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Publications
Dysfunctional Firm Dynamics and Mexico’s Dismal Productivity Performance, 2024 (with S.Levy) . Economía LACEA Journal. Over the last three decades, Total Factor Productivity growth in Latin America has disappointed and informality persisted. To shed light on this outcome, we exploit a unique database for Mexico, a country where manufacturing exports grew from seven to 33 per cent of GDP, but labor informality barely changed, firm informality increased, and TFP growth was negative. We construct a twenty-year panel and analyze firm dynamics from two perspectives, the formal-informal and the sector composition of the economy. In the first case we show that high productivity formal firms exited; surviving firms hardly grew, and their productivity fell because more informalized than formalized; and entrants were less productive than survivors, mostly because of large informal entry. In the second case we show that while manufacturing performed relatively better than services and commerce, its contribution to TFP was modest because informality persisted in this sector; and that despite spectacular growth of manufacturing exports, the country de-industrialized. We document that for TFP, the formal-informal composition of the economy is more important than its sector composition. While our insights are based on Mexican data, they may be relevant to countries in Latin America and other regions characterized by large informal sectors.
Disconnected roads: How Transport Infrastructure Falls Short in Southern Mexico, 2025. Latin American Economic Review. This paper studies the effectiveness of transport infrastructure in promoting development in lagging regions. Using detailed road and census data combined with a spatial general equilibrium model calibrated to Mexico, we show that infrastructure investments in poorer areas are more effective when they enhance connectivity to the national network and are paired with productivity improvements. Between 2004 and 2019, Mexico's southern states received over one-fourth of all new paved roads but saw limited connectivity gains, as investments focused on low-speed, locally administered roads that primarily connected low-productivity municipalities within states. While the national road expansion raised national real income by 1.0% and welfare by 1.7%, the income elasticity with respect to new roads in the South was only half that of the North. To highlight the critical role of local economic conditions in shaping these returns to new transport infrastructure, we show that a counterfactual 2,200km highway in the South generates only one-third the welfare gains of an equivalent highway in the North—unless accompanied by a 5.5% productivity boost.
Ongoing work
Bringing Demand Within Reach: Digital Platforms, Market Access, and the Allocation of Firm Scale, 2026 (with Alvaro Cox and Felix Wellschmied). Firms in developing economies may remain small not because they produce inefficiently, but because reaching consumers is costly. We study whether third-party applications (TPAs) reduce these market-access frictions and change the allocation of firm scale. Using the Mexican Economic Census, which directly measures firm adoption of TPAs, we estimate the effects of platform diffusion across detailed sector-location markets. Our IV strategy interacts supply-driven mobile-internet expansion with markets’ initial distance from the sectoral TPA frontier. TPA diffusion reallocates sales away from both the smallest and largest firms and toward the middle of the size distribution. It strengthens the productivity–scale relationship through incumbent reallocation and selective exit, rather than through within-firm productivity growth. Consistent with a market-access mechanism, diffusion reduces multi-establishment expansion, increases formality, and adopters grow in sales and employment without becoming more productive or capital intensive. We rationalize these patterns with a general-equilibrium model in which firms differ in productivity and remoteness and can overcome remoteness through physical expansion or platform adoption. (Draft coming soon)
Historical Persistence and the Dynamics of Development,2026 (with Jonas Gathen). What explains periods of rapid economic growth? We show that they are driven by aggregate changes in the economic environment and economies slowly catching up with previous changes. Building on 40 years of plant-level manufacturing panel data for Indonesia, we show that large population changes and the slow entry, exit and growth of plants drive prolonged periods of catch-up growth. Motivated by the empirical evidence, we build a model of plant dynamics, which we estimate on the micro data along the observed growth path without assuming that the economy is at a steady state. Catch-up growth starting from initial conditions in 1975 accounts for 42\% of Indonesia’s subsequent industrialization. But catch-up growth does not become less important over time because further changes in worker and plant demographics induce new adjustments. Observed changes in government policy explain few changes in worker and plant demographics and thus drive at most 10\% of observed economic growth. (New draft coming soon)
Building Up Local Productivity: Infrastructure and Firm Dynamics in Mexico,2026 (with Matias Busso) . This paper studies how transportation infrastructure shapes local productivity through firm dynamics. Using the universe of Mexican firms from 1998 to 2018, detailed highway-network data, and quasi-random delays in planned highway construction, we show that improved market access raises local labor productivity by increasing firm productivity, firm size, entry, and survival. To quantify the aggregate and spatial implications, we develop a spatial general-equilibrium model with heterogeneous firms, endogenous entry and exit, and a realistic geography of trade costs. Calibrating the model to Mexican census and highway data, we find that highway investments between 1998 and 2018 increased welfare and real income by about half a percent, with substantial spatial reallocation of workers and production. Nearly half of the gains are driven by endogenous increases in local productivity generated by firm dynamics, primarily through better firm selection. The results show that infrastructure policy affects development not only by lowering trade costs, but also by reshaping the local firm distribution. (New draft coming soon)
Pro-Worker Labor Reforms under Large Firm Heterogeneity, 2026 (with Santiago Levy). Pro-worker labor policies often rest on a distributional premise: firms are owned by high-income entrepreneurs, workers are low-income, and higher mandated pay transfers rents from the former to the latter. In developing economies, this premise is incomplete. We study this issue in Mexico, where most firms are small or informal and many workers are recorded without monetary wages. Using the Economic Censuses, we estimate firm-level labor mark-downs after imputing labor costs for non-remunerated workers from local outside options. Preliminary results show that market power is highly heterogeneous. Formal-only estimates misrepresent both production elasticities and labor mark-downs, and the firms with the strongest product-market power are not necessarily those with the strongest labor-market power. Monopsony rents appear concentrated in particular segments of the firm-size and formality distribution, rather than pervasive across the economy. This heterogeneity changes the evaluation of pro-worker reforms. Policies targeted at firms with labor-market rents, such as restrictions on outsourcing, can raise workers’ pay with limited efficiency costs. Broad mandates, such as large minimum-wage increases, bind mostly for firms with little or no monopsony power. The results show that in economies with large firm heterogeneity, measuring market power on the full firm distribution is essential for both inference and policy design. (Draft coming soon)
Working papers
The heterogeneous impacts of import competition on Mexican manufacturing plants, 2019 (with Juan Blyde). We study the impact of import competition on Mexican firms between 2003 and 2013 by exploiting variation in Chinese import penetration across industries. We find that the trade shock induced a decline in employment, sales, exports, and productivity. Importantly, the effects are heterogeneous: smaller and less efficient plants experiencing the largest adjustments, while the most efficient plants exhibited relatively minor effects and, for some outcomes, no effects at all. The productivity gap between small and large plants has been increasing over time and that the reallocation of resources has been productivity-enhancing, particularly in sectors that have experienced large-scale import penetration from China.
The longitudinal linkage of mexico’s economic census 1999-2014, 2018 (with Matias Busso and Santiago Levy). This technical note describes the methodology to construct a longitudinal dataset using the Economic Censuses of Mexico from 1999 to 2014. The procedure is based on an algorithm that links establishments with identical or significantly similar location, legal entity and industry. Since a set of longitudinal identifiers is already available for the 2009 and 2014 Economic Censuses, it is used to validate our results, obtaining 90% accuracy. The paper links 1.44 million establishments for the period 1999-2004, 1.52 million for 2004-2009 and 2.15 million for 2009-2014.
Policy reports
NAFTA-USMCA and Wages in Mexico, 2022 (with Santiago Levy). This note focuses on some features of Mexico’s labor market that, in our view, are crucial to understand the effects of NAFTA-USMCA on wage in Mexico. In our assessment we find that (i) Despite NAFTA, average wages in Mexico did not increase from their pre-NAFTA levels, although in its absence they would have been marginally lower. (ii) So long as Mexico’s current domestic regulations remain -particularly those pertaining to labor and social insurance- it is unlikely that the U.S.-Mexico-Canada Agreement (USMCA), the trade pact that superseded NAFTA in 2019, will lead to higher average wages. (iii) If the USMCA increases labor costs significantly in the USMCA-related segment of the economy, aggregate productivity in Mexico may suffer.
Also circulates as LABOR, USMCA Forward: Building a more competitive, inclusive, and sustainable North American economy
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