
The spatial distribution of wealth in the United States is very heterogeneous. We study the spatial distribution of wealth in a country and how it is shaped by regional earning characteristics and mobility frictions. For this, we develop a tractable model of consumption, savings and location choice with many regions, incomplete markets and heterogeneous agents facing persistent and transitory income shocks. Our theory extends a workhorse macroeconomic model of consumption and savings under uncertainty to an economy with multiple labor markets and costly mobility. Despite complex spatial and ...
Working Papers , Paper 2627

Working Paper
International trade and labor reallocation: misclassification errors, mobility, and switching costs
Dvorkin, Maximiliano (2023-12)
International trade has increased at a rapid pace in the last decades, altering production and labor demand in different sectors of the economy. The estimated effects of trade on employment and welfare critically depend on data about workers’ reallocation patterns, which is typically plagued with coding errors. I show that the estimated employment and welfare effects of international trade, and the estimated structural parameters of standard models are biased when the analysis uses data subject to misclassification errors. I develop an econometric framework to estimate misclassification ...
Working Papers , Paper 2021-014

Working Paper
FDI and the task content of domestic employment for U.S. multinationals
Grimm, Alexis; Kim, Mina (2016-09-01)
Using a unique dataset, we examine how the foreign direct investment activities of U.S. multinational manufacturers are related to the composition of their domestic employment. The analysis is based on a dataset in which Bureau of Economic Analysis (BEA) firm-level data on the foreign operations of U.S. multinationals are matched with Bureau of Labor Statistics (BLS) establishment-level data on occupation and wage distributions. The main implication of our findings is that foreign direct investment is generally positively correlated with domestic labor demand, with automated/routine tasks ...
Globalization Institute Working Papers , Paper 286

Working Paper
On Terms of Trade, Offshoring Ties, and the Enforcement of Trade Agreements
Basu, Arnab K.; Bandyopadhyay, Subhayu; Chau, Nancy H.; Mitra, Devashish (2023-04)
This paper unpacks the role of offshoring in the enforcement of trade agreements. In a two-country model of task offshoring, we show that by depressing demand and thus demand for embodied labor, own-tariff effects on factor content weighted terms of trade are: (i) negative in upstream countries, backfiring on upstream workers, and (ii) positive in downstream countries which render imported labor tasks even cheaper. This progression in own-tariff effects on terms of trade along the supply chain presents a novel challenge to the effectiveness of dispute settlement rules designed to nullify ...
Working Papers , Paper 2022-039

Working Paper
Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy
Atalay, Enghin; Hortacsu, Ali; Runyun, Mustafa; Syverson, Chad; Ulu, Mehmet Faith (2023-06-13)
We investigate the impact of a set of place-based subsidies introduced in Turkey in 2012. Using firm-level balance-sheet data along with data on the domestic production network, we first assess the policy’s direct and indirect impacts. We find an increase in economic activity in industry-province pairs that were the focus of the subsidy program, and positive spillovers to the suppliers and customers of subsidized firms. With the aid of a dynamic multi-region, multi-industry general equilibrium model, we then assess the program’s impacts. Based on the calibrated model, we find that, in the ...
Working Papers , Paper 23-12

Working Paper
Offshoring in Developing Countries: Labor Market Outcomes, Welfare, and Policy
Basu, Arnab K.; Bandyopadhyay, Subhayu; Chau, Nancy H.; Mitra, Devashish (2016-05-31)
Does a reduction in offshoring cost benefit workers in the world's factories in developing countries? Using a parsimonious two-country model of offshoring we find very nuanced results. These include cases where wages monotonically improve, worsen, as well as where wages exhibit an inverted U-shaped relationship with the offshoring cost. We identify qualitative conditions under which these relationships hold. Since global welfare always rises with an improvement in offshoring technology, we find that there is a role for a wage tax or a minimum wage in the developing country. We derive the ...
Working Papers , Paper 2016-11

Working Paper
New-Keynesian Trade: Understanding the Employment and Welfare Effects of Trade Shocks
Ulate, Mauricio; Vasquez, Jose P.; Rodriguez-Clare, Andres (2020-09-01)
There is a growing empirical consensus that trade shocks can have important effects on unemployment and nonemployment across local-labor markets within an economy. This paper introduces downward nominal wage rigidity to an otherwise standard quantitative trade model and shows how this framework can generate changes in unemployment and nonemployment that match those uncovered by the empirical literature studying the “China shock.” We also compare the associated welfare effects predicted by this model with those in the model without unemployment. We find that the China shock leads to ...
Working Paper Series , Paper 2020-32

Working Paper
When Trade Compresses: The Impact of Liberalization on Wage Inequality
Hernandez Martinez, Victor; Kozeniauskas, Nicholas; Merga, Roman (2026-01-12)
We study the effects of trade liberalization on the full wage distribution, exploiting Spain's 1993 entry into the European Single Market. Using employer-employee data, we identify the causal effects of trade across the entire wage distribution, using a novel shift-share instrument embedded in an unconditional quantile regression. We find that the liberalization reduced wage inequality, leading to wage compression through earnings gains at the bottom of the distribution and wage losses at the top. We trace this compression to two asymmetric channels: import competition disproportionately ...
Working Papers , Paper 26-01

Working Paper
Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock
Dvorkin, Maximiliano; Caliendo, Lorenzo; Parro, Fernando (2015-05-01)
We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. ...
Working Papers , Paper 2015-9

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