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Project
Academic Research
Leveraging the Global Talent Pool to Jumpstart Prosperity in Emerging Economies
In this project, researchers measure countries’ degree of openness towards different groups of migrants, and test the hypothesis that more developed economies are more open to international migrants, and in particular to international talent. -
Project
United States
Mapping the Functional Structures of State Governments
Researchers find economic structure trumps income, location and ideology when examining differences in U.S. state governments. -
Journal Articles
A journey through time: the story behind ‘eight decades of changes in occupational tasks, computerization and the gender pay gap’
Industry and Innovation, 31
In this interview article, we embark on a fascinating journey through time alongside the winners of the 2023 DRUID Best Paper Award. DRUID, an annual research conference renowned as the […]
In this interview article, we embark on a fascinating journey through time alongside the winners of the 2023 DRUID Best Paper Award. DRUID, an annual research conference renowned as the hub of cutting-edge research on innovation and the dynamics of structural, institutional, and geographic change, bestows this award on the most innovative and exceptional conference submission. As longstanding allies of DRUID, Industry and Innovation offers an exclusive peek behind the curtains, unveiling the untold stories that underlie award-winning research.
In 2023, this coveted DRUID prize was awarded to a paper by Ljubica Nedelkoska, Shreyas Gadgin Matha, James McNerney, Andre Assumpcao, Dario Diodato, and Frank Neffke. Their work stands out through an impressive data collection effort and the exploration of a compelling and urgent research question – how technological change has impacted the gender pay gap. Throughout this interview, the author team takes us down memory lane, retelling the story behind their research project. On this journey through time, we trace the genesis of the authors’ innovative ideas and the intricate pathways they navigated in their quest to understand the past as a means of unravelling the future of work and its implications for gender inequality in the labour market. This journey not only takes us back in time but also points to potential avenues for future research and open questions that lie ahead.
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Working Papers
A Measure of Countries’ Distance to Frontier Based on Comparative Advantage
This paper presents a structural ranking of countries by their distance to frontier. The ranking is based on comparative advantage. Hence, it reveals information on the productive capabilities of countries […]
This paper presents a structural ranking of countries by their distance to frontier. The ranking is based on comparative advantage. Hence, it reveals information on the productive capabilities of countries that is fundamentally different from GDP per capita. The ranking is centered on the assumption that countries’ capabilities across products are similar to those of other countries with comparable distance to frontier. It can be micro-founded using standard trade models. The estimation strategy provides a general, non-parametric approach to uncovering a log-supermodular structure from the data, and I use it to also derive a structural ranking of products by their complexity. The underlying theory provides a flexible micro-foundation for the Economic Complexity Index (Hidalgo and Hausmann, 2009). -
Working Papers
A New Algorithm to Efficiently Match U.S. Census Records and Balance Representativity with Match Quality
We introduce a record linkage algorithm that allows one to (1) efficiently match hundreds of millions of records based not just on demographic characteristics but also name similarity, (2) make […]We introduce a record linkage algorithm that allows one to (1) efficiently match hundreds of millions of records based not just on demographic characteristics but also name similarity, (2) make statistical choices regarding the trade-off between match quality and representativity and (3) automatically generate a ground truth of true and false matches, suitable for training purposes, based on networked family relationships. Given the recent availability of hundreds of millions of digitized census records, this algorithm significantly reduces computational costs to researchers while allowing them to tailor their matching design towards their research question at hand (e.g. prioritizing external validity over match quality). Applied to U.S Census Records from 1850 to 1940, the algorithm produces two sets of matches, one designed for representativity and one designed to maximize the number of matched individuals. At the same level of accuracy as commonly used methods, the algorithm tends to have a higher level of representativity and a larger pool of matches. The algorithm also allows one to match harder-to-match groups with less bias (e.g. women whose names tend to change over time due to marriage).
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Working Papers
A Simple Theory of Economic Development at the Extensive Industry Margin
We revisit the well-known fact that richer countries tend to produce a larger variety of goods and analyze economic development through (export) diversifcation. We show that countries are more likely […]We revisit the well-known fact that richer countries tend to produce a larger variety of goods and analyze economic development through (export) diversifcation. We show that countries are more likely to enter ‘nearby’ industries, i.e., industries that require fewer new occupations. To rationalize this finding, we develop a small open economy (SOE) model of economic development at the extensive industry margin. In our model, industries differ in their input requirements of non-tradeable occupations or tasks. The SOE grows if profit maximizing frms decide to enter new, more advanced industries, which requires training workers in all occupations that are new to the economy. As a consequence, the SOE is more likely to enter nearby industries in line with our motivating fact. We provide indirect evidence in support of our main mechanism and then discuss implications: We show that there may be multiple equilibria along the development path, with some equilibria leading on a pathway to prosperity while others resulting in an income trap, and discuss implications for industrial policy. We finally show that the rise of China has a non-monotonic effect on the growth prospects of other developing countries, and provide suggestive evidence for this theoretical prediction. -
Working Papers
A Structural Ranking of Economic Complexity
We propose a structural alternative to the Economic Complexity Index (ECI, Hidalgo and Hausmann 2009; Hausmann et al. 2011) that ranks countries by their complexity. This ranking is tied to […]We propose a structural alternative to the Economic Complexity Index (ECI, Hidalgo and Hausmann 2009; Hausmann et al. 2011) that ranks countries by their complexity. This ranking is tied to comparative advantages. Hence, it reveals information different from GDP per capita on the deep underlying economic capabilities of countries. Our analysis proceeds in three main steps: (i) We first consider a simplified trade model that is centered on the assumption that countries’ global exports are log-supermodular (Costinot, 2009a), and show that a variant of the ECI correctly ranks countries (and products) by their complexity. This model provides a general theoretical framework for ranking nodes of a weighted (bipartite) graph according to some under- lying unobservable characteristic. (ii) We then embed a structure of log-supermodular productivities into a multi-product Eaton and Kortum (2002)-model, and show how our main insights from the simplified trade model apply to this richer set-up. (iii) We finally implement our structural ranking of economic complexity. The derived ranking is robust and remarkably similar to the one based on the original ECI. -
Publication
Agents of Structural Change: The role of firms and entrepreneurs in regional diversification
Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or non‐local founders of establishments create most novelty in a region? Using matched employer/employee data for the whole […]Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or non‐local founders of establishments create most novelty in a region? Using matched employer/employee data for the whole Swedish workforce, we determine how unrelated and therefore how novel the activities of different establishments are to a region’s industry mix. Up‐ and downsizing establishments cause large shifts in the local industry structure, but these shifts only occasionally require an expansion of local capabilities because the new activities are often related to existing local activities. Indeed, these incumbents tend to align their production with the local economy, deepening the region’s specialization. In contrast, structural change mostly originates via new establishments, especially those with non‐local roots. Moreover, although entrepreneurs start businesses more often in activities unrelated to the existing regional economy, new establishments founded by existing firms survive in such activities more often, inducing longer‐lasting changes in the region.
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Journal Articles
Agents of Structural Change: The Role of Firms and Entrepreneurs in Regional Diversification
Economic Geography, 1-26.
Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or nonlocal establishment founders create most novelty in a region? We develop a theoretical framework that […]
Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or nonlocal establishment founders create most novelty in a region? We develop a theoretical framework that focuses on the roles different agents play in regional transformation. We then apply this framework, using Swedish matched employer–employee data, to determine how novel the activities of new establishments are to a region. Incumbents mainly reinforce a region’s current specialization: incumbent’s growth, decline, and industry switching further align them with the rest of the local economy. The unrelated diversification required for structural change mostly originates via new establishments, especially via those with nonlocal roots. Interestingly, although entrepreneurs often introduce novel activities to a local economy, when they do so, their ventures have higher failure rates compared to new subsidiaries of existing firms. Consequently, new subsidiaries manage to create longer-lasting change in regions.
Last updated on 12/10/2021
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Working Papers
Agglomeration Economies: The Heterogeneous Contribution of Human Capital and Value Chains
**Updated version of this paper published here** We document the heterogeneity across sectors in the impact labor and input-output links have on industry agglomeration. Exploiting the available degrees of freedom in […]**Updated version of this paper published here**
We document the heterogeneity across sectors in the impact labor and input-output links have on industry agglomeration. Exploiting the available degrees of freedom in coagglomeration patterns, we estimate the industry-specic benefits of sharing labor needs and supply links with local firms. On aggregate, coagglomeration patterns of services are at least as strongly driven by input-output linkages as those of manufacturing, whereas labor linkages are much more potent drivers of coagglomeration in services than in manufacturing. Moreover, the degree to which labor and input-output linkages are reflected in an industry’s coagglomeration patterns is relevant for predicting patterns of city-industry employment growth.