The Coherence of US Cities

Diversified economies are critical for cities to sustain their growth and development, but they are also costly because diversification often requires expanding a city’s capability base. We analyze how cities manage this trade-off by measuring the coherence of the economic activities they support, defined as the technological distance between randomly sampled productive units in a city. We use this framework to study how the US urban system developed over almost two centuries, from 1850 to today. To do so, we rely on historical census data, covering over 600M individual records to describe the economic activities of cities between 1850 and 1940, as well as 8 million patent records and detailed occupational and industrial profiles of cities for more recent decades. Despite massive shifts in the economic geography of the United States over this 170-year period, average coherence in its urban system remains unchanged. Moreover, across different time periods, datasets, and relatedness measures, coherence falls with city size at the exact same rate, pointing to constraints to diversification that are governed by a city’s size in universal ways.

Public-Private Dialogs to Spur Export-led Growth: The Case of Productivity Taskforces in Namibia

This case study examines the implementation of Namibia’s first Productivity Task Force focused on the high-value fruit sector from 2021 to 2024. Productivity task forces, modeled after Peru’s Mesas Ejecutivas, facilitate public-private dialogues to resolve sector-specific productivity issues. The Namibian Investment Promotion and Development Board, the Ministry of Agriculture, Water and Land Reform, and the Ministry of Finance led the Namibian task force. The study highlights critical stages, including the task force’s management and organization, political authorization, and the identification and resolution of productivity problems. While some challenges remain unsolved, the PTF has laid the groundwork for long-term improvements in government capacity, better public-public coordination, public-private collaboration, and a more business-friendly environment. The study offers valuable insights for implementing similar public-private initiatives in other developing countries. This title is also available as Open Access on Cambridge Core.

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Cambridge Elements are a new concept in academic publishing and scholarly communication, combining the best features of books and journals. They consist of original, concise, authoritative, and peer-reviewed scholarly and scientific research, organised into focused series edited by leading scholars, and provide comprehensive coverage of the key topics in disciplines spanning the arts and sciences.

Regularly updated and conceived from the start for a digital environment, they provide a dynamic reference resource for graduate students, researchers, and practitioners.

Leaving Home: Cumulative Climate Shocks and Migration in Sub-Saharan Africa

We combine a multi-country household panel dataset with high-resolution gridded precipitation data to investigate how cumulative climatic shocks affects the decision to leave the households in five sub-Saharan African countries. We find that while the effect of recent adverse weather shocks is on average modest, the cumulative effect of a persistent exposure to droughts over several years leads to a significant increase in the probability for a household member to leave the household. We speculate that this pattern can be indicative of increased migratory flows due to increase in the frequency of extremes.

GLocal: A global development dataset of subnational administrative areas

The purpose of the GLocal dataset is to enable research in international development that requires both global scope and local precision. Leveraging modern geospatial analysis tools, we process a diverse array of sources to provide researchers with a growing set of economic, demographic, ecological and socio-political variables for geographic units relevant to public policy. We provide separate data files for different levels of administrative and periodic aggregation, along with ad-hoc files with more detailed information on specific topics. In this data descriptor paper, we discuss both our data processing methodologies and validation pipelines, and provide a short case study to illustrate the research potential of the dataset. We also introduce a simple web app, glocal.streamlit.app, which offers a user-friendly interface for exploring and visualizing the dataset. Given the growing number of public and granular sources of relevance for international development research, we hope to continue adding features and expand the GLocal dataset in the future.

Harnessing Global Value Chains for Regional Development: How to Upgrade through Regional Policy, FDI, and Trade

In today’s increasingly interconnected global economy, place-based development strategy must be strategic towards leveraging global economic opportunities. Riccardo Crescenzi and Oliver Harman explore this intricate landscape and provide a valuable guide for regional policymakers in their aptly titled book, Harnessing Global Value Chains for Regional Development: How to Upgrade through Regional Policy, FDI, and Trade.

This book delves deep into the importance of the export-led processes of development, especially for lagging regions across the globe. Income disparities among regions are primarily influenced by disparities in exports. While both intensive and extensive margin of export diversification play key roles, the inability of regions to diversify into new exports is a particular hindrance. The authors articulate a compelling argument for both developing and developed economies to pivot towards export-led growth through integration into global value chains (GVCs). Foreign direct investment (FDI) and the importance of multinational enterprises (MNEs) are a recurring theme throughout for subnational development.

Not only has this book centred the focus of policymakers onto exports, but also they have keenly pointed out the international structure of global production, and how subnational regions can fit in. Complex production has become an international affair. The more complex and sophisticated an export is, the more intermediate imports are sourced from all over the globe. This complex production cannot be captured by a single country, giving subnational regions ample opportunity to join these GVCs. Ultimately, locales which tend to export more intricate products are seamlessly integrated into GVCs, and thus richer as a result. The authors rightly focus on how to support regions to fit into global production and contribute sophisticated inputs.

The emphasis on economic openness and regional engagement with global production is a key highlight, and one that offers immediate benefit to regional policymakers in broadening their perspective. The benefits of free trade agreements (FTAs), both inward and outward FDI, MNEs, and imbibing productive knowledge from abroad cannot be overstated and are rightfully identified by the authors as key towards enhancing one’s export position. Moreover, the significance of both importing and exporting intermediate products (as opposed to final goods) is underscored. Regarding FDI, Crescenzi and Harman rightly note: ‘FDI can bring new technologies, managerial practices, and marketing strategies that can improve the quality and variety of goods and services, and increase the efficiency and effectiveness of production processes.’ This aptly captures the essence of FDI’s role in infusing an economy with the productive knowledge – or knowhow – that forms the basis for what we at the Harvard Growth Lab refer to as economic complexity.

Crescenzi and Harman shed light on not just the importance but also the process of export diversification, drawing a clear distinction between horizontal leaps (existing tasks in new but complementary GVCs) and vertical leaps (new tasks along existing GVCs). The discussion on vertical leaps demonstrates how a country’s role in a GVC can and should go beyond assembly and into higher value-add sections of the value chain. As the authors note: ‘vertical policies that promote upgrading and innovation, such as through investment in R&D, technology transfer, and skills development, are crucial for enhancing the competitiveness and sustainability of firms and regions’. Participation in an existent GVC can be widened to capture a larger tranche of global production.

Similarly, the authors flesh out how to make horizontal leaps into new GVCs. The authors note how horizontal leaps tend to happen in industries which are related to the existing productive structure of a place. Horizontal leaps are not random, nor should they always target the ‘hot’ industries such as technology and ICT. Leaps into new export industries – critical for continued economic growth – should target GVCs that match existing capabilities and regional advantages. Here, the previous highlight on economic openness remains most relevant. FDI and MNEs play an invaluable role in bringing in new knowhow to an economy which allows a region to export new products and make these key horizontal leaps.

One of the standout sections is the focus on green GVCs (GGVCs). In a world veering towards decarbonisation, the potential for diversification is high. The authors quickly home in on the burgeoning significance of green industrial parks (GIPs) in determining future manufacturing competitiveness. Entrance into GGVCs is not a given, and the book points out that the success of GIPs depends on a range of factors, such as the availability of green technologies and services, the level of stakeholder engagement and participation, the quality of infrastructure and services, the regulatory and policy framework, and the capacity of local institutions and actors to manage and monitor the park. While Crescenzi and Harman adeptly note the importance of GGVCs, one feels the diverse economic potential of GGVCs are underexplored. GGVCs are pivotal for decarbonisation of the developed world, which emits most of the carbon. Developing countries, on the other hand, have very low carbon emissions per capita. The focus for developing country entrance into GGVCs should be less on local mitigation and more on how they can contribute to lowering global emissions by supplying the means of decarbonisation.

As noted by the authors, GIPs hold a unique importance. As the world demands products to be made from green energy (see the European Union’s Carbon Border Adjustment Mechanism), GVCs will relocate to areas in which renewable energy is cheap and plentiful. As it stands, the Global South holds a distinct natural advantage regarding renewal energy production (solar, wind, hydropower), so long as such potential can be harnessed and linked to GIPs. In short, because clean energy is better consumed close to its source, energy intensive industries will have to relocate to renewable energy endowed places (which happen to be poor). The dynamics of how to link access to renewable energy with the relocation of energy-intensive manufacturing will be critical for regional policymakers.

Further, global decarbonisation represents a wide opportunity for the developing world regarding the production of the enablers of decarbonisation. Such items – including component parts for turbines, solar panels and certain battery types – will be in rising demand throughout the process of global decarbonisation. An explicit targeting of entrance into these GVCs is strategically important to enable the rich to decarbonise and the poor to grow. This represents an opportunity in which the authors may wish to follow-up.

In conclusion, Harnessing Global Value Chains for Regional Development is a must-read for policymakers, researchers and anyone keen on understanding the dynamics of modern economic development, especially as they relate to global economic production. Crescenzi and Harman have crafted an important work that bridges theory with actionable insights, offering a roadmap for regions keen on leveraging GVCs for sustainable growth.

On the Design of Effective Sanctions: The Case of Bans on Exports to Russia

We build on Baqaee and Farhi (2019, 2021) and derive a theoretically-grounded criterion that allows targeting bans on exports to a sanctioned country at the level of ∼5000 6-digit HS products. The criterion implies that the costs to the sanctioned country are highly convex in the market share of the sanctioning parties. Hence, there are large benefits from coordinating export bans among a broad coalition of countries. Applying our results to Russia reveals that sanctions imposed by the EU and the US in response to Russia’s invasion of Ukraine are not systematically related to our arguments once we condition on Russia’s total imports of a product from participating countries. We discuss drivers of these differences, and then provide a quantitative evaluation of the export bans to show that (i) they are very effective with the welfare loss typically ∼100 times larger for Russia than for the sanctioners; (ii) improved coordination of the sanctions and targeting sanctions based on our criterion allows to increase the costs to Russia by about 80% with little to no extra cost to the sanctioners; and (iii) there is scope for increasing the cost to Russia further by expanding the set of sanctioned products.

Crime, Inequality and Subsidized Housing: Evidence from South Africa

We study the relationship between housing inequality and crime in South Africa. We create a novel panel dataset combining information on crime at the police station level with census data. Our analysis shows that housing inequality explains a significant share of the variation in both property and violent crimes, net of spillover effects, time and district fixed effects. An increase of roughly one standard deviation in housing inequality explains 10–12 percent of total crime increases. Additionally, we analyze a prominent housing program for low-income South Africans to show that policies that decrease inequality in housing conditions may also reduce crime. We suggest that these policies can help mitigate the societal and individual strains that are often correlated with criminal engagement.

COVID-19 and emerging markets: A SIR model, demand shocks and capital flows

We quantify the macroeconomic effects of COVID-19 for a small open economy. We use a two-country framework combined with a sectoral SIR model to estimate the effects of collapses in foreign demand and supply. The small open economy (country one) suffers from domestic demand and supply shocks due to its own pandemic. In addition, there are external shocks coming from the rest of the world (country two). Aggregate exports of the small open economy decline when foreign demand goes down, and aggregate imports suffer from lockdowns in the rest of the world. We calibrate the model to Turkey. Our results show that the optimal policy, which yields the lowest output loss and saves the maximum number of lives, for the small open economy, is an early and globally coordinated full lockdown of 39 days.

Mental health concerns precede quits: shifts in the work discourse during the Covid-19 pandemic and great resignation

To study the causes of the 2021 Great Resignation, we use text analysis and investigate the changes in work- and quit-related posts between 2018 and 2021 on Reddit. We find that the Reddit discourse evolution resembles the dynamics of the U.S. quit and layoff rates. Furthermore, when the COVID-19 pandemic started, conversations related to working from home, switching jobs, work-related distress, and mental health increased, while discussions on commuting or moving for a job decreased. We distinguish between general work-related and specific quit-related discourse changes using a difference-in-differences method. Our main finding is that mental health and work-related distress topics disproportionally increased among quit-related posts since the onset of the pandemic, likely contributing to the quits of the Great Resignation. Along with better labor market conditions, some relief came beginning-to-mid-2021 when these concerns decreased. Our study underscores the importance of having access to data from online forums, such as Reddit, to study emerging economic phenomena in real time, providing a valuable supplement to traditional labor market surveys and administrative data.

Media release: What can we learn from the Great Resignation?

The impact of return migration on employment and wages in Mexican cities

How does return migration from the US to Mexico affect local workers? Return migrants increase the local labor supply, potentially hurting local workers. However, having been exposed to a more advanced U.S. economy, they may also carry human capital that benefits non-migrants. Using an instrument based on involuntary return migration, we find that, whereas workers who share returnees’ occupations experience a fall in wages, workers in other occupations see their wages rise. These effects are, however, transitory and restricted to the city-industry receiving the returnees. In contrast, returnees permanently alter a city’s long-run industrial composition, by raising employment levels in the local industries that hire them.