Alonso Alfaro Ureña
Featured Working Papers
Research question: What are the average and distributional implications of "Responsible Sourcing" policies by multinationals in host countries?
Abstract: Responsible Sourcing (RS) requirements by multinational enterprises (MNEs) impose minimum standards on worker compensation, benefits, working conditions and other production practices at their suppliers worldwide. We develop a quantitative general equilibrium model to study the incidence of RS on firms and workers in sourcing origin countries. We show that the welfare implications of RS are a priori ambiguous, and sensitive to alternative hypotheses on the motivation behind RS by MNEs and the market environment in which these policies are implemented. We derive testable comparative statics that help discriminate between the alternative hypotheses. We then build a new database covering the near-universe of RS rollouts by more than 400 MNE affiliates in Costa Rica (CR) since 2009, and combine it with firm-to-firm transaction records and matched employer-employee administrative microdata for all CR firms. We use these data to provide new evidence on the effects of RS rollouts, discriminate between model assumptions, and calibrate the model for counterfactual analysis. We find that RS is not just "hot air", documenting significant negative effects on the sales and employment of exposed suppliers, and positive effects on the earnings of their workers. Overall, we find that RS policies by MNEs in CR have increased domestic welfare, and that the gains are concentrated among initially low-wage workers, reducing inequality.
Abstract: We extend a canonical model of export dynamics à la Das et al. (2007) to allow a firm's export costs in a country and period to depend on the other countries the firm concurrently exports to. When deciding on its set of export destinations in any period, the firm internalizes the impact exporting to a country has on its export costs in other countries. We develop a new algorithm to solve the firm's decision problem that overcomes the computational challenges inherent to the large dimensionality of its state space and choice set. We estimate firms enjoy cost reductions when exporting to countries that are geographically or linguistically close to each other, or that share deep trade agreements. These cost reductions have a positive impact on overall exports, especially to small countries and to members of deep trade agreements, counteracting the trade diversion effect of preferential trade agreements predicted by standard general equilibrium trade models.
Quarterly Journal of Economics. Volume 137, Issue 3, August 2022, 1495–1552. Working Paper w/ Online Appendix (link)
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]
The Evolution of Labor Earnings and Inequality in Costa Rica: Micro-Level Evidence
[Draft available soon]