Michael Peters Publications

The extent to which women participate in the labor market and have access to formal employment differs greatly across Indian states. In this paper we build on the methodology developed by Hsieh, Hurst, Jones, and Klenow (2019) to estimate the productivity consequences of such differences. Using rich microdata on occupational sorting and earnings, our theory allows to separately identify labor demand distortions (e.g., discrimination in hiring for formal jobs) from labor supply distortions (e.g., frictions that discourage women’s labor force participation). We find that both demand distortions and supply distortions are negatively related to state-level economic development. Equalizing distortions across Indian states could raise state-level productivity by up to 15%.

Does economic growth close labor market-linked gender gaps that disadvantage women? Conversely, do gender inequalities in the labor market impede growth? To inform these questions, we conduct two analyses. First, we estimate regressions using data on gender gaps in a range of labor market outcomes from 153 countries spanning two decades (1998-2018). Second, we conduct a systematic review of the recent economics literature on gender gaps in labor markets, examining 16 journals over 21 years. Our empirical analysis demonstrates that growth is not a panacea. While economic gender gaps have narrowed and growth is associated with gender gap closures specifically in incidence of paid work, the relationship between growth and labor market gaps is otherwise mixed, and results vary by specification. This result reflects, in part, the gendered nature of structural transformation, in which growth leads men to transition from agriculture to industry and services while many women exit the labor force. Disparities in hours worked and wages persist despite growth, and heterogeneity in trends and levels between regions highlight the importance of local institutions. To better understand whether gender inequalities impeded growth, we explore a nascent literature that shows that reducing gender gaps in labor markets increases aggregate productivity. Our broader review highlights how traditional explanations for gender differences do not adequately explain existing gaps and how policy responses need to be sensitive to the changing nature of economic growth. We conclude by posing open questions for future research.

Structural transformation in most currently developing countries takes the form of a rapid rise in services but limited industrialization. In this paper, we propose a new methodology to structurally estimate productivity growth in service industries that circumvents the notorious difficulties in measuring quality improvements. In our theory, the expansion of the service sector is both a consequence—due to income effects—and a cause— due to productivity growth— of the development process. We estimate the model using Indian household data. We find that productivity growth in non-tradable consumer services such as retail, restaurants, or residential real estate, was an important driver of structural transformation and rising living standards between 1987 and 2011. However, the welfare gains were heavily skewed toward high-income urban dwellers.

Structural transformation in most currently developing countries takes the form of a rapid rise in services but limited industrialization. In this paper, we propose a new methodology to structurally estimate productivity growth in service industries that circumvents the notorious difficulties in measuring quality improvements. In our theory, the expansion of the service sector is both a consequence—due to income effects—and a cause—due to productivity growth—of the development process. We estimate the model using Indian household data. We find that productivity growth in nontradable consumer services such as retail, restaurants, or residential real estate was an important driver of structural transformation and rising living standards between 1987 and 2011. However, the welfare gains were heavily skewed toward high-income urban dwellers.

Virtually all theories of economic growth predict a positive relationship between population size and productivity. In this paper, I study a particular historical episode to provide direct evidence for the empirical relevance of such scale effects. In the af- termath of the Second World War, 8 million ethnic Germans were expelled from their domiciles in Eastern Europe and transferred to West Germany. This inflow increased the German population by almost 20%. Using variation across counties, I show that the settlement of refugees had large and persistent effects on the size of the local popula- tion, manufacturing employment, and income per capita. These findings are quantita- tively consistent with an idea-based model of spatial growth if population mobility is subject to frictions and productivity spillovers occur locally. The estimated model im- plies that the refugee settlement increased aggregate income per capita by about 12% after 25 years and triggered a process of industrialization in rural areas.

Virtually all theories of economic growth predict a positive relationship between population size and productivity. In this paper, I study a particular historical episode to provide direct evidence for the empirical relevance of such scale effects. In the aftermath of the Second World War, 8 million ethnic Germans were expelled from their domiciles in Eastern Europe and transferred to West Germany. This inflow increased the German population by almost 20%. Using variation across counties, I show that the settlement of refugees had large and persistent effects on the size of the local population, manufacturing employment, and income per capita. These findings are quantitatively consistent with an idea‐based model of spatial growth if population mobility is subject to frictions and productivity spillovers occur locally. The estimated model implies that the refugee settlement increased aggregate income per capita by about 12% after 25 years and triggered a process of industrialization in rural areas.

The last decades have seen a significant increase in the concentration of economic activity. Firms are getting bigger and the top firms account for a larger and larger share of employment and sales. The paper The ‘Matthew effect’ and market concentration: Search complementarities and monopsony Power provides a novel and intriguing take on these patterns. It starts from the premise that production is subject to search frictions. Producing firms need to find retailers to sell their goods to consumers. Similarly, retailers need to find producers to actually have something to sell. Crucially, both producers and retailers can decide on their search effort and search more intensely if the return of doing so is large.

Delegating managerial tasks is essential for firm growth. Most firms in developing countries, however, do not hire outside managers but instead rely on family members. In this paper, we ask if this lack of managerial delegation can explain why firms in poor countries are small and whether it has important aggregate consequences. We construct a model of firm growth where entrepreneurs have a fixed time endowment to run their daily operations. As firms grow large, the need to hire outside managers increases. Firms' willingness to expand therefore depends on the ease with which delegation can take place. We calibrate the model to plant-level data from the United States and India. We identify the key parameters of our theory by targeting the experimental evidence on the effect of managerial practices on firm performance from Bloom et al. (2013). We find that inefficiencies in the delegation environment account for 11 percent of the income per capita difference between the United States and India. They also contribute to the small size of Indian producers, but would cause substantially more harm for US firms. The reason is that US firms are larger on average and managerial delegation is especially valuable for large firms, thus making delegation efficiency and other factors affecting firm growth complements.

Markups vary systematically across firms and are a source of misallocation. This paper develops a tractable model of firm dynamics where firms' market power is endogenous and the distribution of markups emerges as an equilibrium outcome. Monopoly power is the result of a process of forward-looking, risky accumulation: firms invest in productivity growth to increase markups in their existing products but are stochastically replaced by more efficient competitors. Creative destruction therefore has pro-competitive effects because faster churn gives firms less time to accumulate market power. In an application to firm-level data from Indonesia, the model predicts that, relative to the United States, misallocation is more severe and firms are substantially smaller. To explain these patterns, the model suggests an important role for frictions that prevent existing firms from entering new markets. Differences in entry costs for new firms are less important.