We study how US immigration policy and the Internet boom affected not just the US, but also led to a tech boom in India. Students and workers in India acquired computer science skills to join the rapidly growing US IT industry. As the number of US visas was capped, many remained in India, enabling the growth of an Indian IT sector that eventually surpassed the US in IT exports. We leverage variation in immigration quotas and US demand across occupations to show that India experienced a ‘brain gain’ when the probability of migrating to the US was higher. Changes in the US H-1B cap induced changes in fields of study, and occupation choice in India. We then build and estimate a quantitative model incorporating trade, innovation, and dynamic occupation choice in both countries. We find that high-skill migration raised the average welfare of workers in each country, but had distributional consequences. The H-1B program induced Indians to switch to computer science occupations, and helped drive the shift in IT production from the US to India. We show that accounting for endogenous skill acquisition is key for quantifying the gains from migration.

We characterize how firms structure supply chains under climate risk. Using new data on the universe of firm-to-firm transactions from an Indian state, we show that firms diversify sourcing locations, and that suppliers exposed to climate risk charge lower prices. Our event-study analysis shows firms with suppliers in flood-affected districts experience a temporary decline in inputs, followed by a return to original levels. We develop a general equilibrium spatial model of firm input sourcing under climate risk. Firms diversify identical inputs from suppliers across space, trading off the probability of a climate disruption against higher input costs. We quantify the model using data on 271 Indian regions, showing real wages vary across space and are correlated with geography and productivity. Wages are inversely correlated with sourcing risk, giving rise to a cost minimization-resilience tradeoff. Supply chain diversification unambiguously reduces real wage volatility, but ambiguously affects their levels, as diversification may come with higher input costs. While diversification helps mitigate climate risk, it exacerbates the distributional effects of climate change by reducing wages in regions prone to more frequent shocks.

Neighborhoods are strong determinants of both economic opportunity and criminal activity. Does improving connectedness between segregated and unequal parts of a city predominantly import opportunity or export crime. We use a spatial general equilibrium framework to model individual decisions of where to work and whether to engage in criminal activity, with spillovers across the criminal and legitimate sectors. We match at the individual level various sources of administrative records from Medellin, Colombia, to construct a novel, granular dataset recording the origin and destination of both workers and criminals. We leverage the rollout of a cable car system to identify key parameters of the model, informing how changes in transportation costs causally affect the location and sector choices of workers and criminals. Our counterfactual exercises indicate that, when improving the connectedness of almost any neighborhood, overall criminal activity in the city is reduced, and total welfare is improved.

Emerging economies often feature low-quality institutions, generating micro-level trade frictions. In these settings, firms may rely on cultural-proximity-based informal institutions to overcome such frictions. We quantify the aggregate effects of cultural proximity in a production network. Using new microdata on firm-to-firm trade from India with information on prices, transactions, and caste and religious connections, we find that higher cultural proximity reduces prices and fosters trade at intensive and extensive margins. Our evidence suggests these results are driven by firms trying to overcome frictions imposed by low-quality institutions. Guided by these facts, we propose a quantitative firm-level production network model, where cultural proximity and institutional quality influence trade and matching costs. Our counterfactual exercises indicate that an economy composed of culturally closer firms features lower costs, lower prices, higher sales and higher welfare with respect to an economy with culturally distant firms.

How does income from international migrant labor affect the long-run development of migrant-origin areas? We leverage the 1997 Asian Financial Crisis to identify exogenous and persistent changes in international migrant income across regions of the Philippines, derived from spatial variation in exposure to exchange rate shocks. The initial shock to migrant income is magnified in the long run, leading to substantial increases in income in the domestic economy in migrant-origin areas; increases in population education; better-educated migrants; and increased migration in high-skilled jobs. 77.3% of long-run income gains are actually from domestic (rather than international migrant) income. A simple model yields insights on mechanisms and magnitudes, in particular, that 23.2% of long-run income gains are due to increased educational investments in origin areas. Improved income prospects from international labor migration not only benefit migrants themselves, but also foster long-run economic development in migrant-origin areas.

We provide one of the first estimates of elasticities of substitution across suppliers within the same product. We estimate these elasticities by using new real-time administrative tax data on product-level prices and quantities with firm-to-firm transactions, and leveraging the geographic and temporal variation from the Covid-19 lockdowns in India. Suppliers are highly complementary even at this granular level, with an estimated elasticity of 0.55, thus amplifying negative shocks by transmitting them through the supply chain. We quantify this transmission and show that under our estimated elasticities, the overall fall in output is substantial and widespread. In policy counterfactuals, we quantify the importance of firm connectivity separately from firm size, and of targeting aid to connected firms. Protecting more connected firms mitigates output declines non-linearly with the size of the productivity shock.

This paper studies the role of customer and supplier acquisition in shaping firm dynamics and aggregate productivity. Using transaction-level data from a large Indian state, we document lifecycle patterns of customer and supplier networks. We find that younger firms have fewer customers and suppliers, lower sales and intermediate expenditures, and higher output prices and input costs. Motivated by these patterns, we develop a model of endogenous network formation where heterogenous firms undertake costly acquisition of customers and suppliers over the lifecycle. We study the normative properties of the model and find that the decentralized equilibrium is inefficient due to vertical and search externalities. Inefficient pricing and acquisition choices lead to quantitatively large aggregate productivity losses. We use the model to study how differences in acquisition technology map to productivity differences. We find that improvements in acquisition technology can generate sizable productivity gains, and that improvements in allocative efficiency are central for delivering these gains.