Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
Institutional Affiliation: University of Chicago
NBER Working Papers and Publications
|February 2019||Spatial Linkages, Global Shocks, and Local Labor Markets: Theory and Evidence|
with Costas Arkolakis, Federico Esposito: w25544
Abstract How do shocks to economic fundamentals in the world economy affect local labor markets? In a framework with a flexible structure of spatial linkages, we characterize the model-consistent shock exposure of a local market as the exogenous shift in its production revenues and consumption costs. In general equilibrium, labor outcomes in any market respond directly to the market’s own shock exposure, and indirectly to other markets shocks exposures. We show how spatial linkages control the size and the heterogeneity of these indirect effects. We then develop a new estimation methodology – the Model-implied Optimal IV (MOIV) – that exploits quasi-experimental variation in economic shocks to estimate spatial linkages and evaluate their counterfactual implications. Applying our methodolog...
|August 2018||Shift-Share Designs: Theory and Inference|
with Michal Kolesár, Eduardo Morales: w24944
We study inference in shift-share regression designs, such as when a regional outcome is regressed on a weighted average of observed sectoral shocks, using regional sector shares as weights. We conduct a placebo exercise in which we estimate the effect of a shift-share regressor constructed with randomly generated sectoral shocks on actual labor market outcomes across U.S. Commuting Zones. Tests based on commonly used standard errors with 5% nominal significance level reject the null of no effect in up to 55% of the placebo samples. We use a stylized economic model to show that this overrejection problem arises because regression residuals are correlated across regions with similar sectoral shares, independently of their geographic location. We derive novel inference methods that are valid...
|July 2015||Nonparametric Counterfactual Predictions in Neoclassical Models of International Trade|
with Arnaud Costinot, Dave Donaldson: w21401
We develop a methodology to construct nonparametric counterfactual predictions, free of functional-form restrictions on preferences and technology, in neoclassical models of international trade. First, we establish the equivalence between such models and reduced exchange models in which countries directly exchange factor services. This equivalence implies that, for an arbitrary change in trade costs, counterfactual changes in the factor content of trade, factor prices, and welfare only depend on the shape of a reduced factor demand system. Second, we provide sufficient conditions under which estimates of this system can be recovered nonparametrically. Together, these results offer a strict generalization of the parametric approach used in so-called gravity models. Finally, we use China's r...
Published: Rodrigo Adao & Arnaud Costinot & Dave Donaldson, 2017. "Nonparametric Counterfactual Predictions in Neoclassical Models of International Trade," American Economic Review, vol 107(3), pages 633-689. citation courtesy of