Fields of Specialization
- International Trade
- Economic Geography
Sorting and Agglomeration. American Economic Review (2018)
The distribution of firms in space is far from uniform. Some locations
host the most productive large firms, while others barely attract any.
In this paper, I study the sorting of heterogeneous firms across
locations and analyze policies designed to attract firms to particular
regions (place-based policies). I first propose a theory of the
distribution of heterogeneous firms in a variety of sectors across
cities. Aggregate TFP and welfare depend on the extent of agglomeration
externalities produced in cities and on how heterogeneous firms sort
across them. The distribution of city sizes and the sorting patterns of
firms are uniquely determined in equilibrium. This allows me to
structurally estimate the model, using French firm-level data. I find
that nearly half of the observed productivity advantage of large
cities is due to firm sorting. I use the estimated model to quantify
the general equilibrium effects of place-based policies. I find that
policies that decrease local congestion lead to a new spatial
equilibrium with higher aggregate TFP and welfare. In contrast,
policies that subsidize under-developed areas have negative aggregate
Tourism and Economic Development: Evidence from Mexico's Coastline (with Ben Faber). Forthcoming at the American Economic Review
Tourism is a fast-growing services sector in developing countries. This paper combines a rich collection of Mexican microdata with a quantitative spatial equilibrium model and a new empirical strategy to study the long-term economic consequences of tourism both locally and in the aggregate. We find that tourism causes large and significant local economic gains relative to less touristic regions that are in part driven by significant positive spillovers on manufacturing. In the aggregate, however, these local spillovers are largely offset by reductions in agglomeration economies among less touristic regions, so that the national gains from tourism are mainly driven by a classical market integration effect.
- Optimal Spatial Policies, Geography and Sorting (with Pablo Fajgelbaum). Revise and Resubmit at the Quarterly Journal of Economics
Abstract We study optimal spatial policies in quantitative trade and geography frameworks with spillovers and sorting of heterogeneous workers. We first characterize efficient spatial transfers and the labor subsidies that would implement them. Then, we quantify the aggregate and distributional effects of implementing these policies in the U.S. economy. Under homogeneous workers and constant-elasticity spillovers, a constant labor subsidy over space restores efficiency regardless of micro heterogeneity in fundamentals and trade costs. In that case, the quantification suggests that the observed spatial transfers in the U.S. are close to efficient. Spillovers across heterogeneous workers create an additional rationale for place-specific subsidies to attain optimal sorting. Under heterogeneous workers, the quantification suggests that optimal spatial policies may require stronger redistribution towards low-wage cities than in the data, reduce wage inequality in larger cities, weaken spatial sorting by skill, and lead to significant welfare gains. Spillovers across different types of workers are a key driving force behind these results.
Granular Comparative Advantage (with Oleg Itskhoki). Revise and Resubmit at the Jounal of Political Economy
Large firms play a pivotal role in international trade, shaping the export patterns of countries. We propose and quantify a granular multi-sector model of trade, which combines fundamental comparative advantage across sectors with granular comparative advantage embodied in outstanding individual firms. We develop an SMM-based estimation procedure, which takes full account of the general equilibrium of the model, to jointly estimate these fundamental and granular forces using French micro-data with information on firm domestic and export sales across manufacturing industries. We find that granularity accounts for about 20\% of the variation in realized export intensity across sectors, and is more pronounced in the most export-intensive sectors. In turn, idiosyncratic firm dynamics accounts for a large share of the evolution of a country's comparative advantage over time. Governments face strong incentives to target trade policy at large individual foreign exporters, and to use lenient antitrust regulation at home to substitute for beggar-thy-neighbor trade policy.
- Income Growth and the Distributional Effects of Urban Spatial Sorting (with Victor Couture, Jessie Handbury and Erik Hurst) (Work in Progress)