Research

We document that sales of individual products decline steadily throughout most of the product life cycle. Products quickly become obsolete as they face competition from newer products sold by competing firms and the same firm. We build a dynamic model that highlights an innovation-obsolescence cycle, where firms need to introduce new products to grow; otherwise, their portfolios become obsolete as rivals introduce their own new products. By introducing new products, however, firms accelerate the decline of their own existing products, further depressing their sales. This mechanism has sizable implications for quantifying economic growth and the impact of innovation policies.

We document strong skill matching in Turkish firms’ production networks. Additionally, in the data, export demand shocks from rich countries increase firms’ skill intensity and their trade with skill-intensive domestic partners. We explain these patterns using a quantitative model with heterogeneous firms, quality choices, and endogenous networks. A counterfactual economy-wide export demand shock of 5% leads both exporters and nonexporters to upgrade quality, raising the average wage by 1.2%. This effect is nine times the effect in a scenario without interconnected quality choices. We use the model to study the conditions for the success of export promotion policies.

This paper concerns technology escaping from the United States and how much we should be concerned about it. This topic appears frequently in news articles, with the presumption that we should be very concerned. Since technology is non rival, maybe we shouldn’t be too concerned. Even after it’s escaped, we still have it. But, given security concerns, maybe we should be concerned about some of these technologies escaping. I applaud the authors for bringing rigorous analysis to this contentious issue.

What is the pathway to development in a world marked by rising economic nationalism and less international integration? This paper answers this question within a framework that emphasizes the role of demand-side constraints on national development, which is identified with sustained poverty reduction. In this framework, development is linked to the adoption of an increasing returns to scale technology by imperfectly competitive firms that need to pay the fixed setup cost of switching to that technology. Sustained poverty reduction is measured as a continuous decline in the share of the population living below $1.90/day purchasing power parity in 2011 U.S. dollars over a five-year period. This outcome is affected in a statistically significant and economically meaningful way by domestic market size, which is measured as a function of the income distribution, and international market size, which is measured as a function of legally-binding provisions to international trade agreements, including the General Agreement on Tariffs and Trade, the World Trade Organization, and 279 preferential trade agreements. Counterfactual estimates suggest that, in the absence of international integration, the average resident of a low- or lower-middle-income country does not live in a market large enough to experience sustained poverty reduction. Domestic redistribution targeted towards generating a larger middle class can partially compensate for the lack of an international market.

In panel data on Chinese establishments spanning the 2001 WTO accession, import competition is associated with increases in revenue productivity. We propose a model that interprets this (and additional evidence) as firms choosing to differentiate their products to escape import competition. In the model, the profit from endogenous differentiating is decreasing in trade costs and is an inverted U-shaped function of productivity. We estimate the model and study a counterfactual trade liberalization. In response to import competition, firms differentiate their products and increase their markups, thereby increasing revenue productivity as in the data. Since product differentiation is underprovided by the market, the endogenous differentiation increases welfare relative to a model without firms’ option to differentiate. So, the model rationalizes the positive relationship between import competition and revenue productivity in the data, and it puts forth a new source of gain from trade.

Structural transformation in most currently developing countries takes the form of a rapid rise in services but limited industrialization. In this paper, we propose a new methodology to structurally estimate productivity growth in service industries that circumvents the notorious difficulties in measuring quality improvements. In our theory, the expansion of the service sector is both a consequence – due to income effects – and a cause – due to productivity growth – of the development process. We estimate the model using Indian household data. We find that productivity growth in non-tradable consumer services such as retail, restaurants, or residential real estate, was an important driver of structural transformation and rising living standards between 1987 and 2011. However, the welfare gains were heavily skewed toward high-income urban dwellers.

We examine international regulatory agreements that are negotiated under lobbying pressures from producer groups. The way in which lobbying influences the cooperative setting of regulatory policies, as well as the welfare impacts of international agreements, depend crucially on whether the interests of producers in different countries are aligned or in conflict. The former situation tends to occur for product standards, while the latter tends to occur for process standards. We find that, if producer lobbies are strong enough, agreements on product standards lead to excessive deregulation and decrease welfare, while agreements on process standards tighten regulations and enhance welfare.

This paper studies the welfare effects of encouraging rural–urban migration in the developing world. To do so, we build and analyze a dynamic general-equilibrium model of migration that features a rich set of migration motives. We estimate the model to replicate the results of a field experiment that subsidized seasonal migration in rural Bangladesh, leading to significant increases in migration and consumption. We show that the welfare gains from migration subsidies come from providing better insurance for vulnerable rural households rather than from correcting spatial misallocation by relaxing credit constraints for those with high productivity in urban areas that are stuck in rural areas.

We track the effects of the COVID-19 pandemic on mental health in eight Low and Middle Income Countries (LMICs) in Asia, Africa, and South America utilizing repeated surveys of 21,162 individuals. Many respondents were interviewed over multiple rounds pre- and post-pandemic, allowing us to control for time trends and within-year seasonal variation in mental health. We demonstrate how mental health fluctuates with agricultural crop cycles, deteriorating during pre-harvest “lean” periods. Ignoring this seasonal variation leads to unreliable inferences about the effects of the pandemic. Controlling for seasonality, we document a large, significant, negative impact of the pandemic on mental health, especially during the early months of lockdown. In a random effects aggregation across samples, depression symptoms increased by around 0.3 standard deviations in the four months following the onset of the pandemic. The pandemic could leave a lasting legacy of depression. Absent policy interventions, this could have adverse long-term consequences, particularly in settings with limited mental health support services, which is characteristic of many LMICs.

What do recent advances in economic geography teach us about the spatial distribution of economic activity? We show that the equilibrium distribution of economic activity can be determined simply by the intersection of labor supply and demand curves. We discuss how to estimate these curves and highlight the importance of global geography—the connections between locations through the trading network—in determining how various policy relevant changes to geography shape the spatial economy.

We apply deep learning to daytime satellite imagery to predict changes in income and population at high spatial resolution in US data. For grid cells with lateral dimensions of 1.2 km and 2.4 km (where the average US county has dimension of 51.9 km), our model predictions achieve R2 values of 0.85 to 0.91 in levels, which far exceed the accuracy of existing models, and 0.32 to 0.46 in decadal changes, which have no counterpart in the literature and are 3–4 times larger than for commonly used nighttime lights. Our network has wide application for analyzing localized shocks.

A Universal Basic Income (UBI) is often seen as an attractive policy option to replace existing targeted transfer and subsidy programs. However, in a budget-neutral switch to a UBI there is a trade-off between the generosity of the universal transfer, and hence its poverty impact, and the implied increase in tax burden. We summarize our results for fourteen low- and middle-income countries. We find that, with the exception of Russia, a poverty reducing, budget-neutral UBI would entail a significant increase in the net tax burden of top deciles. The efficiency cost and political resistance for such a policy would likely be too high.

We examine the employment effects of 3G mobile internet expansion in developing countries. We find that 3G significantly increases the labor force participation rate of women and the employment rates of both men and women. Our results suggest that 3G affects the type of jobs and there is a distinct gender dimension to these effects. Men transition away from unpaid agricultural work into operating small agricultural enterprises, while women take more unpaid jobs, especially in agriculture, and operate more small businesses in all sectors. Both men and women are more likely to work in wage jobs in the service sector.