Alonso Alfaro Ureña
Featured Working Papers
Second-round Revise and Resubmit at the at Quarterly Journal of Economics.
Abstract: We study the effects of becoming a supplier to multinational corporations (MNCs) using tax data tracking firm-to-firm transactions in Costa Rica. Event-study estimates reveal that domestic firms experience strong and persistent gains in performance after supplying to a first MNC buyer. Four years after, domestic firms employ 26% more workers and have a 4 to 9% higher total factor productivity (TFP). These effects are unlikely to be explained by demand effects or changes in tax compliance. Moreover, suppliers experience a large drop in their sales to all other buyers except the first MNC buyer in the year of the event, followed by a gradual recovery. The dynamics of adjustment in sales to others suggests that firms face short-run capacity constraints that relax over time. Four years later, the sales to others grow by 20%. Most of this growth comes from the acquisition of new buyers, which tend to be "better buyers" (e.g., larger and with more stable supplier relationships). Finally, surveys of domestic firms and MNCs provide further insights into the wide-ranging benefits of supplying to MNCs. According to our surveys, these benefits range from better managerial practices to a better reputation.
Abstract: This paper estimates the effects of multinational corporations (MNCs) on workers. To that end, we combine microdata on all formal worker-firm and firm-firm relationships in Costa Rica with an instrumental variable approach that exploits shocks to the size of MNCs in the country. First, using an event-study design, we find an MNC wage premium of nine percent. This premium reflects above market wages rather than compensation for disamenities. Next, we study the effects of MNCs on workers in domestic firms. As MNCs bring jobs that pay a premium, they improve outside options by altering both the level and composition of labor demand. MNCs can also enhance the performance of domestic employers through input-output linkages. Shocks to firm performance may then pass through to wages. We show that the growth rate of annual earnings of a worker experiencing a one standard deviation increase in either her labor market or firm-level exposure to MNCs is one percentage point higher than that of an identical worker with no change in either MNC exposure. Finally, we develop a model to rationalize the reduced-form evidence and estimate structural parameters that govern wage setting in domestic firms. We model MNCs as paying a wage premium and buying inputs from domestic firms. When hiring workers, firms incur recruitment and training costs. We find that workers are sensitive to improvements in outside options. Moreover, we estimate that the marginal recruitment and training cost of the average domestic firm is 90% of the annual earnings of a worker earning the competitive market wage. This high cost allows incumbent workers to extract part of the increase in firm rents coming from intensified linkages with MNCs.
(Mis)matching to Good Suppliers: Evidence from Transactions Microdata
[Draft available upon request]
Responsible Sourcing? Theory and Evidence from Costa Rica
Firm Export Dynamics in Interdependent Markets
Firms exhibit persistence in their export destinations and these destinations tend to be similar to their home market or to other export destinations of the firm. To account for these patterns in firms’ export decisions, we develop a dynamic model featuring country-specific fixed and sunk export costs, and allow the fixed costs that a firm pays to export to a country in a period to depend on which other countries the firm exports to in the same period. Sunk costs and complementarities across countries in fixed export costs jointly imply that a firm’s export decision in a country and period will impact its export decisions in any other country in any future period. Each firm in our model thus decides in every period the bundle of countries it exports to by solving a forward-looking dynamic combinatorial discrete choice model. Using a novel solution algorithm and detailed data for the period 2005-2015 on the export choices of the universe of manufacturing firms located in Costa Rica, we study the importance that cross-country complementarities play in determining firms’ export decisions.
The Evolution of Labor Earnings and Inequality in Costa Rica: Micro-Level Evidence
[Draft available soon]