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Journal of Development Economics
Journal of Development Economics
Winner of Colegio de México's Victor Urquidi Award, 2022.
We study how internal migration responds to an increase in criminal violence in the context of Mexico’s 2007 War on Drugs. To identify causal effects, we exploit the changes in homicides generated by conflict between drug-trafficking organizations. Instrumental variable regressions show that high skilled individuals are less likely to migrate to a municipality where the homicide rate increased. Conversely, we find out-migration from municipalities that experienced an increase in murders but only to other municipalities in the same commuting zone. We interpret these facts as evidence that the migration response to increases in violence is tempered by moving costs. Using a discrete-choice model over destination choices, we estimate individuals would be willing to accept a reduction in wages of 0.15% to 0.58% to decrease the local homicide rate by 1%. The welfare cost of the post-2007 spike in homicides is in the order of 10% of GDP per year.
Remote Work and High Proximity Employment in Mexico (with Alejandrina Salcedo)
Remote Work and High Proximity Employment in Mexico (with Alejandrina Salcedo)
We show that in Mexico, remote work is related to lower post-pandemic employment in high proximity consumer services, a large sector that mainly employs low-income workers. Through a triple difference event study design where we compare employment in high and low proximity sectors across municipalities with different levels of remote work, before and after the pandemic, we find that a 1 percentage point increase in employment that can be performed remotely decreases local employment in high proximity consumer services by around 0.36 percentage points. Wage and worker transition data is consistent with a lower demand of high proximity services by remote workers. We find evidence that our results are not driven by changing patterns of consumption associated to Internet access during the pandemic. Since high proximity employment tends to locate in places where the propensity to remote work occupations is larger, such as cities, our estimates imply that remote work may have slowed the employment recovery from the pandemic in certain regions. In this sense, a counterfactual where we reassign remote work potential equally across municipalities results in a more robust recovery in Mexico’s service-heavy central region, which faced the steepest, most persistent drop in service employment. Our results suggest that if remote work remains an important feature of labor markets, consumer service sectors in cities in the developing world may face challenges in the post-COVID era.
Labor Market Consequences of Homicides: Evidence from Mexico (with Matteo Ghilardi and Hugo Tuesta)
Labor Market Consequences of Homicides: Evidence from Mexico (with Matteo Ghilardi and Hugo Tuesta)
Revise and resubmit with minor revisions, Journal of Development Economics short papers
Revise and resubmit with minor revisions, Journal of Development Economics short papers
This paper explores how fluctuations in crime rates influence labor market outcomes in Mexico. Using detailed survey data and an individual-fixed effect estimation, the analysis reveals distinct gender dynamics in response to rising homicide rates. Men are more likely to exit the labor market due to reduced demand for their labor, while women increasingly join the workforce, mainly in the informal sector, to offset this decline. This outcome is largely driven by the presence of drug trafficking organizations, which primarily employ men in their operations. Escalating violence also increases labor mobility, leading to higher job separations, particularly among women seeking safer employment. Our results highlight that while increasing crime in the form of homicides may not induce large changes in the aggregate level of employment, there is evidence of labor reallocation across and within sectors. This suggests an increase in labor market misallocation.
Local labor market determinants of the Phillips curve slope
Local labor market determinants of the Phillips curve slope
We estimate the slope of the Phillips curve in Mexico between 2005 and 2020 using city level data. Following Hazell et al. (2022), we overcome the endogeneity of unemployment and core inflation through a panel instrumental variable strategy. Time-period fixed effects account for aggregate supply, demand, and expectation variables, while possible endogeneity between unemployment and core inflation at the city-month level is addressed with local labor demand shock instruments. We find a statistically significant Phillips curve linking local unemployment to local core inflation in Mexico, but this relationship is relatively weak: an increase of 1 percentage point in city-level unemployment lowers core year-on-year inflation by approximately 0.18 percentage points. We analyze city-level characteristics that relate to steeper Phillips curves, and find that informality rates, cash transfers, and some demographic characteristics in cities strengthen the relationship between unemployment and inflation.
Internet Access, Education, and Labor Outside Mexico's Cities
Internet Access, Education, and Labor Outside Mexico's Cities
We estimate the effect of an increase in home Internet access on education and labor outcomes in Mexico at the locality level between 2010 and 2020. Using variation in access due to the conversion of existing government-owned fiber optic lines towards commercial use, we find that a 10 percentage point increase in the fraction of households that have Internet access increases school attendance among 18 to 24 year olds by 2 percentage points, with the strongest effects concentrated in women and in rural areas. Consistent with increased attendance among relatively older students, we find a decrease in labor force participation and an increase in educational attainment in pos-basic levels (corresponding to high school or more). Our estimation strategy compares localities within the same municipality, which prevents the study of effects in larger cities, but allows us to control for unobserved municipality level trends. Since we estimate effects by comparing nearby locations where infrastructure is changing at different rates, migration is an important threat to identification. We find that working age population and school age population for the age ranges that we study do not respond meaningfully to more local Internet access, providing support to the empirical strategy.
This paper studies the use of domestic outsourcing to circumvent labor regulations and its consequences for firms and workers. Drawing on longitudinal plant data and employer-employee data from Mexico, we first provide novel evidence on a phenomenon wherein many firms were outsourcing their entire workforce. These entities operated as empty establishments, with positive production and costs but no legally hired workers. We provide evidence that a central motive for this practice was to avoid mandatory profit-sharing with employees. We then leverage a reform that significantly restricted the use of outsourcing to understand the implications for both firms and workers when this practice is constrained. Using difference in differences design, we find that the reform caused firms to insource their workers and newly incur profit-sharing payments. We find no effect on total employment (composed of outsourced workers + in-house workers). Moreover, we find that treated firms offset the increase in profit sharing by a small decrease in wage growth relative to the control group. This decrease did not fully compensate for increases in profit sharing and total worker compensation for treated workers, i.e. wages + profit sharing, increased by approximately 2%. We provide a theoretical model to show that our results are consistent with a labor market where (i) firms offer workers a compensation bundle of wages and profit sharing (ii) outsourcing all workers allows firms to avoid mandatory profit sharing (iii) workers respond more to differences in wages than to differences in profit sharing when deciding where to work.
Equilibrium Particulate Exposure (with Matthew Turner and Lint Barrage)
Equilibrium Particulate Exposure (with Matthew Turner and Lint Barrage)
We assemble global spatially disaggregated panel data describing ambient particulate levels and transport, population, and economic and polluting activities. These data indicate the importance of country level determinants of pollution, of the equilibrium process that separates or brings together people and particulates, of urbanization, of coal and organic fuel consumption. We then develop an Integrated Assessment Model describing particulate emissions, economic activity and particulate dispersion. Model results indicate the importance of general equilibrium adjustments to particulates policy. For example, restrictions on agricultural burning can increase equilibrium pollution exposure by shifting labor to more polluting industries and locations. Our model also allows us to evaluate the effect of particulates policies in about 60 countries.
Other Ongoing Projects
Other Ongoing Projects
Labor market power among formal firms in the presence of informality (with Horacio Reyes)
Sectoral and geographical adjusment costs of Mexican workers, by gender (with Horacio Reyes)
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