John Morrow

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Working Papers

    


The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition


(with Swati Dhingra)

Abstract. A fundamental question in monopolistic competition theory is whether the market allocates resources optimally. This paper generalizes the Spence-Dixit-Stiglitz framework to heterogeneous firms, addressing when the market provides optimal quantities, variety and productivity. Under constant elasticity demand, each firm prices above its average cost, yet we show market allocations are first-best. When demand elasticities vary, market allocations are not optimal and reflect the distortions of imperfect competition. After determining the nature of market distortions, we investigate how integration may serve as a remedy to imperfect competition. Both market distortions and the impact of integration depend on two demand side elasticities, and we suggest richer demand structures to pin down these elasticities. We also show that integration eliminates distortions, provided the post-integration market is sufficiently large.



Citation:  (Bibtex)




    Is Skill Dispersion a Source of Productivity and Exports in Developing Countries?  
 

Abstract. Recent literature claims that skill mix within firms, in contrast to average human capital, influences the entire economy. This paper provides theoretical and empirical evidence of the linkage from skill mix to output, inequality, productivity and exports. I develop a multisector model of firms who employ teams of workers in production. In this setting I derive two main results. First, I consider what impact changes in the skill distribution from migration, education or outsourcing have on output. I find an increase in industry specific workers boosts output, but in contrast to classical models, worker spillovers to other industries may attenuate output. Second, I consider the impact of price changes caused by tariff reductions or subsidies. I show a rise in output prices raises the total wages of a worker team but changes relative wages within teams. The new relative wages depend on the supply of team members to the industry. Inequality will increase if the supply of high skilled workers is tight. This possibility of a sector boom coincident with higher inequality provides a new explantion of inequality trends beyond skill biased technical change. Empirically, my model motivates a novel specification that characterizes industries as "intensive in skill diversity" or "intensive in skill similarity." Productivity differences explained by skill mix intensity are comparable to the magnitude of training and imported inputs combined. I also find skill mix differences explain intrasector export variation better than physical or human capital.
  
  Citation:  (Bibtex)  
       
    Left, Right, Left: Income and Political Dynamics in Transition Economies  
 

(with Michael Carter)

Abstract. The political left turn in Latin America, which lagged its transition to liberalized market economies by a decade or more, challenges conventional economic explanations of voting behavior. While the implications of upward mobility for the political preferences of forward-looking voters have been studied, neither the upward mobility model nor conventional myopic median voter models are well equipped to explain Latin America’s political transformation. This paper generalizes the forward-looking voter model to consider a broad range of dynamic processes. When voters have full information on the nature of income dynamics in a transition economy, we show that strong support for redistributive policies will materialize rapidly if income dynamics offer few prospects of upward mobility for key sections of the electorate. In contrast, when voters have imperfect information, our model predicts a slow and politically polarizing shift toward redistributive voter preferences under these same non-concave income dynamics. Simulation using fitted income dynamics for two Latin American economies suggests that the imperfect information model better accounts for the observed shift back to the left in Latin America, and that this generalized, forward-looking voter approach may offer additional insights about political dynamics in other transition economies.
  
  Citation:  (Bibtex)  
       
    Benford's Law, Families of Distributions and a Test Basis  (Appendix) (Under Review)
  
 

Abstract. This paper presents improved, asymptotically valid test values for Benford's Law, a particular distribution of First Significant Digits. Also derived are new test values for heuristic tests used in the literature and small sample properties of the tests are investigated. Since not all data should be expected to satisfy Benford's Law, a simple method is presented by which all continuous distributions may be transformed to satisfy Benford with arbitrary precision and induce scale invariance, one of the properties underlying Benford's Law in the literature. This allows application of Benford tests to arbitrary samples, a hurdle to current empirical work. The results yield improved tests for Benford's law applicable to a broader class of data.

  
  Citation:  (Bibtex)  
 

 
   

Strategic Interaction in the Sex Market  (Interactive Example w/Chicago Data)

  
 

(with Yoav Sivan)

Abstract. There have been few attempts to empirically explain the pursuit of short term relationships and sex in a formal context. Previous work has lamented the paucity of empirical studies which utilize incentive driven behavior to draw conclusions and recommend policy. We provide an empirical approach derived from a game theoretic model of social interaction and apply it to a population of high interest. Specifically, we apply the approach to a population of sexually active men who have sex with men (MSM) in a large metropolitan area and derive qualitative conclusions regarding how individuals behave in the marketplace for sex.

  
  Citation:  (Bibtex)  
       
 

Other Projects

    
    First Significant Digit Laws  
 

This is a small platform independent tool which may be used to quickly apply tests related to Benford's Law.  The software allows the user to collect test statistics, make graphs of first significant digits, and perform complex data manipulation which is often required to, say, test data enumerator quality in large surveys.