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The Impact of Multinationals Along the Job Ladder
Multinational affiliates are more productive than domestic firms, so how do they affect a host country through the labor market? We use data for Norway to show that the labor market is characterized by a job ladder, with multinationals on the upper rungs. We calibrate a general equilibrium job ladder model with endogenous multinational entry to the Norwegian data. In a counterfactual where multinationals face an infinite entry cost, payments to labor fall and profits of domestic firms rise, but the impact is heterogeneous. Competition for workers increases low down on the job ladder, while it ...
Working Paper
Gains from Offshoring? Evidence from U.S. Microdata
We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to confidential data on U.S. firm operations. We exploit these data to assess how offshoring affects domestic firm-level aggregate employment, output, wages and productivity. Consistent with heterogenous firm models where offshoring involves a fixed cost, we find that the average offshoring firm is larger and more productive than the average non-offshorer. After initiating offshoring, firms experience large declines in employment (46.2 per cent), output ...
Working Paper
International trade and labor reallocation: misclassification errors, mobility, and switching costs
Over the last few decades, international trade has increased at a rapid pace, altering domestic production and labor demand in different sectors of the economy. A growing literature studies the heterogeneous effects of trade shocks on workers’ employment and on welfare when reallocation decisions are costly. The estimated effects critically depend on data on workers’ reallocation patterns, which is typically plagued with coding errors. In this paper, I study the consequences of misclassification errors for estimates of the labor market effects of international trade and show that ...
Working Paper
International trade and labor reallocation: misclassification errors, mobility, and switching costs
Over the last few decades, international trade has increased at a rapid pace, altering domestic production and labor demand in different sectors of the economy. A growing literature has studied the heterogeneous effects of trade shocks on workers’ industry and occupation employment and on welfare when reallocation decisions are costly. The estimated effects critically depend on data on workers’ reallocation patterns, which is typically plagued with coding errors. In this paper, I study the consequences of misclassification errors for estimates of the labor market effects of international ...
Working Paper
The Multinational Wage Premium and Wage Dynamics
Using detailed administrative data linking French firms and workers over the years 2002-2007, we document a distinct U-shaped pattern in worker-level wages surrounding the time their employer is acquired by a foreign firm, with a dip in earnings observed in years just before domestic firms switch to MNE status. The dip in earnings is evident in both wages and in-kind payments given to workers. {{p}} To guide our empirical approach, we present a model with fair wage considerations among workers and endogenous cross-border acquisition activity among heterogeneous firms that predicts this ...
Working Paper
Heterogeneous Capital Ownership, Partial Democracy and Political Support for Immigration
This paper analyzes and compares equilibrium immigration levels of some popular political economy models in the context of unequal capital holdings. We show that immigration rises (falls) with inequality in a limited (inclusive) democracy where only a small (large) fraction of the population has voting rights. Furthermore, we highlight the similarities between a campaign-contributions model and a partial-democracy model in terms of their predictions about immigration policy. In particular, we show that extension of voting rights in a partial democracy has qualitatively similar implications on ...
Working Paper
International trade and labor reallocation: misclassification errors, mobility, and switching costs
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 Paper
Offshoring in Developing Countries: Labor Market Outcomes, Welfare, and Policy
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 Paper
On Trade Policy Preference and Offshoring Ties
This paper unpacks the role of the domestic content of imports as a novel source of policy interdependence along the global supply chain. We show how a rise in local contents embodied in imports can skew national trade policy preferences, and pull upstream and downstream countries in asymmetric ways with respect to (i) the nature of unilaterally optimal trade policy prescriptions, and (ii) the attractiveness of leveraging market access-based dispute settlement procedures. We discuss the pros and cons of deep trade integration as a remedy, involving well-enforced labor standards both upstream ...
Working Paper
Heterogeneous Agents Dynamic Spatial General Equilibrium
I develop a dynamic model of migration and labor market choice with incomplete markets and uninsurable income risk to quantify the effects of international trade on workers’ employment reallocation, earnings, and wealth. Macroeconomic conditions in different labor markets and idiosyncratic shocks shape agents’ labor market choices, consumption, earnings, and asset accumulation over time. Despite the rich heterogeneity, the model is highly tractable as the optimal consumption, labor supply, capital accumulation, and migration and reallocation decisions of individual workers across ...