Selected research

A Competitive Theory of Mismatch

This paper constructs a general competitive equilibrium model of worker-job mismatch. Mismatch is micro-founded and driven by the inability of market participants to fully anticipate and instantaneously adjust to changes in market conditions. A rise in mismatch increases aggregate unemployment and vacancies, and it raises their dispersion across sub-markets (skills, industries, occupations, or geographic regions). Without appealing to a reduced-form aggregate matching function, the theory provides an explanation for the shifts in the U.S. Beveridge curve consistent with microeconomic evidence on labor market dispersion. The wage predictions of the model are consistent with microeconometric earnings equations.

Disease and diversity in Africa's Long-term Economic Development

This paper establishes a line of continuity between pre-colonial economic conditions and the modern era. Using the Standard Cross-Cultural Sample, a rich ethnographic account of pre-industrial societies at the time of their first encounter with Europeans, I find that pathogen stress has a negative and significant effect on the sophistication of pre-modern economies. A likely channel is the effect of disease on social segmentation and ethnic diversity. A causal link between disease and diversity holds even in current times, especially in Africa. The results weigh against the "colonial origins" hypothesis that disease influences current economic outcomes only through European settlements.

Random Behavior and Market Demand

Gary Becker has shown that the Law of Demand could result from an irrational decision-making process in which individuals choose randomly among feasible alternatives. His analysis relies on a uniform distribution, non-satiation, and a two-commodity case. This paper presents a model of random behavior that relaxes all these assumptions, thereby allowing the study of alternative and potentially more realistic decision-making assumptions. Under these general conditions, it is shown that mean (or market) demands satisfy all the properties of standard demand theory including symmetry and negative semi-definitiveness of the Slutsky matrix. The results accommodate prominent choice behaviors discussed in decision theory.

"Gallantry in Action": Evidence of Favorable Selection in a
Volunteer Army (with Tom Koch)

The received wisdom of all-volunteer armies depends crucially upon selection: are volunteers better soldiers than drafted men? We test for adverse selection using an innovative collection of data sets that covers the majority of the U.S. Army enlistments during World War II. Rather, we find favorable selection: volunteer soldiers earned distinguished awards at a higher rate than drafted men. This result is consistent across a variety of specifications and with rich sets of controls. Productivity differences between volunteers and draftees increased after Pearl Harbor. The estimated monetary benefits of increasing voluntary participation, holding the number of awards constant, are sizable.

Reconsidering the Fiscal Advantages of Conscription (with Tom Koch)

A standard analysis of conscription claims that, by lowering the budgetary cost of the military, a draft could be less distortionary than a volunteer army, especially when military needs are large. However, when skills are heterogeneous, volunteer enlistments leave more high-income earners in the civilian sector, leading to a larger tax base. This paper reconsiders the advantages of conscription in an economy where agents are privately informed of their civilian and military productivities. In a calibrated version of the model, we find that voluntary enlistments lead to less distortionary taxation and higher social welfare than a draft. Drafts are more distortionary when military needs are large.

Population Growth and Technological Change: A Re-examination

The relationship between population growth and technological change is of obvious importance. Past studies of this relationship, notably Kremer (1993), provide evidence consistent with the view that population spurs technological innovation. This paper re-examines the available evidence and presents new predictions emerging from a slightly more general framework. It is found that existing time series evidence relies entirely upon transient circumstances such as the modern demographic transition. Evidence based on geographically isolated societies after the last glaciation, a "natural experiment," becomes insignificant after controlling for possible confounding influences.

Agricultural Productivity, Structural Change, and Economic Growth in Post-Reform China (with Kang Hua Cao)

We examine the role of agricultural productivity in China's post-reform sectoral reallocation and economic growth. We estimate agriculture's TFP growth considering labor quality differentials, and construct the labor input using microeconomic farm data. The labor input in agriculture decreased at 5-6% annually while agricultural TFP grew at 6.5-7%. Using a calibrated two-sector general equilibrium model, we find that if agricultural TFP growth is reduced by a half, the labor reallocation observed in China would take place in over 50 years, and the post-reform per capita growth rate would be reduced between 20 to 50% from its predicted level.

Selected publications

Airborne Diseases: Tubercolusis in the Union Army

This paper examines the medical histories of a sample of 25,000 Union Army soldiers and veterans to study the determinants of diagnosis, discharge, and mortality from tuberculosis. We find that water and airborne diseases during the war contributed significantly to the presence of tuberculosis. Height and a higher body mass index (BMI) are also associated with protection against TB but these effects are not always robust. As an upper bound, we estimate that the contribution of modern gains in height and in BMI to the mortality decline of tuberculosis ranges from one-fourth to one-half with the rest explained by the decline in the prevalence of water and airborne diseases, especially diarrhea, dysentery, and typhoid. The paper finds weaker support for alternative hypotheses that rely on occupational influences and exogenous changes in the virulence of tuberculosis.

Explorations in Economic History, 2011, Vol. 48(2), 325-342

Altruism, Fertility, and the Value of Children: Health Policy Evaluation and Intergenerational Welfare (with Rodrigo Soares)

This paper accounts for the value of children and future generations in the evaluation of health policies. This is achieved through the incorporation of altruism and fertility in a "value of life" type of framework. We are able to express adults' willingness to pay for changes in child mortality and also to incorporate the welfare of future generations in the evaluation of current policies. Our model clarifies a series of puzzles from the literature on the "value of life" and on intergenerational welfare comparisons. We show that, by incorporating altruism and fertility into the analysis, the estimated welfare gain from recent reductions in mortality in the U.S. easily doubles.

Journal of Public Economics, 2009, Vol. 93(1-2), 280-295

Escaping High Mortality

This paper develops an economic analysis of mortality to account for the mortality decline during the demographic transition. We propose a unified growth model in which there is intra- and intergenerational health transmission: parental health affects child survival and investments in early life improve health over the entire life-cycle. Based on data from England and Wales between 1640 and 2000, we show that the role of economic changes in mortality is larger than previously estimated. As in current estimates, contemporary income has a minor impact on mortality change. Most of the economic influences, however, are unaccounted for by contemporary relationships.

Journal of Economic Growth, 2007, Vol. 12(4), 351-387

Economic Development and the Escape from High Mortality

This paper studies the characteristic features of the escape from high mortality as recorded from the historical experience of Northwestern Europe and from the current experience of less developed countries. The paper documents stylized facts of mortality change and measures the contribution of economic development, represented by income per capita, to the mortality decline during the second half of the twentieth century. The paper argues that improvements in economic conditions since the eighteenth century are an important factor behind the decline in death rates in developed countries and in the subsequent reduction of death rates in less developed countries. We show that economic development lowers mortality through differential effects in infectious disease mortality and that quantitatively, income growth is able to account for between one-third to one-half of the recent mortality decline.

World Development, 2007, Vol. 35(4), 543-568

Equilibrium, Convergence, and Capital Mobility in Neoclassical Models of Growth

We study convergence in economies integrated by capital trade. Equilibrium generates transitional dynamics even in the absence of internal adjustment costs or borrowing constraints. Trade lowers the speed of convergence of capital-importing economies but increases the convergence of capital-exporting economies.

Economics Letters, 2008, Vol. 99(1), 10-13

Capital Accumulation, Unemployment, and the Putty-Clay

This note studies the dynamics of labor markets in a putty-clay framework. It analyzes the evolution of job creation and job destruction in an economy without market frictions. Unemployment and labor market flows emerge under putty-clay technologies because low productive jobs become unused factors. As capital accumulates, firms destruct low productive jobs by obsolescence. Simultaneously, the use of capital intensive technologies creates new jobs by the low substitution between capital and labor.

Economics Bulletin, 2004, Vol 5(19), 1-8

Income Distribution, Human Capital, and Economic Growth in Colombia

Colombian income distribution has followed a clear path during the last two decades: in the second half of the 1970s, human capital accumulation reduced the dispersion of income distribution, and lead to a period of stagnation between 1983 and 1990, when mobility declined. After the structural reforms, a skill-bias technological change, the wage differential for skilled workers increased inequality by a polarization in the bi-modal distribution of income. These topics are discussed in the paper along some dynamic aspects of income and educational mobility in Colombia.

Journal of Development Economics, 2001, Vol. 66(1), 271-287

Income Distribution and Macroeconomics in Colombia

This paper studies the relation between macroeconomic variables and the distribution of income in Colombia. We relate the dynamics of aggregate economic variables with the cross-section of disaggregate income to determine the transmission and propagation mechanisms of aggregate shocks. The most important finding is a strong negative effect of inflation rates on the distribution of income by education groups and productive sectors.

Journal of Income Distribution, 2007, Vol. 16(2), 6-24

Old working papers

Growth and Unemployment (without market frictions)

This paper introduces structural unemployment into an otherwise standard growth model. Structural unemployment represents obsolescence of skills, a form of unemployment necessary to maximize aggregate output. The theory unambiguously identifies the winners and losers of more rapid technical change. Faster labor-augmenting technical change (whether exogenously or endogenously determined) increases economic growth. However, a higher opportunity cost of capital increases the unemployment of unskilled workers.