Título: Trade Shocks, Firm-Level Investment Decisions, and Labor Market Responses

Autores: Erhan Artuc (World Bank), German Bet (Northwestern), Irene Brambilla (UNLP y Conicet), Guido Porto (UNLP)

Abstract: When export opportunities arise, the gains from trade can only be materialized if the economy adjusts. In particular, in order to expand and meet new markets, firms must tune their capital stock by investing in product lines, machines and equipment. This process is costly and imperfect. Firms face convex and fixed investment costs, as well as investment irreversibility costs. These costs generate regions of firm inaction. When a trade shock occurs, some firms will be moved out of this inaction region and invest. But many other firms will remain in the inaction region, especially if the costs of adjustment are high. As a consequence, the economy reacts partially and gradually. This process, in turn, has implications for labor demand, employment and wages. To explore these issues with a dynamic model featuring a multi sector-economy with worker's mobility costs, heterogeneous firms and costly capital adjustment. We fit this model to plant-level panel data and  household survey data from Argentina. We estimate the structural capital and labor adjustment cost parameters and we use them in counterfactual  simulations. Under firm investment inaction in the presence of capital adjustment costs, the impacts of trade shocks can be very different from those derived from alternative models of capital mobility.

Irene Brambilla

Irene Brambilla is a Professor of Economics at Universidad Nacional de La Plata (UNLP). She is also a Visiting Professor at Universidad de San Andrés and a Researcher at CONICET. Previously she held positions as Assistant Professor at Yale University and Faculty Research Fellow at the NBER. She obtained her Ph.D. from Princeton University in 2004. 

Professor Brambilla's research interest are international trade and applied microeconomics. She has taught courses on International Trade, Empirical Methods in Industrial Organization, Applied Econometrics, and Intermediate Microeconomics.

El seminario será dictado en inglés