Research

Working Paper

The Spoils of War: Trade Shocks during WWI and Spain's Regional Development

This paper analyzes to what extent labor market frictions limit the gains from market integration. I use an external demand shock to the Spanish economy as a natural experiment to identify and quantify the effect of labor mobility costs on Spain's development. Using newly digitized trade and labor market data, I show that during WWI (1914-1918) a large, temporary and sectorally heterogeneous demand shock emanated from belligerent countries, as a result of which Spain expanded its manufacturing employment and exports, while income growth between the north and south in Spain diverged. To quantify and analyse the role of mobility costs I build and estimate a multi-sector economic geography model that allows for sectoral and spatial mobility costs. Spatial mobility costs dominated with an estimated 80% of reallocation of labor taking place within rather than between provinces. I use the estimated model to calculate counterfactuals to examine the effects of and interaction between output and input market integration: Comparing to the non-shock counterfactual I find that the WWI-shock increased manufacturing employment by 10%, and induced highly uneven spatial development with the north growing 27% faster. The shock constituted a 6% increase in market size and increased aggregate real incomes by 20%. Lowering mobility costs by 10% increases real income gains from the WWI-shock by an additional 3%, and exceeds gains in the non-shock scenario, suggesting that labor market integration and output market integration are complements.

Work in Progress

Is Tourism good for Locals? Evidence from Barcelona (with Treb Allen, Sharat Ganapati and Rocio Madera)

Labor Market Dynamics and Sectoral Diversity (with Illenin Kondo and François de Soyres)

Transport Networks and Internal Trade Costs: Quantifying the Gains from Repealing the Jones Act (with Woan Foong Wong and Scott N. Swisher IV)

Globalization and Taste Heterogeneity: Evidence from Hollywood (with Konrad Adler)