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Job Market Paper

“Does Skill Abundance Still Matter? The Evolution of Comparative Advantage in the 21st Century” [Download PDF]

Abstract

This paper documents that skill-abundant countries no longer have a comparative advantage in skill-intensive sectors. While this empirical relationship was strong, it weakened in the 1990s and disappeared by the 2000s. The decline is only evident in countries and sectors with high automation, with no significant variation due to offshoring. Using a quantitative trade model incorporating both automation and offshoring, I confirm that observed changes in automation can account for the evolution of comparative advantage while observed changes in offshoring cannot. Through the lens of the same model, I draw implications for the relationship between technology and inequality: automation increases skill premia in high-automation, developed countries and increases welfare globally, while offshoring has smaller, more evenly distributed welfare gains.

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Working Papers

“The Granular Origins of Agglomeration” [Download PDF]
with Daniel G O’Connor

Abstract

A few large firms dominate many local labor markets. How does that granularity affect the geography of economic activity? And what does it mean for the efficiency of firm entry? To answer these questions, we propose a new economic geography model featuring granular firms subject to idiosyncratic shocks. We show that average wages increase in the size of the local labor market due to that granularity, and provide a sufficient statistic for the contribution of our mechanism. We further prove that too few firms enter in equilibrium. Using Japanese administrative data on manufacturing, we provide evidence consistent with our mechanism and quantify it. Our mechanism implies that markets with around 2 firms per sector have an elasticity of wages to population of 0.05 and firms capture only 85\% of their contribution to production in profits. In large markets like Tokyo, the elasticity is around 0.001, and firm entry is approximately efficient. Enacting optimal place-based industrial policy would increase the number of firms in modest-sized cities by more than 30\% and actually decrease the number of firms and people in Tokyo.

“Decomposing the Rise of the Populist Radical Right” [Download PDF]
with Oren Danieli, Noam Gidron, and Ro’ee Levy
VOXEU
Reject and Resubmit at Journal of Political Economy

Abstract

Support for populist radical right parties in Europe has dramatically increased in recent years. We decompose the rise of these parties from 2005 to 2020 into four components: shifts in party positions, changes in voter attributes (opinions and demographics), changes in voter priorities, and a residual. We merge two wide datasets on party positions and voter attributes and estimate voter priorities using a probabilistic voting model. We find that shifts in party positions and changes in voter attributes do not play a major role in the recent success of populist radical right parties. Instead, the primary driver behind their electoral success lies in voters’ changing priorities. Particularly, voters are less likely to decide which party to support based on parties’ economic positions. Rather, voters—mainly older, non-unionized, low-educated men—increasingly prioritize nativist cultural positions. This allows populist radical right parties to tap into a preexisting reservoir of culturally conservative voters. Using the same datasets, we provide a set of reduced-form evidence supporting our results. First, while parties’ positions have changed, these changes are not consistent with the main supply-side hypothesis for populist support. Second, on aggregate, voters have not adopted populist right-wing opinions. Third, voters are more likely to self-identify ideologically based on their cultural rather than their economic opinions.

“Welfare Effects of Polarization: Occupational Mobility over the Life-cycle” [Download PDF]
with Sagiri Kitao

Abstract

What are the welfare effects of polarization: wage and employment losses of middle-class workers relative to low- and high-skill groups? We build a model of overlapping generations who choose consumption, savings, labor supply, and occupations over their life-cycles, and accumulate human capital. We simulate a wage shift observed since the early 1980s and investigate individuals’ responses. Polarization improves welfare of young individuals that are high-skilled, while it hurts low-skilled individuals across all ages and especially younger ones. The gain of the high-skilled is larger for generations entering in later periods, who can fully exploit the rising skill premium.

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Selected Work in Progress

“Geography of Business Interactions: Evidence from Business Card Exchange Data”
with Shota Komatsu, Juan Martínez, Kentaro Nakajima, Takanori Nishida, Kensuke Teshima, and Junichi Yamasaki

Abstract

In-person business meetings are a critical driver of agglomeration benefits, yet the scarcity of data has hindered exploration into their nature. This study leverages a novel dataset obtained from a business card exchange application, used by 0.4 million workers in Tokyo, to examine the impact of geographical distance on business card exchanges and other types of business networks. By analyzing the moving of firms, we find a distinct pattern in how the frequency of business card exchanges decreases with distance, particularly noting a significant drop beyond a 500-meter radius. Additionally, we observe that the rate of decline in these exchanges due to distance closely correlates with the level of industry agglomeration, and we find similar drops in other types of business networks such as patent collaborations. These findings highlight the pivotal role of very local interaction in fostering agglomeration benefits.

“Optimal Industry Mix with Granular Shocks”
with Daniel G O’Connor

Abstract

When firms are subject to granular and industry-wide shocks, regions overspecialize, leaving workers overexposed. Using German employer-employee matched data, we study the optimal industrial policy incorporating heterogeneity in occupation, industry, and region.

“Trade, Deindustrialization, and Service-led Growth”
with Tishara Garg and Edward Wiles

Abstract

We examine the impact of trade liberalization on structural change patterns in India. Leveraging district-level variations in sectoral composition, we find that districts with greater tariff reductions experienced larger declines in manufacturing employment shares. By extending Matsuyama’s 1992 model of deindustrialization to include a non-tradable service sector, we demonstrate analytically and through simulations that India's observed deindustrialization and service-led growth can be qualitatively attributed to trade liberalization. We aim to structurally estimate the model parameters to quantify the role of trade liberalization in driving these structural changes.

“Long-run Implications of Labor Market Power in the United States”
(approved US Census Project)

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Policy Papers

“Automation and the Disappearance of Routine Work in Japan” [Download PDF]
with Ippei Fujiwara and Toyoichiro Shirota
Discussion Paper 23-E-082, Research Institute of Economy, Trade and Industry (RIETI)
Accepted at Journal of the Japanese and International Economies

Abstract

We examine the implications of automation technology in Japan since 1980, comparing different local labor markets with different degrees of automation exposure. First, we do not find that automation reduces the employment rate within demographic groups and that automation encourages workers to move from regular to non-regular employment. Second, we show that automation shifts employment from routine occupations in the manufacturing sector to service sectors, while increasing the share of establishments and sales in the manufacturing sector. Finally, we show that this shift in labor demand is attributed to younger generations and non-college-educated workers.

“Who Suffers from the COVID-19 Shocks? Labor Market Heterogeneity and Welfare Consequences in Japan” [Download PDF]
with Sagiri Kitao and Minamo Mikoshiba
Journal of the Japanese and International Economies, Volume 59, March 2021

Abstract

Effects of the COVID-19 shocks in the Japanese labor market vary across workers of different age groups, genders, employment types, education levels, occupations, and industries. We document heterogeneous changes in employment and earnings in response to the COVID-19 shocks, observed in various data sources during the initial months after the onset of the pandemic in Japan. We then feed these shocks into a life-cycle model of heterogeneous agents to quantify welfare consequences of the COVID-19 shocks. In each dimension of the heterogeneity, the shocks are amplified for those who earned less prior to the crisis. Contingent workers are hit harder than regular workers, younger workers than older workers, females than males, and workers engaged in social and non-flexible jobs than those in ordinary and flexible jobs. The most severely hurt by the COVID-19 shocks has been a group of female, contingent, low-skilled workers, engaged in social and non-flexible jobs and without a spouse of a different group.

“Heterogeneous Vulnerability to the COVID-19 Crisis and Implications for Inequality in Japan” [Download PDF]
with Sagiri Kitao and Minamo Mikoshiba
Discussion Paper 20-E-039, Research Institute of Economy, Trade and Industry (RIETI).
VOXEU

Abstract

We study how the COVID-19 crisis could affect earnings inequality across heterogeneous individuals in Japan. We use the Employment Status Survey (ESS) to identify groups of individuals who are more vulnerable to the COVID-19 shocks, which likely affect workers in different industries, occupations, and employment types in different magnitude. We assess the impact using various data and early evidence including expenditures data from the JCB Consumption NOW during the first weeks of the pandemic. Our study identifies significant heterogeneity in vulnerability to the COVID-19 shocks across workers of different types. We find that the crisis will hit low-income groups by more and is likely to significantly exacerbate inequality through multiple channels, calling for urgent and large-scale assistance targeted towards affected individuals.