Labour and Trade

We use high‐frequency data on fine particulate matter air pollution (PM 2.5) at the locality level to study the effects of high pollution on daily labor supply decisions in the metropolitan area of Mexico City. We document a negative, non‐linear relationship between PM 2.5 and same‐day labor supply, with strong effects on days with extremely high pollution levels. On these days, the average worker experiences a reduction of around 7.5% of working hours. Workers partially compensate for lost hours by increasing their labor supply on days that follow high‐pollution days. We find that low‐income workers reduce their labor supply significantly less than high‐income workers. Unequal responses to high pollution along other dimensions (job quality, flexibility, gender) matter, but less than income. We provide suggestive evidence that reductions in labor supply due to high pollution are consistent with avoidance behavior.

This paper quantifies employer market power in US manufacturing and how it has changed over time. Using administrative data, we estimate plant-level markdowns—the ratio between a plant's marginal revenue product of labor and its wage. We find most manufacturing plants operate in a monopsonistic environment, with an average markdown of 1.53, implying a worker earning only 65 cents on the marginal dollar generated. To investigate long-term trends for the entire sector, we propose a novel, theoretically grounded measure for the aggregate markdown. We find that it decreased between the late 1970s and the early 2000s, but has been sharply increasing since.

We examine the role of technological change in explaining the large and persistent decline in earnings following job loss. Using detailed skill requirements from the near universe of online vacancies, we estimate technological change by occupation and find that technological change accounts for 45 percent of the decline in earnings after job loss. Technological change lowers earnings after job loss by requiring workers to have new skills to perform newly created jobs in their prior occupation. When workers lack the required skills, they move to occupations where their skills are still employable but are paid a lower wage.

Full days worked at home account for 28 percent of paid workdays among Americans 20-64 years old, as of mid 2023, according to the Survey of Working Arrangements and Attitudes. That’s about four times the 2019 rate and ten times the rate in the mid-1990s that we estimate in time-use data. We first explain why the big shift to work from home has endured rather than reverting to pre-pandemic levels. We then consider how work-from-home rates vary by worker age, sex, education, parental status, industry and local population density, and why it is higher in the United States than other countries. We also discuss some implications of the big shift for pay, productivity, and the pace of innovation. Over the next five years, U.S. business executives anticipate modest increases in the share of fully remote jobs at their own companies and in the share of jobs with hybrid arrangements, whereby the employee splits the workweek between home and employer premises. Other factors that portend an enduring shift to work from home include the ongoing adaptation of managerial practices and further advances in technologies, products, and tools that support remote work.

A determinant of aggregate productivity differences, both across countries and within countries over time, is how well resources such as capital and labour are allocated across firms. The importance of such resource misallocation for aggregate productivity is often inferred from the dispersion in average revenue products (revenues over inputs) in firm-level data. This paper proposes a methodology to correct estimates of misallocation for measurement error in revenue and inputs.

A huge challenge for research and policy efforts to accelerate economic development is that firms in poor countries grow surprisingly slowly, making job creation in the “Global South” difficult to achieve. Why can't some firms access desirable markets?

The informal sector accounts for a large part of the economy in most developing countries, comprising between 20-80 percent of the labour force and an equally large share of firms. Yet, we still know little about the overall labour market and welfare effects of trade liberalisation in settings characterised by extensive labour market regulation, weak enforcement, and informality, which characterize many developing economies. This research fills this gap by developing a structural equilibrium model of trade and informality.

A rapidly growing number of US cities have decided to set local minimum wages. Are minimum wages set at city level a good idea? This study examines the main trade-offs emerging from the local variation in minimum wage policies.