Simon Galle

Working Papers

The Labor Market Impact of Technical Change: Inspecting the Mechanisms

with Fenella Carpena

We boil down the impact of technical change on the wage distribution to three fundamental elasticities, and show how these govern the impact of, e.g., artificial intelligence on the labor market.

 

Competition, Financial Constraints and Misallocation: Plant-level Evidence from Indian Manufacturing 

I study how the interplay of market power and financial constraints affects firm growth and aggregate efficiency.

 

Publications

[4] The Unequal Effects of Trade and Automation across Local Labor Markets

The Journal of International Economics (2024) 

with Linnea Lorentzen

Slides, Online Appendix, Replication Package

Substantive question: How does the China shock compare to automation of labor in its GE impact across US commuting zones? We show that the China shock has stronger distributional effects, but its impact on aggregate gains is less than a third of automation’s impact. The combined shock (automation+China) fits the data better than either of the shocks separately.

Methodological contributions: Our framework models both trade and automation as sector-specific shocks, tractably incorporates several margins of labor market adjustment, and transparently estimates the three associated labor supply elasticities using 2SLS: the reallocation elasticity, the employment elasticity, and the intensive margin elasticity.

 

[3] Slicing the Pie: Quantifying the Aggregate and Distributional Effects of Trade

The Review of Economic Studies (2023) 

with Andrés Rodríguez-Clare and Moises Yi

Slides, Online Appendix, Replication Package

Theoretical contributions: We introduce a Roy-Frechet model of worker reallocation in the benchmark multi-sector gravity model. This setup generalizes the specific-factors intuition to a setting with labor reallocation, leads to a parsimonious formula for the group-level welfare effects from trade, and nests the aggregate results in Arkolakis, Costinot and Rodriguez-Clare (2012). Like the trade elasticity, the reallocation elasticity governs the aggregate gains from trade. Moreover, it also determines the size of the distributional effects.

Empirical contributions: We structurally estimate the reallocation elasticity in a transparent 2SLS setup, leveraging the ADH findings. In the quantification, we find that the China shock increases average welfare but some groups experience losses as high as five times the average gain.

Additional results on: the inequality-adjusted gains from trade, voluntary non-employment and involuntary unemployment, and a comparison of the college premium vs. the general specific factors impact as drivers of inequality.

 

[2] Elections and Selfishness 

Electoral Studies (2021)

with Kjetil Bjorvatn, Lars Ivar Oppedal Berge, Edward Miguel, Daniel Posner, Bertil Tungodden, and Kelly Zhang  (equal authorship by Kjetil and me)

Online Appendix, BI Business Review

Motivation: Elections affect the division of resources in society and are occasions for political elites to make appeals rooted in voters’ self-interest. Hence, elections may erode altruistic norms and cause people to behave more selfishly.

What we do and find: We test our intuition using Dictator Games in a lab-in-the-field experiment involving a sample of more than 1,000 individuals in Kenya and Tanzania, adopting two approaches : within-lab experimental priming, and cross-lab variation in exposure to an election campaign. Our results suggest that elections may affect social behavior in important—and previously unrecognized—ways.

 

[1] Ethnically Biased? Experimental Evidence from Kenya

Journal of the European Economic Association (2020)

with Lars Ivar Oppedal Berge, Kjetil Bjorvatn, Edward Miguel, Daniel Posner, Bertil Tungodden, and Kelly Zhang

Previous version: How Strong Are Ethnic Preferences?

Online Appendix, Replication Files,  VoxEU Column