RESEARCH

Working papers

Outsourcing Dynamism. Coauthored with Claudia Macaluso and Chen Yeh.

This paper investigates the increasing importance of domestic outsourcing in U.S. manufacturing. On a yearly basis, one in two manufacturing plants hires at least some of its workers through a temporary help agency. The agency is the employer of record for temporary workers, though they perform their tasks at the client business' premises.  The average share of revenue spent on such arrangements has gone up by 85 percent since 2006. We develop a methodology to transform reported expenses on temporary and leased workers into plant-level outsourced employment counts, using administrative data on the U.S. manufacturing sector. We find that  domestic outsourcing is an important margin of adjustment that plants use to modify their workforce in response to productivity shocks. Plant-level outsourced employment adjusts more quickly and is twice as responsive as payroll employment. These micro implications have significant aggregate consequences. Without taking reallocations in outsourced employment into account, the measured pace at which jobs reallocate across workplaces is underestimated. On average, we omit the equivalent of 15 percent of payroll employment reallocations in each year. However, outsourced employment churns at a much higher rate compared to its payroll counterpart. Therefore, the omission of outsourced reallocations can rationalize 37 percent of the secular decline in the aggregate job reallocation rate. Lastly, the extent of mismeasurement varies with the business cycle, falling in downturns and increasing in upturns and implying that the speed of economic recovery is underestimated.

This paper investigates whether domestic outsourcing accounts for the decline in worker reallocation the U.S. has experienced in the last decades. Domestic outsourcing happens when firms contract with other firms or individuals in the U.S. to provide goods and services previously performed in-house. On the other hand, outsourced employees are workers whose employer of record (the staffing agency) is not the firm where they perform their job tasks (the client). While remaining on their staffing agency’s payroll, outsourced employees reallocate across client firms. In fact, they do so at a higher pace than payroll employees, but their reallocations are omitted in the datasets used to measure labor fluidity. Therefore, the measured pace of reallocation is underestimated. To quantify this channel, I provide a decomposition of the worker reallocation rate that illustrates a relationship between the decline in reallocations and an increase in outsourced employees’ job tenure. I successfully test this implication in microdata from the Job Tenure Supplement of the Current Population Survey. I find that between 1996 and 2018, outsourced  employees average tenure increased by 18 months, while the average tenure of payroll employees increased by less than 8 months. The tenure estimates translate into an increasing proportion of omitted reallocations between 1994 and 2018, accounting for over one-fifth of the observed decline in the worker reallocation rate.

Does Turnover inhibit Specialization? Evidence from a Skill Survey in Peru. Coauthored with Munseob Lee and Claudia Macaluso.

We design, pilot, and field a new survey of occupational skills in Peru, to investigate human capital differences between poor and rich countries. Though the average skill level is comparable, Peruvian jobs have markedly more uniform skill profiles than jobs in the US. However, matching frictions are no more severe than in the US, and recruiting technology is largely equivalent as well. A model with complementarities in  production offers a plausible explanation. Uncertainty about labor availability, more pronounced in poor countries’ turbulent labor markets, destabilizes production. This generates an endogenous labor demand preference for unspecialized workers.


Work in progress

Global Gender Wage Gaps along the Wage Distribution and the Legal and Social Environment. Coauthored with Kathleen Beegle and Josefina Posadas.

Heterogeneity in Post-secondary Human Capital Formation. Coauthored with Darwin Cortés and Julieth Santamaria.                                                                                  Foco Económico entry (in Spanish).


Selected World Bank work and publications

The Economics of the Gender Wage Gap in Armenia (2018). World Bank WPS 8409. Coauthored with Lourdes Rodriguez Chamussy and Nistha Sinha.

Gender differences on sexual behavior and school inputs: Evidence from Bogotá (2015). Universidad del Rosario working paper 175. Coauthored with Darwin Cortés and Juan Miguel Gallego. Presented at LACEA 2016.                                                                                                                                                                                               Foco Económico entry (in Spanish).