I am a Postdoctoral Research Associate at the Department of Economics of Princeton University. Starting in 2021, I will become an Assistant Professor at the Department of Management of the London School of Economics.
My main fields of research are International Trade and Labor Economics. I am also interested in Development Economics and Economic Geography.
Email: jpvc at princeton dot edu, Curriculum Vitae
The Effects of Multinationals on Workers: Evidence from Costa Rica with Alonso Alfaro-Ureña and Isabela Manelici.
- This paper estimates the effects of foreign multinational corporations (MNCs) on workers. To that end, we combine microdata on all worker-firm and firm-firm relationships in Costa Rica with an instrumental variable strategy that exploits shocks to the size of MNCs in the country. First, using a within-worker event-study design, we find a direct MNC wage premium of nine percent. This premium reflects above market wages rather than compensation for disamenities. Next, we study the indirect effects of MNCs on workers in domestic firms. As MNCs bring jobs that pay a premium, they can improve the outside options of workers by altering both the level and composition of labor demand. MNCs can also enhance the performance of domestic employers through firm-level input-output linkages. Shocks to firm performance may then pass through to wages. We show that the growth rate of annual earnings of a worker experiencing a one standard deviation increase in either her labor market or firm-level exposure to MNCs is one percentage point higher than that of an identical worker with no change in either MNC exposure. Finally, we develop a model to rationalize the reduced-form evidence and estimate structural parameters that govern wage setting in domestic firms. We model MNCs as paying a wage premium and buying inputs from domestic firms. To hire new workers, domestic firms need to incur recruitment and training costs. Model-based estimates reveal that workers in domestic firms are sensitive to improvements in outside options. Moreover, the marginal recruitment and training cost of the average domestic firm is estimated at 90% of the annual earnings of a worker earning the competitive market wage. This high cost allows incumbent workers to extract part of the increase in firm rents coming from intensified linkages with MNCs.
The Effects of Joining Multinational Supply Chains: New Evidence from Firm-to-Firm Linkages with Alonso Alfaro-Ureña and Isabela Manelici. R&R at the Quarterly Journal of Economics. [online appendix]
- This paper investigates the effects of becoming a supplier to multinational corporations (MNCs) using administrative data tracking all firm-to-firm transactions in Costa Rica. Event-study estimates reveal that after starting to supply to MNCs, domestic firms experience strong and persistent improvements in performance, including the expansion of their workforce by 26% and gains in standard measures of total factor productivity (TFP) of 6-9% four years after. Moreover, the sales of domestic firms to buyers other than the first MNC buyer grow by 20%, both through a larger number of buyers and larger sales per buyer. We propose a simple model by which TFP and reputation affect the number of buyers, but TFP alone affects sales conditional on buying. We find a model-based increase in TFP of 3% four years after. Finally, we collect survey data from managers in both domestic firms and MNCs for further insights on mechanisms. Our surveys suggest that becoming suppliers to MNCs is transformative for domestic firms, with changes ranging from new managerial practices to better reputation.
New-Keynesian Trade: Understanding the Employment and Welfare Effects of Sector-Level Shocks with Andrés Rodríguez-Clare and Mauricio Ulate. (New draft coming soon)
- There is a growing empirical consensus suggesting that sector-specific productivity increases in a foreign country or trade liberalizations can have important unemployment and nonemployment effects across the different regions of an economy. Such employment changes cannot be explained by the workhorse quantitative trade model since it assumes full employment and a perfectly inelastic labor supply curve. In this paper we show how adding downward nominal wage rigidity and home employment allows the quantitative trade model to generate changes in unemployment and nonemployment that match those uncovered by the empirical literature studying the "China Shock." We also compare the associated welfare effects predicted by this model with those in the model without unemployment. We find that the China Shock leads to welfare increases in most states of the U.S., including many that experience unemployment during the transition. On average across U.S. states, nominal rigidities reduce the gains from the China Shock from 31 to 17 basis points.
Selected work in progress
(Mis)matching to Good Suppliers: Evidence from Transactions Microdata with Alonso Alfaro-Ureña and Paolo Zacchia.
Costa Rican Production Network: Stylized Facts with Alonso Alfaro-Ureña, Mariany Fuentes, and Isabela Manelici. Research Paper of the Central Bank of Costa Rica, Nr. 002/2018.
The Evolution of Labor Earnings and Inequality in Costa Rica: Micro-Level Evidence with Alonso Alfaro-Ureña, Isabela Manelici, and Alfredo Mendoza. Research Paper of the Central Bank of Costa Rica, 2019. (Draft avaliable soon).