The Demographic Origins of Premature Deindustrialization
Draft coming soon!
This paper examines whether accelerated demographic transitions—by shrinking the young-adult (25–34) population share earlier—contribute to premature deindustrialization by changing economies’ sectoral comparative advantage. In a country-year panel, instrumenting the 25-34 population share with birth rates lagged 25-34 years, I show that larger young-adult cohorts predict higher manufacturing employment and larger manufacturing humps. IPUMS International microdata from more than 80 countries and household consumption data show that manufacturing work and durable-goods spending are concentrated among younger workers and households, whereas service employment rises with age and has steeper wage-age profiles. I quantify these mechanisms in a multi-sector open-economy OLG model with age-varying task productivity, mobility frictions, durable demand, and trade. Replacing Thai with historical U.S. demographics around the agricultural transition raises mean manufacturing employment by 3.4 percentage points, peak manufacturing employment by 3.8 points, and cumulative real output per capita growth by 53 points; 20 points come from life-cycle labor allocation and durable demand.
Trade, Financial Frictions, and the Missing Manufacturing Window
with Santiago Etchegaray
Draft | CEMFI WP version | Slides
Submitted
Why do some economies experience a pronounced manufacturing phase during structural transformation, while others move more directly into low-skilled services? This paper shows that financial underdevelopment, by shaping export competitiveness and domestic investment demand, is a quantitatively important driver of flat-manufacturing paths. Motivating evidence links financial depth to manufacturing activity and export performance. We then quantify the mechanism in a dynamic multi-country model of structural transformation and trade, where financial underdevelopment both weakens competitiveness in finance-dependent sectors and lowers demand for manufacturing-intensive investment goods. Moving flat-manufacturing economies halfway to the financial frontier closes over a quarter of the observed flat–steep peak gap; it raises real output per worker by 13 to 17 percent and real consumption per worker by 8 to 12 percent. Paired with lower nonfinancial trade costs, the same financial improvement closes almost three quarters of the peak gap, as finance shapes the manufacturing response that openness amplifies.
Tariffs as Taxes on Capital
with Rubén Domínguez-Díaz, José-Elías Gallegos and Javier Quintana
Draft available upon request
Tariffs tax imported goods, but their macroeconomic effects depend on whether those goods are consumed, used as inputs, or used to build capital. This paper fills a missing data gap by constructing a multi-country investment input-output matrix that traces each sector’s capital goods to their origin country-sector. Embedded in a multi-country, multi-sector New Keynesian model, the matrix shows that tariffs on capital-goods are distinct because investment is durable and forward-looking. In a uniform US tariff experiment, including capital more than doubles the US real GDP contraction, from 1.2 to about 2.5 percent. We further show that aggregate outcomes vary with the targeted sector’s exposure: investment-goods exposure predicts larger aggregate output contractions, while final-demand exposure predicts larger inflation increases. Applying the model to the 2025–26 US–China tariffs confirms the importance of tariff composition: the actual schedule yields an output contraction 1 percentage point smaller than a uniform package with the same import-weighted average tariff path.
IMF Governance in a Fragmenting World
with Martín Gonzalez-Eiras
Draft available upon request
We develop a welfare-based theory of IMF governance in which voting weights and contributions reflect economic size, crisis risk, and trade linkages that transmit crises across countries. In the relatively balanced risk environment of Bretton Woods, the efficient voting rule can be implemented by quotas proportional to GDP at PPP and openness. After Bretton Woods, as IMF borrowing shifted toward emerging and developing economies, quotas remain optimal, but vote aggregation must account for unequal crisis risk. In a bipolar world with alliance-dependent trade costs, the model’s efficient allocation gives more voice to China and countries exposed to China-centered trade. Without governance reform, a China-centered coalition may find the Fund less attractive, raising the risk of institutional separation.
The Global Reach of EU Regulation: Evidence from Third-Country Trade
This paper tests the “Brussels effect”: whether EU non-tariff measures (NTMs) shape not only trade with the EU but also third-country trade in the same products. Using UN TRAINS NTM data matched to HS6 bilateral flows from UN Comtrade/WITS, it estimates how changes in EU NTMs affect the comovement between an exporter’s shipments to the EU and its shipments to non-EU destinations, controlling for tariffs and rich fixed effects. The results show a positive and significant propagation effect, consistent with EU regulation influencing firms’ global market choices.