2015 Theses Doctoral

Essays on Development Economics

Kumler, Todd

This dissertation uses individual-level and aggregate data to study topics in development economics. The first chapter analyzes the impact of Chinese competition on Mexican labor markets. Over the past two decades, the growth of manufacturing in China has significantly impacted international trade. This paper explores how the dramatic rise in Chinese manufacturing exports influences employment in Mexico through product competition in the US export market. Following Autor, Dorn, and Hanson (2013), we compare employment outcomes for formal workers living in different Mexican labor markets to changes in Chinese import competition from 1993 to 2003. We find that exposure to Chinese competition has negative labor market effects for formally employed Mexican workers. In particular, a formally employed individual working in a labor market that experiences the average change in exposure to Chinese competition is 2.0 to 2.7 percentage points less likely to be formally employed in five years.
The second chapter examines the under-reporting of workers wages in Mexico. Non-compliance of firms with tax regulations is a major constraint on state capacity in developing countries. We focus on an arguably under-appreciated dimension of non-compliance: under-reporting of wages by formal firms to evade payroll taxes. We compare two sources of wage information from Mexico --- firms' reports of individuals' wages to the Mexican social security agency and individuals' responses to a household labor-force survey --- to investigate the extent of wage under-reporting and how it responded to an important change in the social security system. We document that under-reporting by formal firms is extensive, and that compliance is better in larger firms. Using a difference-in-differences strategy based on the 1997 Mexican pension reform, which effectively tied pension benefits more closely to reported wages for younger workers than for older workers, we show that the reform led to a relative decline in under-reporting for younger workers. The empirical patterns suggest that giving employees incentives and information to improve the accuracy of employer reports can be an effective way to improve payroll-tax compliance.
The third chapter studies the effect of trade liberalization on fertility, sex ratios, and infant mortality in India. We compare women and births in rural Indian districts more or less exposed to tariff cuts. For low socioeconomic status women, tariff cuts increase the likelihood of a female birth and these daughters are less likely to die during infancy and childhood. On the contrary, high-status women are less likely to give birth to girls and their daughters have higher mortality rates when more exposed to tariff declines. Consistent with the fertility-sex ratio trade-off in high son preference societies, fertility increases for low-status women and decreases for high-status women. An exploration of the mechanisms suggests that the labor market returns for low-status women (relative to men) and high-status men (relative to women) have increased in response to trade liberalization. Thus, altered expectations about future returns from daughters relative to sons seem to have caused families to change the sex-composition of and health investments in their children.