Global economic change and the future of organized workers

Working papers

Unions and robots: International competition, automation and the political power of organized labor. Mimeo, New York University. 2021.

Abstract

International competition has led to the increasing adoption of labor-replacing technology via automation. What are the consequences of this development for the political influence of organized labor? Conventional wisdom suggests that automation affects organized labor because it leads to unemployment and lower wages. In contrast, I argue that automation is relevant because it makes (skilled) workers more productive, increasing the opportunity costs of rent-seeking behavior via union activities - which are key manifestations of labor organization. Consequently, the political influence of organized labor falls in response to automation. I provide causal evidence for my claims using data from the United States (2004-2014) and a shift-share design that leverages the exogenous element of international competition in the exposure to robots at the district level. My main finding shows that an increase in one robot per a thousand workers reduces by about two percentage points the likelihood that congresspeople vote in accordance to unions' interests. Further, I identify three causal mechanisms behind this: reductions in unionization rates and union activities in response to robot exposure, as well as lower political participation from workers through campaign contributions. To distinguish my theory from the competing explanation, I demonstrate via demediation analysis that my findings are driven by union decline in the private sector and not by the effect of automation on employment. Furthermore, I show that the effect of automation is strongest wherein the cost of opportunity of union activities is higher, which I proxy with the share of skilled labor predating exposure to robots.

Work in progress

Does international competition affect the political power of organized labor?

Abstract

In progress.

The impact of COVID lockdowns on workers’ capacity for collective action.
with Pablo Querubin.

Abstract

In progress.

Elite cues, identity and the crisis of embedded liberalism

Working papers

Elite cues, identity and protectionism. Mimeo, New York University. 2021.

Abstract

Does international economic competition fuel populism and protectionism? Conventional wisdom holds that workers adversely affected by international competition vote for populists because the latter favor high barriers to trade. However, I demonstrate that international competition cannot in general generate these outcomes by itself. In a game-theoretic model I show that populist protectionism emerges when a political entrepreneur influences voters’ preferences over trade policy via elite cues. Successful elite cues affect preferences because they make voters’ identities salient, fueling policy-polarization among voters which can boost the political appeal of the entrepreneur. I find that the size of the voting blocs shapes the incentives to target cues to narrower groups: When most losers from international competition are from an ethnic majority, for instance, the ethnic minority may be disregarded by the entrepreneur even if they also lose from trade. Furthermore, cues are become more likely in ethnically-heterogenous communities because the entrepreneur can generate more polarization by targeting narrower identities. Counterintuitively, I demonstrate that the entrepreneur only uses cues when there’s little voter polarization because otherwise the benefit from using cues is too low. I also demonstrate that a political entrepreneur is endogenously protectionist in response to international competition because the losers from trade make a large voting bloc. The novel theory I propose explains why, when and where we should observe populism and protectionism in response to international competition.

Work in progress

Elite cues, loss aversion and the crisis of embedded liberalism: using prospect theory to understand voters’ attitudes against globalization.

Abstract

In progress.

International trade, conflict and regime change

Working papers

Tariff revenues matter for democratization: Theory and evidence from the First Wave of Globalization. Mimeo, New York University. 2021.
with Rafael Ch.

Abstract

Do tariff revenues affect democratization? We argue that tariff revenues have two theoretically-relevant effects: i) A \emph{rapacity effect} because the windfalls generate incentives to control government, ii) A \emph{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 they lose they share power to avoid expropriation. We test these claims during the First Wave of Globalization, where 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 generate a rapacity effect. In contrast, in capital-abundant economies the return to land falls, thus the redistributive effect offsets the rapacity effect. Congruently, we find a positive but insignificant effect for tariff revenues in this case.

Does economic interdependence lead to state consolidation? Mimeo, New York University. 2021.

Abstract

States often deal with both ungoverned spaces and secessionism, failing to govern their territory. I develop a model to determine if and how can economic interdependence within countries address these issues. I show that economic interdependence has a non-monotonic effect on unity within states: High levels of interdependence promote unity because interdependence generates efficiency costs that tie the hands of the governments towards improving the redistribution of resources, increasing the opportunity cost of both secessionist conflict and the creation of ungoverned spaces. For low levels of interdependence, unity is achieved through the threat of coercion, but it is less stable. For intermediate levels, redistribution may be insufficient to prevent a dislocation, and secessionism can generate violent conflict. I also investigate the effects of international trade on secessionism, but this is currently work in progress. My findings generate new perspectives for studying trade, civil conflict and state consolidation.

Work in progress

Does international trade lead to peace between countries? New theory and evidence from the First Wave of Globalization.

Abstract

In progress.

In books

Think locally, regress globally: Promises and Pitfalls of Conventional IR Data. Forthcoming in “Handbook of Research Methods in International Relations,” Joseph Huddleston, Tom Jamieson, and Patrick James, Eds. Edward Elgar.
with Matt Malis.

Abstract

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.

Climate change and political (in)stability

Working papers

Climate change and political (in)stability. Mimeo, New York University. 2022.
with Amanda Kennard.

Abstract

What are the implications of climate change for political stability? As climate change brings to bear new economic, physiological, and social pressures, we argue that citizens will tend to update negatively about their political environment. Environmental pressures shape citizen beliefs about the loyalty of political leaders; the security capacity of the state; and their ability to rely on members of their own community. Successful political mobilization –peaceful or otherwise – is increasing in the frequency of climate extremes. We develop a model of collective action in the presence of climate shocks and show that rational actors systematically under-estimate environmental impacts, attributing observed outcomes instead to uncorrelated features of their political environment. We provide causal evidence for our claims using geocoded weather data along with a unique household-level panel survey from India. Unusually high temperatures reduce trust in leaders and police forces while increasing intra-community cooperation. Climate extremes also increase voter turnout and rates of anti-incumbent voting.

Work in progress

Climate impacts on citizen learning and collective action.
with Amanda Kennard.

Abstract

In progress.

Development and education

The Value of Redistribution: Natural Resources and the Formation of Human Capital under Weak Institutions. Journal of Development Economics, Vol. 149, 102581. 2021.
with Jorge guero, Stanislao Maldonado and Hugo Ñopo.

Abstract

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.

Broken gears: the value added of higher education on teachers’ academic achievement. Higher Education, Vol. 72, No. 3, pp. 341-361. 2016.
with Hugo Ñopo.

Abstract

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.

Policy working papers

“Below Modal Grade for Age”: The causal impact of falling behind in schooling on academic achievement in America.
with Hugo Ñopo.

Abstract

We use a regression discontinuity design to determine the causal effect of being Below Modal Grade for Age (BMGA) in test scores and grade retention, in the American continent, using data from the Programme for International Student Assessment (PISA). We find that BMGA status reduces test scores by 0.1 standard deviations and increases the likelihood of grade retention by 4 percentage points. We also find that the impact of BMGA is strongest in Latinamerica because BMGA status is more likely to induce grade retention in these countries.

Colonial legacies and inequality of opportunity in education.
with Hugo Ñopo.

Abstract

We study the impact of the colonial legacies of the mita on inequality opportunity in educational achievement. To do this we use data from Peru's "Evaluación Censal de Estudiantes" (2007-2012), which evaluates the math and communication skills for all children in the second grade of primary in Peru. We define inequality of opportunity in education as the difference in the ability of displaying the expected cognitive skills for age. Our results show evidence of an effect of mita on academic performance in communication, but no effect in math. We investigate differences in school characteristics between mita and non-mita districts as potential mechanisms, and find a negative effect on the likelihood of having access to sanitation. We establish also that the lack of sanitation is related to lower public spending in health and sanitation in mita areas. Investigating the mediating rol of private education in the effects of the mita, we find that private good provision cannot address the effects of the colonial legacies on educational outcomes.

Poverty and inequality analysis and measurement

Rent imputation for welfare measurement: A review of methodologies and empirical findings. Review of Income and Wealth, Vol. 63, No. 4, 881-89.2017.
with Sergio Olivieri, Lidia Ceriani and Marco Ranzani.

Abstract

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.

Long-Run Effects of Democracy on Income Inequality in Latin America. Journal of Economic Inequality, Vol. 14, No. 3, pp. 289-307.2016.

Abstract

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.

Lower Bounds on Inequality of Opportunity and Measurement Error. Economics Letters, Vol. 137, pp. 102-105. 2015.

Abstract

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.

In books

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. 2016.
with Sonalde Desai, Rinku Murgai and Ambar Narayan

Abstract

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.

Policy working papers

Welfare dynamics in Colombia: results from synthetic panels. Policy Research Working Paper Series 8441, The World Bank. 2018. Background working paper for Colombia’s Poverty Assessment.
with Hai-Anh Dang, Eduardo Malasquez, Sergio Olivieri and Julieth Pico.

Abstract

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.

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.
with Eduardo Malasquez, Sergio Olivieri and Julieth Pico.

Abstract

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.

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.
with Silvia Redaelli

Abstract

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.

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.
with Sailesh Tiwari and Akhmad Shidiq

Abstract

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.

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.
with Ambar Narayan and Sailesh Tiwari

Abstract

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.