Working Papers:
Protection for Free? An Analysis of U.S. Tariff Suspensions, June, 2010 (with Rod Ludema and Anna Maria Mayda, Georgetown University)
Abstract:This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.
A Fistful of Dollars: Lobbying and the Financial Crisis , May, 2010 (with Deniz Igan and Thierry Tressel, IMF) (IMF WP No. 7194)
Abstract: Has lobbying by financial institutions contributed to the financial crisis? We use detailed information on financial institutions’ lobbying and mortgage lending to answer this question, and find that lobbying was associated with more risk-taking during 2000-07 and worse outcomes in 2008. Lobbying lenders originated riskier mortgages, securitized at faster intensity, and expanded more. They suffered from higher delinquencies, experienced negative returns during key bank failures, but positive returns with the bailout announcement, and had a higher bailout probability. These findings suggest that lending by politically active lenders played a role in accumulation of risks and thus contributed to the crisis. .
Democracy and Reforms, February, 2009 (with Paola Giuliano, UCLA and Antonio Spilimbergo, IMF) (IZA DP No. 4032, CEPR DP No. 7194)
Abstract: Empirical evidence on the relationship between democracy and economic reforms is scarce, limited to few reforms and countries and for few years. This paper studies the impact of democracy on the adoption of economic reforms using a new dataset on reforms in the financial, capital, public, and banking sectors, product and labor markets, agriculture, and trade for 150 countries over the period 1960�2004. Democracy has a positive and significant impact on the adoption of economic reforms but there is no evidence that economic reforms foster democracy. Our results are robust to the inclusion of a large variety of controls and estimation strategies.
Exchange Rates and Wages in an Integrated World, January, 2009 (with Antonio Spilimbergo, IMF) (CEPR DP No. 7167)
Abstract: We analyze how the pass-through from exchange rate to domestic wages depends on the degree of integration between domestic and foreign labor markets. Using data from 66countries over the period 1981�2005, we find that the elasticity of domestic wages to real exchange rate is 0.1 after a year for countries with high barriers to external labor mobility, but about 0.4 in countries with low barriers to mobility. The results are robust to the inclusion of various controls, different measures of exchange rates, and concepts of labor market integration. These findings call for including labor mobility in macro models of external adjustment.
Do Interest Groups Affect US Immigration Policy?, November, 2008 (with Giovanni Facchini, Essex and Anna Maria Mayda, Georgetown) (CEPR DP No.6898, IZA DP No. 3183,IMF WP No.08/244)
Abstract: While anecdotal evidence suggests that interest groups play a key role in shaping immigration policy, there is no systematic empirical analysis of this issue. In this paper, we construct an industry-level dataset for the United States, by combining information on the number of temporary work visas with data on lobbying activity associated with immigration. We find robust evidence that both pro- and anti-immigration interest groups play a statistically significant and economically relevant role in shaping migration across sectors. Barriers to migration are lower in sectors in which business interest groups incur larger lobby expenditures and higher in sectors where labor unions are more important.
Publications / Forthcoming Papers
Policies, Enforcement, and Customs Evasion: Evidence from India, March, 2008 (with Arvind Subramanian, Peterson Institute for International Economics and Petia Topalova, IMF), Journal of Public Economics, 2008, Vol 92, Pages 1907-1925 (IMF WP No. 07/60)
Abstract: We examine the effect of tariff policies on evasion of customs duties, in the context of the trade reform in India of the 1990s. By exploiting the variation in tariff rates across time and products, we identify a robust positive elasticity of evasion with respect to tariffs. A second contribution of the paper is to provide some evidence on the impact of enforcement. While we cannot identify the direct impact of enforcement on evasion, we can establish the extent to which enforcement-related factors, such as product characteristics that determine the ease of detection of evasion, affect the evasion elasticity. The results render support to the hypothesis that improvements in enforcement can reduce the responsiveness of evasion to tariffs.
Health Aid and Infant Mortality, (with David Newhouse, World Bank), Journal of Health Economics, 2009, Volume 28, Issue 4, July, Pages 855-872 (IMF WP No. 07/100)
Abstract: This paper examines the relationship between health aid and infant mortality, using data from 118 countries between 1973 and 2004. Health aid has a beneficial and statistically significant effect on infant mortality: doubling per capita health aid is associated with a 2 percent reduction in the infant mortality
rate. For the average country, this implies that increasing per capita health aid by US$1.60 per year is associated with 1.5 fewer infant deaths per thousand births. The estimated effect is small, relative to the 2015 target envisioned by the Millennium Development Goals. It implies that achieving the MDG target through additional health aid alone would require a roughly 15-fold increase in current levels of aid..
Trade Liberalization and Wage Inequality: Evidence from India, (with Utsav Kumar, Conference Board, New York), Review of Development Economics, 2008, Vol. 12, Issue 2, pp. 291-311 (IMF WP No. 05/20)
Abstract: We evaluate empirically the impact of the dramatic 1991 trade liberalization in India on the industry wage structure. The empirical strategy uses variation in industry wage premiums and trade policy across industries and over time. In contrast to most earlier studies on developing countries, we find a strong, negative, and robust relationship between changes in trade policy and changes in industry wage premiums over time. The results are consistent with liberalization-induced productivity increases at the firm level, which get passed on to industry wages. We also find that trade liberalization has led to decreased wage inequality between skilled and unskilled workers in India. This is consistent with the magnitude of tariff reductions being relatively larger in sectors with a higher proportion of unskilled workers.
Emigration and Wages in Source Countries: Evidence from Mexico, Journal of Development Economics, 2007, no. 82, pp. 180-199 (IMF WP No. 06/86)
Stolper-Samuelson is Dead and Other Crimes of Both Theory and Data, (with Donald Davis, Columbia University), in Ann Harrison eds. Globalization and Poverty: University of Chicago Press and the National Bureau of Economic Research, March, 2007.
Emigration and Brain-Drain: Evidence from the Caribbean, The B.E. Journals in Economic Analysis & Policy, Berkeley Electronic Press, 2007, Vol 7, Issue 1 (Topics), Article 24, (IMF WP No. 06/25), covered in the BBC.
Abstract: This paper quantifies the magnitude and nature of migration flows from the Caribbean and estimates their costs and benefits. The Caribbean countries have lost 10�40 percent of their labor force due to emigration to OECD member countries. The migration rates are particularly striking for the high-skilled. Many countries have lost more than 70 percent of their labor force with more than 12 years of completed schooling�among the highest emigration rates in the world. The region is also the world�s largest recipient of remittances as a percent of GDP. Remittances constituted about 13 percent of the region�s GDP in 2002. Simple welfare calculations (under very conservative assumptions of elasticities) suggest that the losses due to high-skill migration (ceteris paribus) outweigh the official remittances to the Caribbean region.
Work in Progress
Three’s Company: Washington, Wall Street and K Street (with Deniz Igan, IMF)
Globalization and Firm Lobbying (with William Kerr, Harvard Business School and William Lincoln, University of Michigan)
The Empirics of Monetary Transmission in Low-Income Countries (with Peter Moniel, Peter Pedroni, Williams College, and Antonio Spilimbergo, IMF)
Determinants of Product Market Reforms (with Paola Giuliano, UCLA and Antonio Spilimbergo, IMF)