Job Market Paper

Presented: SEA 2021, MEA 2020, EGSO 2020, Bank of Mexico 2020

Awards: PIV, Bank of Mexico 2020


Political alignment bring disproportional public spending but has unintended consequences in private job sector growth


Abstract

A law that created a new intergovernmental transfer caused a significant and unexpected change in local public spending in Mexico. I combine this natural experiment with a close elections discontinuity design to estimate the effect of government spending on private-formal employment. I show spending shocks appear to deter the growth of private-formal employment significantly. An increase of 10 percentage points in the growth rate of local spending leads to a decline of 9 percentage points in the growth rate of formal private jobs. This effect is not explained by public sector enlargement, increases in productivity, nor increases in corruption. Two main factors behind the decline in employment are reallocation towards informal-intensive sectors and reductions of the labor force.

Working Papers

with Kiyomi Cadena, Laura Moreno and Carlos Rodríguez

Resubmitted at Journal of Development Economics


Placed-based policies aim to spur development in distressed local economies. Local economic growth masks the fact that benefits are concentrated in non-poor residents of poor places.

Abstract

Intergovernmental transfers are an important source of local public revenues in developing countries. This paper exploits statutory variation in the formula used to assign a large earmarked transfer across local governments in Mexico to identify the effects of transfers on local investment in social infrastructure and income distribution. Results show a significant effect of transfers on the aggregate delivery of social infrastructure (electricity, sewerage, piped water) and housing quality, but no robust effects on monetary poverty. The non-effect on monetary poverty is explained by the bulk of the monetary gains of these investments being captured by non-poor residents in poor places, leading to higher local income inequality. These results reveal that even when earmarked there could be unintended unequalizing consequences of intergovernmental transfers.

with Luis Felipe Lopez, Nora Lustig and Carlos Rodriguez

Resubmitted at Review of Development Economics


The decline in wage inequality in Latin America goes beyond a decline in the education premium. It masks an undesired decline in the experience and city wage premium.

Abstract

We study the dynamics of wage inequality in Latin America in the last two decades. We find a consistent trend reversal in wage inequality in the region since the early 2000s: wage inequality fell across all countries in a way not predicted by the trends each country had experienced in the 1990s. The decline in wage inequality is explained by a disproportional expansion in the real hourly wage among low-paid workers, reducing both lower and upper tail inequality. About 40 percent of the observed reduction in wage variance was a response to the more equal wage structure, while the rest derived from a reduction in wage dispersion among workers with similar observable traits. The equalization of the wage structure in the 2000s is correlated with a reduction in the wage premium across education, experience, and place of residence groups. The reduction in the gender gap contributed, to a lesser extent, to the trend reversal.

with Tobias Pfutze and Carlos Rodriguez

Resubmitted at Empirical Economics


Urban infrastructure investments aim to benefit households who live in areas where the infrastructure takes place. After the infrastructure is built, poor residents are being displaced by households at the top of the income distribution

Abstract

The effects of urban transport policies on household welfare is a broadly understudied topic in developing countries. This paper analyzes the distributional effects of a newly established bus rapid transit (BRT) system in Barranquilla, Colombia. Using pooled cross-sectional household survey data, analyzed by block, over 2008-15 and a difference in differences approach, it shows that, in proximity to newly opened stations, poor households were replaced by households in the middle and upper-socioeconomic strata. These results suggest that the designers of such systems, despite the generally positive assessment of the systems, may have overlooked distributional consequences. Moreover, it shows that any results on outcomes that may be directly affected by the related policy will be biased due to changes in composition.

Work in progress

with Umberto Muratori and Pedro Juarros

Awards: Doctoral Grants, Washington Center of Equitable Growth


Innovation tends to be concentrated in a few large and productive cities. Government induced demand for innovation can increase innovation as long as other amenities that complement innovation are in place


Abstract

Innovation is a widely acknowledge determinant of economic growth, and it is currently is disproportionately concentrated in a few large-productive cities. Can policy spur innovation in lagged economic areas? This paper answers this question using data on innovation-related spending from the department of defense and administrative records on the universe of patents during the last three decades, 1980-2010. We find that defense spending does not increase the number of patents registered. Still, it does improve the quality of those patents. The results are more substantial in middle-sized cities, suggesting that innovation spending must be targeted to places that have other amenities that complement innovation.

The political economy of anti-corruption audits

Trade liberalization and demand for redistribution

With German Reyes and Thiago Scot

Pre-Doctoral Publications

Review of World Economics

With Andres Garcia and Ricardo Arguello


How sensitive is regional poverty measurement in LAC to the value of the poverty line?

Economía

With Andres Castañeda, Santiago Garriga, Leonardo Luchetti and Leonardo Gasparini


Inequality stagnation in Latin America in the aftermath of the global financial crisis

Review of Development Economics

With Louise Cord, Liliana Sousa, Leonardo Luchetti, Carlos Rodriguez and Oscar Barriga


Weather shocks and health at birth in Colombia

World Development

With Mabel Andalon, Joao Pedro Azevedo, Viviane Sanfelice and Carlos Rodriguez


Sectoral and poverty impacts of agricultural policy adjustments in Colombia

Agricultural Economics IAAE

With Ricardo Argüello