Fields of Specialization
- International Trade
- Economic Geography
Sorting and Agglomeration. American Economic Review, 2018 (Lead article)
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). American Economic Review, 2019
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). Accepted at the Quarterly Journal of Economics
We study optimal spatial policies in a quantitative trade and geography framework with spillovers and spatial sorting of heterogeneous workers. We characterize the spatial transfers that must hold in efficient allocations, as well as labor subsidies that can implement them. There exists scope for welfare-enhancing spatial policies even when spillovers are common across locations. Using data on U.S. cities and existing estimates of the spillover elasticities, we find that the U.S. economy would benefit from a reallocation of workers to currently low-wage cities. The optimal allocation features a greater share of high skill workers in smaller cities relative to the observed allocation. Inefficient sorting may lead to substantial welfare costs.
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)
We explore the impact of rising incomes at the top of the distribution on changes in spatial
sorting patterns within large US cities. We develop and quantify a spatial model of a city with
heterogeneous agents, heterogeneous neighborhoods of endogenous quality, and non-homothetic
preferences for locations with different amenities. As the rich get richer, their increased demand
for luxury amenities available downtown drives housing prices up in downtown areas. The poor
are made worse off, either being displaced or paying higher rents for amenities that they do not
value as much. Endogenous provision of private amenities amplifies the mechanism, while public
provision of other amenities in part curbs it. We quantify the corresponding impact on wellbeing
inequality. Through the lens of the quantified model, the change in income distribution
between 1990 and 2014 lead to neighborhood change and spatial resorting within urban areas
that increased the welfare of richer households relative to that of poorer households by an
additional two percentage points on top of their differential income growth.
- Place-Based Redistribution (with Pat Kline and Danny Yagan). Work in Progress