Excited to share a new working paper that's been years in the making:

"International Trade and Earnings Inequality: A New Factor Content Approach" with Rodrigo Adão, Paul Carrillo, Arnaud Costinot and Dave Donaldson.

Ungated version here: econ.uzh.ch/dam/jcr:839bc5… ImageImage
This work builds on a previous and ongoing collaboration with the Ecuadorian tax authority, which made it possible to use very detailed anonymized administrative tax data to study in deeper ways how trade affects income inequality.

We combine firm-to-firm transaction data from the value added tax (VAT), firm-employee matched data from social security taxes, owner-firm matched data from firm registries, and firm-level import and export transaction records from customs.

This allows us to analyze how trade shocks flow
- from importing and exporting firms to other firms, as the VAT data allows tracing out the entire network of firms in the country
- from firms to employees through employment and salary payment
- from firms to firm owners

Together with theory, this information allows us to measure the export and import exposures of *individuals*—be they workers or capital owners— across the income distribution and, in turn, to infer the overall incidence of trade on earnings inequality.

The results show that international trade substantially raises inequality in Ecuador, especially in the upper half of its income distribution. In the absence of trade, top-income individuals would be relatively poorer. However, the empirical analysis also implies that...

...the drop in inequality that took place in Ecuador over the last decade would have been less pronounced if its economy had been subject to the same domestic shocks, but unable to trade with the rest of the world.

We are able to analyze the import and export channel separately. Export exposure in Ecuador is broadly pro middle-class, while import exposure tends to be pro-rich because Ecuadorian firms employing high-skill labor also import more intermediate goods.

To deal with potential endogeneity in the estimation of trade and the demand parameters, we construct shift-share instrumental variables that are driven by foreign shocks.

Results show that trade generates about 11% higher gains for those at the 90th percentile than those at the median

But openness also increased the fall in inequality caused by domestic shocks. Without trade, the 90-10 ratio of earnings would have decreased by 17% instead of 32%.

/end ImageImageImageImage

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More from @DinaPomeranz

3 Nov 20
Income inequality over time in the US vs. Switzerland.

In the US, income inequality is much higher and has grown hugely over recent years:
Wealth inequality, on the other hand, has increased a lot both in the US and in Switzerland, and is similarly high in both countries.

Wealth inequality is as usual much higher than income inequality.
How many billionaires in the US became billionaires themselves vs. inherited the wealth?
Read 14 tweets
15 Oct 20
Zusammenfassung meiner Präsentation in der Kommissionen für Wirtschaft und Abgaben (WAK) des Schweizer Parlaments zum Thema "Wirtschaftliche Folgen von Covid-19":

1) Für den Schutz der Wirtschaft ist die Eindämmung der Pandemie zentral.

Es ist nicht Covid-Prävention oder Schutz der Wirtschaft - sondern Covid Prävention für den Schutz der Wirtschaft.

Das schlimmste für die Wirtschaft ist die lähmende Wirkung einer starken Epidemie.
Bei der Wahl spezifischer Massnahmen kann es jedoch Trade-Offs geben.

- Möglichst grosse epidemiologische Wirkung
- Möglichst kleiner wirtschaftlicher Schaden

Massnahmen mit viel Wirkung, die kaum schaden: breites Testen, Contact Tracing, Covid App, Masken, Homeoffice
Read 12 tweets
17 Mar 20
Today I added a few slides about Covid-19 to the beginning of the "Global Policy Analysis" class, before delving into the regular material. Students expressed appreciation that we took time to do that. @adinarom encouraged me to share it here in case it's useful for others.

We first took an anonymous vote, so that I could get a sense of where students were at regarding the topic:

It turned out the majority response was 2), with the smallest response going to 1).

We then started by looking at recent numbers of confirmed cases & how they have evolved in a steep increasing slope in most countries.

Looking at absolute numbers, Switzerland doesn't look so high. But we are a small country. In per capita terms, we are actually the 2nd highest:
Read 26 tweets
28 Feb 20
Keynote by @rodrikdani
Great to see that trade and development is becoming a "thing" again in academic econ. It used to be a big topic, then for a while trade econs and development econs lost some interest in each others' work. Great to see them coming together again more, e.g. at this conference.
For Asian "growth miracle" countries, industrialization-led structural change was a key mechanism. But such rapid and sustained industrialization may not be available anymore in today's environment.
Read 16 tweets
31 Dec 19
For the New Year, I'll share a few trends of the past decade.

Since for many longer-term trends, data is not yet available until 2019, I will post the last available 10 years.

Happy New Year!
The share of people in the world who live in extreme poverty (i.e. with less than 1.90 Dollars per day, adjusted for prices), fell by more than half, from 22% to 10%, between 2005-2015:

The share of people living in extreme poverty fell on all continents.

In East Asia from 19% to 2%, in Sub-Saharan Africa from 51% to 41%:
Read 20 tweets
15 Dec 19
Looking forward to day 1 of the 4th Zurich Conference on Public Finance in Developing Countries tomorrow!

Excited to have a wonderful line-up of presentations again & I particularly look forward to @OdhiamboFrank_O's talk on "Do's & Don'ts for Field Work" & to @adnanqk's Keynote
And we're off to a good start!
Presentation by IPA Kenya research manager @OdhiamboFrank_O with advice for researchers who work with research assistants remotely for research in countries other than where they live:

Read 19 tweets

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