Essays in International Macroeconomics
Aristizabal-Ramirez, Maria
2022
Abstract
The first chapter, co-authored with Christian Posso, examines the impact of changes in corporate credit supply on employment and wages outside of financial-crisis episodes. We construct an rich employee-employer-credit-bank database using Colombian administrative data from the period 2008-2018 and estimate corporate credit-supply shocks using firm and bank fixed effects. These estimates provide new evidence on: In response to a positive credit-supply shock, (i) firms increase their investment but do not change their average employment or wages; (ii) wages decline in the bottom half of the wage distribution while increasing at the top of the distribution, and (iii) firms with more liquid assets increase employment. We develop a model where the effect of a credit-supply shock is consistent with the empirical facts. In the model, two opposing mechanisms are key to explaining the results: capital-low-skill substitutability and firm-specific liquidity constraints to finance labor. These competing forces explain why average wages and employment do not change in response to credit-supply shocks while low-skilled wages decline. We use the model to study how permanent reductions in the banking intermediation premium influence firm-level responses to credit-supply shocks. The second chapter, co-authored with John Leahy and Linda Tesar, is motivated by a set of cross-country observations on economic growth, structural transformation, and investment rates in a large sample of countries. (i) Hump-shaped relationship between a country's investment rate and its level of development. (ii) Advanced economies (AE) reach their investment peak at a higher level of income and at an earlier point in time relative to emerging markets (EM). (iii) A decline in the agricultural share and an increase in the services share, both relative to manufacturing. (iv) The pace of change observed in the 1930 to 1980 period in AE is similar to that in EM since 1960. Motivated by these facts, we develop a two-region model of the world economy that captures the dynamics of investment and structural change. The regions are isolated from each other up to the point of capital market liberalization in the early 1990s. At that point, capital flows from AE to EM and accelerates the process of structural change in EM. Both regions gain from the liberalization of financial markets, but the majority of the gains accrue to the EM. The overall magnitude of gains depends on the date of liberalization, the relative sizes of the two regions, and the degree of asymmetry between the two regions at the point of liberalization. Finally, we consider the impact of a "second wave" of liberalization when China fully opens its economy to capital inflows. The third chapter studies the effects of financial crises on labor income inequality by exploiting cross-sectional variation at the county level in the U.S during the Great Recession. Using declines in housing net worth to measure the intensity of the financial crisis the paper documents five empirical results. (i) the 90-50 ratio of wages increases during and after the crisis in counties where it was more severe. (ii)These changes are driven by increases in the 90th percentile between peak and trough, and by declines in the 50th percentile between peak and recovery. (iii)There is no evidence suggesting that unemployment is driving the results. (iv)These effects occur within industries. (v)Changes in inequality are driven by differences in wages between High-Skill and Low-Skill occupations.Deep Blue DOI
Subjects
Financial constraints, employment, wages, investment
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