Juan Soto-Diaz

Juan Soto-Diaz

Work in Progress

2022

Booming Sector, Multinationals, and Local Economic Development

Can a resource boom induce long-term local economic development? Do multinational companies (MNCs) foster such equilibria or move away the economic gains from the booming sector? This study examines the heterogeneous economic impacts of MNCs and domestic firms on the characterization of the contemporaneous and long-term effects of resource booms in local labor markets. Informed by a spatial equilibrium model that features a pre- and post-booming economy with productive linkages and endogenous amenities, the empirical analysis exploits predetermined geology to identify the average and heterogeneous local economic impacts of a resource boom in an emerging resource-oriented country. Consistent with the model’s predictions, the evidence suggests that spillovers from local productive linkages of the booming sector can prevent productivity losses by crowding-out effects in the form of local Dutch-Disease, with higher productivity spillovers for MNCs in comparison to domestic firms. However, these spillovers are mediated by dis-amenities rising from externalities in production, and limited by the MNCs’ propensity to offshoring.

Global Value Chains, Industrial Upgrading, and Local Labor Markets

Moving from the production of low-processed commodities to downstream basic manufacturing activities within a value chain is a popular policy strategy in emerging resource-rich economies. However, the welfare and productivity gains from this “route to industrialisation”, and its distributional impacts in local labor markets are not unambiguous. This study exploits variation in the upgrading from low-processed mine copper to smelting and refined copper exports in Chile, the world’s largest copper producer, with two main objectives:(1) identifying the role of resource endowments and export competition in inducing industrial upgrading in local labor markets; and (2) estimating the local welfare and productivity gains from this process of industrial upgrading. The results suggest that:(1) competition in global value chains plays a major role in shaping the development of downstream industries in the smelting and refinement of minerals;(2) the local welfare and productivity gains from industrial upgrading in local labor markets are small; and (3) due to comparative advantages given by resource endowments, the potential gains from industrial policy are largely concentrated in the primary segment of mineral extraction.

How Do Local Labor Markets Look From Above? An Automated Satellite-Imagery Approach

Traditionally the geographical boundaries of local labor markets are delineated based on commuting flow data. However, commuting data are expensive to collect, are sporadically collected in developed countries and rarely available in less developed countries. Yet, recent advances in computing capacity and increased availability of satellite imagery offers a unique opportunity to generate local labor market areas in poor environment contexts in a cheap, frequent and automated way. By relying on the well documented mapping between land-use and labor commuting, this paper shows that land-use cover captured with satellite images provides sufficient information to delineate the spatial boundaries of local labor market areas, providing an automated, replicable, and efficient methodology of identification. The performance and practicality of our methodology is compared to other standard definitions and methods in the literature, such as commuting zones. Our approach replicates the performance of commuting-based methods to delineate local labor markets with a better identification of the heterogeneity among these spatial units