Skill Supply, Firm Size, and Economic Development
Paper
Submitted
Abstract
Large firms are more productive than small firms, yet in low-income countries they employ only a small share of workers. Using newly harmonized microdata that link workers’ education and wages to the size of their employer for 57 countries, we document four facts: Countries with lower skill endowments have 1) less employment in large firms and 2) a greater skill premium, and 3) large firms are more skill-intensive than small firms across countries, 4) with a gap that is larger in low-income countries. A model in which heterogeneous firms choose between a skill-intensive modern technology and a traditional one matches these patterns. In a quantitative analysis of the model, skill endowments account for 88% of the cross-country variation in large-firm employment, and technology choice adds a third to a country’s output gain from a larger skill endowment. Small firms in low-income countries are thus largely an efficient response to skill scarcity, and adjustments in the size structure of firms are an important vector of output gains from increasing skill supply.
Climate Change, Income Inequality, and Migration in a Spatial Economy
Paper
Solo-authored.
Abstract
Negative local labor market shocks create strong incentives to migrate,
yet low-income households often remain in place. This paper studies how
income shapes migration responses to climate change and the resulting welfare
effects. Using Brazilian Census data, I show that high-income individuals
are systematically more mobile than low-income individuals from the same
origin. To interpret this pattern and quantify the impacts of climate change,
I develop a dynamic spatial general equilibrium model with monetary migration
costs and liquidity constraints, embedded in a two-sector trade framework in
which rising temperatures depress agricultural productivity. The quantitative
results imply sharply regressive welfare losses: in already hot regions,
low-income households experience permanent consumption declines of about
0.6–0.9% per period, with worst-case losses near 3.3%, while richer households
are largely insulated. Two mechanisms drive these disparities: climate shocks
reduce agricultural wages in hot areas, and monetary migration costs
disproportionately burden low-income individuals, limiting their ability to
relocate in response. A counterfactual policy that makes low-income individuals
as mobile as high-income individuals—modeled as a targeted subsidy—raises
low-income individuals’ welfare by 24%, offsets 4% of climate losses, and
increases aggregate output by relocating labor to more productive regions.
Adaptation to climate change depends not only on where productivity shocks
occur but also on who can afford to relocate. Consequently, adverse shocks
tend to fall disproportionately on those unable to afford relocation.