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
Those hit hardest by climate change are often too poor to move away from it.
Using Brazilian census microdata, I show that within the same origin, migration
rises steeply with income, and that when the poor got richer in the 2000s, they
left lagging places more. I build a dynamic spatial model in which moving costs
cash, not only utility, and heat lowers farm productivity. A 500 km move
costs around a year’s earnings for the median least-educated worker. Under high
emissions, climate change costs 2.56% of consumption, permanently, and the
poorest quarter in hot regions loses 25% more than the richest. Removing the
fare altogether would reduce the climate loss of the low-income workers it holds
back in the hottest regions by 11.7%. A tax-financed subsidy that pays part of
the fare for those with below-median income has three effects. For those who
move in response, it reduces the loss from climate change, by 4.7% in the
hottest regions, and it is worth 5.19% of consumption to them; and it raises
national output, by 14.8% of a year’s output cumulated to 2100, as workers
resettle in more productive regions. Migration is often cast as a way to adapt
to climate change, but it is an option only for those who can afford it; paying
part of the fare opens it to the poor and raises national output along the way.