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International economic competition has led to the increasing adoption of labor-replacing technology. What are the consequences of this development for the political influence of organized labor? I posit that robots make (skilled) workers more productive, increasing the opportunity cost of rent-seeking behavior via union activities. Consequently, the political influence of organized labor falls in response to robot adoption because unionization declines. I provide evidence for my claims using data from the U.S. (2004-2014) and a shift-share that leverages quasi-exogenous variation in international competition in the exposure to robots, at the congressional district level. An increase in one robot per a thousand workers reduces the likelihood that congresspeople vote with unions’ interests by two percentage points. This effect is larger in areas with higher portions of skilled workers, lending support to the hypothesized opportunity-cost mechanism. Reductions in unionization, union activities and in campaign contributions in response to the exposure to robots explain this finding. Using demediation analysis I demonstrate that my findings are driven by lower unionization rates and not by the competing effect of robots on unemployment.
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Elite cues, identity and protectionism. Mimeo, New York University. 2022. (Job market paper.)International economic competition has led to the increasing adoption of labor-replacing technology. What are the consequences of this development for the political influence of organized labor? I posit that robots make (skilled) workers more productive, increasing the opportunity cost of rent-seeking behavior via union activities. Consequently, the political influence of organized labor falls in response to robot adoption because unionization declines. I provide evidence for my claims using data from the U.S. (2004-2014) and a shift-share that leverages quasi-exogenous variation in international competition in the exposure to robots, at the congressional district level. An increase in one robot per a thousand workers reduces the likelihood that congresspeople vote with unions’ interests by two percentage points. This effect is larger in areas with higher portions of skilled workers, lending support to the hypothesized opportunity-cost mechanism. Reductions in unionization, union activities and in campaign contributions in response to the exposure to robots explain this finding. Using demediation analysis I demonstrate that my findings are driven especially by lower unionization rates and not by the potentially competing effect of robots on unemployment.
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Tariff revenues matter for democratization: Theory and evidence from the First Wave of Globalization. Mimeo, New York University. 2022.Do tariff revenues affect democratization? We argue that tariff revenues have two effects: i) A rapacity effect because the fiscal windfalls generate incentives to control government, and ii) A redistributive effect because tariffs impact the returns to the factors of production, changing the distribution of power between politically-relevant groups. If ruling elites benefit from redistribution, this discourages a challenge to their rule. If elites lose from redistribution, they may share power to avoid expropriation. We test these claims during the First Wave of Globalization, when ruling elites were often landed. We find causal evidence that tariff revenues reduce democratization in land-abundant economies because ruling elites strengthen via the redistributive effect, as the return to land increases, and the windfalls bolster the rapacity effect. In capital-abundant economies the return to land falls, thus the redistributive effect offsets the rapacity effect. Congruently, we find a positive but statistically-insignificant effect for tariff revenues.
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Climate change and political (in)stability. Mimeo, New York University. 2022.As climate change accelerates, a looming question is what effects warming will have on the stability and organization of political systems. We argue that extreme weather associated with climate change can reshape societal relations by altering citizen perceptions of their political environment. We develop a theory of climate change and political mobilization which emphasizes the mediating role of citizens’ beliefs about their leaders, the state, and one another. We provide causal evidence for our claims using panel data at the household level for India (2005-2012). We find an increase in temperature of 3◦ Celsius reduces trust in political leaders and domestic security forces by around 2 percentage points (PP) while increasing cooperation by 3PP. We document further causal evidence for the underlying mechanisms by examining the impacts of climate on agricultural incomes, rates of violent and non-violent crime, and intra-community conflict. Finally we show that climate shocks impact real world political mobilization: temperature extremes lead to higher voter turnout and lower probability of incumbent re-election in state legislatures.
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Does economic interdependence lead to state consolidation? Mimeo, New York University. 2021.Countries deal with both ungoverned spaces and secessionism, failing to govern their territory. Can economic interdependence address these problems? I develop a theory where unity within states exhibits a U-shape as a function of interdependence within country. High levels of interdependence promote unity because they generate efficiency costs that tie the hands of the governments towards improving the spatial distribution of resources, increasing the opportunity cost of a dislocation. For low levels of interdependence, unity is achieved through the threat of coercion. At intermediate levels, neither redistribution nor coercion are sufficient for deterrence, thus the probability for secessionist conflict rises. I also show that stronger economic ties to other countries hamstring unity when the latter provide substitutes to local goods. If the home country economy becomes less competitive, governments’ efficiency costs decrease and thus redistribution, reducing the likelihood of unity. This study provides new perspectives for studying trade, conflict and state formation.
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We exploit time and spatial variation generated by the commodities boom to measure the effect of natural resources on human capital formation in Peru, a country with low governance indicators. Combining test scores from over two million students and district-level administrative data of mining taxes redistributed to local governments, we find sizable effects on student learning from the redistribution. However, and consistent with recent political economy models, the relationship is non-monotonic. Based on these models, we identify improvements in school expenditure and infrastructure, together with increases in health outcomes of adults and children, as key mechanisms explaining the effect we find for redistribution. Policy implications for the avoidance of the natural resource curse are discussed.
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Rent imputation for welfare measurement: A review of methodologies and empirical findings. Review of Income and Wealth, Vol. 63, No. 4, 881-89.2017.Housing should always be included in the construction of the welfare aggregate for welfare analysis. However, assigning a value to the flow of services from dwellings is problematic. Many households own the dwelling in which they live, making this value unobserved; others receive free housing or face prices lower than those at the market. Over the last decades, several estimation techniques have been proposed and implemented by practitioners to overcome this issue. This paper provides a review of methods commonly used to impute rent and discusses the relative advantages and disadvantages of each. We find no consensus on which imputation method is the most appropriate for welfare analysis, as well as a lack of evidence regarding the distributional impact of including rents in the welfare aggregate, particularly in developing countries. Moreover, practices for imputing rents vary across countries, calling for the future development of a unified framework.
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Long-Run Effects of Democracy on Income Inequality in Latin America. Journal of Economic Inequality, Vol. 14, No. 3, pp. 289-307.2016.I address the link between democracy and inequality in Latin America, analyzing whether the degree of democracy that birth cohorts experience during the course of their formative years is related to labor income dispersion later, in adulthood. For this, I measure inequality at the cohort level by using pseudo-panel data built from household surveys for fifteen Latin American countries (from circa 1995 to circa 2011) and measure democracy as the discounted cumulative value of the degree of democracy during the cohort’s formative years. I find that cohorts that have higher discounted cumulative values of the degree of democracy show lower income inequality. However, the effect of democracy on income dispersion is driven by those cohorts that benefited from the surge of democracies that came to exist during the second half of the twentieth century. I also present suggestive evidence that education is one mechanism explaining these results.
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Broken gears: the value added of higher education on teachers’ academic achievement. Higher Education, Vol. 72, No. 3, pp. 341-361. 2016.Good teachers are essential for high-quality educational systems. However, little is known about teachers’ skill formation during college. By combining two standardized tests for Colombian students, one taken at the end of senior year in high school and the other when students are near graduation from college, we test the extent to which students majoring in education relatively improve or deteriorate their skills in quantitative reasoning, native language and foreign language, in comparison with students in other programs. We find that teachers’ skills vis-à-vis those in other majors deteriorate in quantitative reasoning and foreign language, although these skills deteriorate less for those in math-oriented and foreign language-oriented programs, respectively. For native language, we do not find evidence of robust differences in relative learning mobility.
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Lower Bounds on Inequality of Opportunity and Measurement Error. Economics Letters, Vol. 137, pp. 102-105. 2015.I show that lower bound estimates of inequality of opportunity can have substantial measurement error, and that measurement error can vary considerably across samples. As a consequence, the traditional cross-country comparisons researchers make can be misleading.
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This essay seeks to provide practical guidance for applied quantitative IR researchers regarding the steps of the research process in between theory development and statistical analysis. That is, given a clearly articulated theoretical prediction, what must be done before the researcher can run a regression? This chapter primarily addresses decisions pertaining to the selection of a sample of analysis, and the selection of variables to operationalize theoretical quantities of interests, with a focus on the implications of these decisions for internal and external validity and statistical power.
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Why did poverty decline in India? A nonparametric decomposition exercise. Forthcoming in India’s Social and Economic Transformation in 21st Century, Pallavi Choudhuri, Sonalde Desai, and Amaresh Dubey, Eds. Routledge.This paper uses panel data to analyze factors that contributed to the rapid decline in poverty in India between 2005 and 2012. The analysis employs a nonparametric decomposition method that measures the relative contributions of different components of household livelihoods to observed changes in poverty. The results show that poverty decline is associated with a significant increase in labor earnings, explained in turn by a steep rise in wages for unskilled labor, and diversification from farm to nonfarm sources of income in rural areas. Transfers, in the form of remittances and social programs, have contributed but are not the primary drivers of poverty decline over this period. The pattern of changes is consistent with processes associated with structural transformation, which add up to a highly pro-poor pattern of income growth over the initial distribution of income and consumption. However, certain social groups (Adivasis and Dalits) are found to be more likely to stay in or fall into poverty and less likely to move out of poverty. And even as poverty has reduced dramatically, the share of vulnerable population has not.
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This study explores the short-run transitions between poverty, vulnerability, and middle class, using synthetic panels constructed from multiple rounds of Colombia’s Integrated Household Survey (in Spanish Gran Encuesta Integrada de Hogares). The paper reports results from two approaches to define a vulnerability line: the first one employs a nonparametric and parsimonious model, while the second utilizes a fully parametric regression model with covariates. The estimation results suggest a range of between $8 to $13 per day per person in 2005 purchasing power parity dollars as the vulnerability line. Using an average daily vulnerability line of $10 per day per person, subsequent estimates on welfare dynamics suggest that, during the past decade, 20 percent of the Colombian population experienced downward mobility, and 24 percent experienced upward mobility. Furthermore, upward mobility increases with higher education levels and is lower for female-headed households.
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Heterogeneity and Household Life Cycle in the Multidimensional Poverty Index. Knowledge Brief, Poverty and Equity Global Practice, The World Bank. 2018. Knowledge brief for Colombia’s Poverty Assessment.This note discusses the evolution of the MPI in Colombia since 2010 and describes some of the challenges associated with the spatial heterogeneity of multidimensional poverty across urban and rural areas, and the relationship between life cycle and the evolution of the MPI over time. Also, this note opens a discussion that has not been yet addressed by the literature on how to update the indicators in the MPI once these are no longer capturing significant deprivations.
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Measuring Housing Deprivation: Methodology and an Application to Afghanistan. Mimeo, Poverty and Equity Global Practice, The World Bank. 2017. Background working paper for Afghanistan’s Poverty Assessment.Housing adequacy is an important dimension of people’s wellbeing, yet there is no consensus or international standard to define and measure adequate housing, or the absence of it. In this paper we propose a latent utility model to measure housing adequacy that is consistent with the guidelines in the United Nation’s Right to Adequate Housing. First, we provide formal proof that if discrete ordinal data on housing indicators meets the ordering consistency conditions defined herein, housing-adequacy rankings can be gleaned from the eigenvector corresponding to the largest eigenvalue in Multiple Correspondence Analysis (MCA). Second, we define welfare consistent cut-off points for housing deprivation. The algorithm measures the incidence of housing deprivation as headcounts, providing a multidimensional poverty rate for housing. Lastly, we provide an example to estimate housing deprivation rates using Afghanistan’s Living Conditions Survey.
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Mobility and pathways to the middle class in Nepal. Policy Research Working Paper Series 7824, The World Bank. 2016. Background working paper for Nepal’s Poverty Assessment.This paper introduces a variety of concepts and methods to examine living standards improvements in Nepal in a dynamic perspective. Using data from three rounds of Nepal Living Standards Surveys conducted in the past two decades, together with data from a nationally representative survey that was implemented in 2014 specifically to collect information on social and economic mobility, the paper presents novel statistics on the extent of inter- and intra-generational mobility in Nepal. The findings suggest that there has been appreciable upward mobility in education; that is, Nepalis today are increasingly more likely to be better educated than their parents. However, inter-generational mobility of occupations has been much more muted, with 47 percent of Nepal today remaining in the same occupation as their parents. Upward mobility is higher for younger cohorts and for individuals who move from their rural areas of birth to an urban area. There are also significant differences in mobility by social groups, with Dalits and Terai caste groups having lower upward mobility odds. Examining mobility within generations using synthetic panel techniques, the paper finds that: (a) for every two people who escape poverty, one slides back, suggesting significant churning around the poverty line; (b) a large fraction of those who have escaped poverty remain vulnerable to falling back, with an overall vulnerable population of 45 percent; and (c) the share of the middle class—defined as those with sufficiently low likelihood of falling back into poverty—has increased steadily over the past two decades, reaching 22 percent in 2010–11. However, triangulating subjective well-being data from Gallup, it appears that a majority of even those who constitute the middle class are fundamentally insecure about their economic futures. The prevalence of a large vulnerable population and a nascent, growing but struggling middle class represents a key challenge to consolidating recent gains in moving people out of poverty.
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Born with a silver spoon: inequality in educational achievement across the world. Policy Research Working Paper Series 7152, The World Bank. 2015. Background working paper for World Bank’s Visualize Inequality.This paper assesses inequality of opportunity in educational achievement using the Human Opportunity Index methodology on data from the Programme for International Student Assessment. The findings suggest that there are large inequalities in learning outcomes as measured by demonstrated proficiency in the Programme for International Student Assessment test scores in math, reading, and science. Differences in wealth, parental education, and area of residence explain a bulk of this inequality in most of the countries in the sample. Consistent with what has been documented previously in the literature, the paper also finds a strong and stable correlation between inequality of opportunity and public spending on school education. An exploration of the changes in inequality of opportunity between the 2009 and 2012 rounds of the Programme for International Student Assessment, using parametric and nonparametric techniques, suggests that there has been little progress.
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