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1. Offshore Production and Business Cycle Dynamics with Heterogeneous
Firms (November 2008, Job
Market Paper).
Cross-country
variation in production costs encourages the relocation of production
facilities to other countries, a process known as offshoring
through vertical foreign direct investment. I examine the effect of offshoring on the international transmission of business
cycles. Unlike the existing macroeconomic literature, I distinguish between
fluctuations in the number of offshoring firms (the extensive margin) and in the value added per offshoring firm (the intensive
margin) as separate transmission mechanisms. In the model,
firms are heterogeneous in labor productivity. They face a sunk
entry cost in the domestic market and an additional fixed cost to produce
offshore. Offshoring increases with the difference
between the domestic and foreign cost of effective labor and with
firm-specific productivity. The key results are: (1)
The model replicates the procyclical pattern of offshoring and the extensive and intensive margin
dynamics that I document using data from Mexico's maquiladora sector; (2) Offshoring enhances
the comovement of output between the countries
involved; and (3) Offshoring
reduces price dispersion across countries, because it dampens the real
exchange rate appreciation that follows a productivity increase in the parent
country (the Harrod-Balassa-Samuelson
effect). The results are relevant for the study of
macroeconomic interdependence between countries separated by persistent wage
differences, such as the U.S.
and Mexico
or the original and new EU members.
JEL classification: F23, F41
2. Immigration and the Macroeconomy (November
2008), with Federico Mandelman (FRB of Atlanta),
Working Paper 2008-25, Federal Reserve Bank of Atlanta.
We
analyze the dynamics of labor migration and the insurance role of remittances
in a two-country, real business cycle framework. Emigration increases with
the expected stream of future wage gains, but is dampened by the sunk cost
reflecting border enforcement. During booms in the destination economy, the
scarcity of established immigrants lessens capital accumulation, labor productivity
and the native wage. The welfare gain from the inflow of unskilled labor
increases with the complementarity between skilled
and unskilled labor, and with the share of the skilled among native labor.
The model matches the cyclical dynamics of the unskilled immigration from Mexico.
JEL classification: F22, F41
3. Real
Convergence and the Determinants of Growth in EU Candidate and Potential
Candidate Countries: A Panel Data Approach (June 2008), with M. Morgese
Borys (CERGE-EI)
and E.K. Polgar (ECB),
Occasional Paper No. 86, European Central Bank.
We
show that that total factor productivity growth, followed
by capital accumulation, have been the main drivers of convergence for
the EU candidate and potential candidate countries with the euro area. In
contrast, labour has had a marginal contribution to
economic growth. We also provide evidence of conditional convergence in the
transition countries of central, eastern and south-eastern Europe.
More specifically, controlling for the quality of institutions, the extent of
market reforms and macroeconomic policies, we find a significant and negative
link between the initial level of GDP and subsequent growth. In order to
enhance their real convergence with the euro area, the candidate countries
need to address the current labor market mismatches through improved labour utilisation and
investment in human capital.
JEL
classification:
O47, O52
- Explorations
into the Production of State Government Services: Education, Welfare,
Hospitals (November 2007),
with Richard W. Tresch (Boston College),
Working Paper No. 679, Economics Department, Boston College.
This
paper explores the production characteristics of three important U.S. state
government services--public higher education, public welfare, and state
psychiatric hospitalsduring the last half of the twentieth century. We
estimate translog cost functions for the three
services and find that their production attributes are similar in a number of
respects. First, production exhibits substantial economies of scale;
unexploited scale economies are so severe that the average state operates on
the negative portion of its marginal cost curve. Second, the analysis of
technical change indicates that public education, welfare, and hospitals are
affected by severe technical regression in all states, in both the long run
and short run. Third, production of all three services is overcapitalized in
most states; the provision of these services is not long-run efficient.
Finally, we show that the Baumol-Oates cost disease
of lagging productivity growth is rampant in all three services; only the
short-run productivity growth in education matches the performance of the
private sector, as technical regression is more than offset by the
productivity-enhancing scale effect of increased enrollments.
JEL
Classification:
D24, H75.
[ Publications ]
1.
Real Convergence in Central, Eastern and
South-Eastern Europe (forthcoming, May 2009),
with M. Morgese Borys (CERGE-EI) and E.K. Polgar
(ECB), chapter in volume Real Convergence
in Central, Eastern and South-Eastern Europe, Reiner Martin and Adalbert
Winkler (co-editors), Palgrave-Macmillan Press, Houndmills, Basingstoke.
2. Antidumping Prospects
for Discipline from the Doha Negotiations (August 2005), with J. Michael Finger (World Bank), The Journal of World Investment & Trade, Vol. 6, No. 4, p. 531-552, Geneva, August 2005.
·
Also available
as Working Paper
No. 632, Economics Department, Boston College,
November 2005.
[ Other Notables ]
· EU Timetable
Pays Off in Reforms, Financial Times,
September 18, 2006, letter to the editor.
· Removal of
Patent Protection Would Not Solve Drug Affordability Problem,
Financial
Times, June 26, 2004, letter to the editor.
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