Research

Internal Migration and Drug Violence in Mexico (with Andrés Jurado and Aurora Ramírez)

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)

BIS Working Paper, Banco de México Working Paper, Most recent version

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.

Local labor market determinants of the Phillips curve slope (with Horacio Reyes)

Banco de México Working Paper

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.

Labor Market Consequences of Homicides: Evidence from Mexico (with Matteo Ghilardi and Hugo Tuesta)

IMF Working Paper, R&R 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.

Outsourcing, Labor Regulations, and Profit-sharing: Evidence from Mexico (with Agustina Colonna)

Banco de México Working Paper, Latest Draft

Policies that encourage or mandate firms to compensate their workers through profit-sharing arrangements are common worldwide. Yet firms’ incentives to adopt profit-sharing and its effect on total worker compensation remain unclear when firms can offset profit-sharing benefits by adjusting wages. This paper studies these questions in the context of mandatory profit-sharing in Mexico. Drawing on longitudinal establishment data and employer-employee data, we show that many firms circumvented mandatory profit-sharing through outsourcing arrangements, despite having the option to reduce worker compensation by simply lowering wages. A stylized model shows that the incentives to circumvent profit-sharing arise when firms face a labor supply curve that is less elastic to profit-sharing than to wages. Exploiting a reform that enforced profit-sharing by restricting outsourcing, we show that establishments responded to an increase in profit-sharing obligations by reducing wages. However, this wage adjustment was incomplete and average total worker compensation (wages + profit-sharing) increased, with no effect on employment—again consistent with a low labor supply elasticity to profit-sharing. We further show that this reduced elasticity cannot be fully explained by risk aversion and is partly due to workers’ limited awareness and understanding of profit-sharing. These information frictions allowed firms to circumvent profitsharing without fully compensating workers through higher wages, implying that affected workers benefited from profit-sharing enforcement.

Equilibrium Particulate Exposure (with Matthew Turner and Lint Barrage)

Draft, Submitted

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.

Internet Access, Education, and Labor Outside Mexico's Cities

Draft

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.

Non-refereed

Local Labor Market Definitions for Mexico

Banco de México mini-site
Data overview and descriptives

I helped build local labor market definitions for Mexico, following the methodology used to construct U.S. commuting zones. These definitions, along with Census microdata on individuals, housing units and local labor markets covering the period from 1990 to 2020, are published by Banco de México with the aim to promote the study of Mexican local labor markets.

IZA World of Labor: Mexico

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