This paper highlights the importance of distinguishing between temporary and permanent migration when assessing the impact of economic shocks and the welfare consequences of public policies. To this end, I develop a spatial general equilibrium trade model that allows for both types of migration between locations. Applying the model to India, I find that temporary migration contributes 1.5 times more to average welfare and three times more to the welfare of the poorest 10% of districts, compared to permanent migration in the baseline economy. Furthermore, temporary migration plays a key role in reallocating labor in response to local economic shocks, generating significantly larger gains in both productivity and welfare relative to permanent migration. Finally, the model accounting for both forms of migration finds that spatial redistributive policies improve average welfare, whereas models limited to permanent migration predict welfare losses under the same policies. These findings underscore the importance of considering temporary migration when studying the transmission of local shocks and the effects of spatial redistribution.
This paper investigates how reductions in domestic trade costs affect firm productivity and size by improving access to domestic intermediate inputs. Specifically, I examine whether better access to domestic input suppliers encourages firms to shift from in-house production (“make”) toward external procurement (“buy”) of inputs, and quantify how this sourcing decision impacts firm-level productivity and sales. I construct a novel firm-specific Input Market Access (IMA) index using detailed plant-level data from India’s Annual Survey of Industries (ASI, 2000–2007) combined with a district-to-district travel-time matrix. Leveraging India’s Golden Quadrilateral highway project as a quasi-natural experiment, I document that firms experiencing larger improvements in input market access significantly increase their reliance on externally sourced inputs, diversify their input usage, and achieve substantial productivity and sales growth. Importantly, these effects are heterogeneous, with initially smaller firms benefiting relatively more from identical improvement in input access. My decomposition further reveals that improved input market access explains roughly two-thirds of the total productivity gains induced by highway upgrades, highlighting input connectivity as the dominant channel behind infrastructure-driven firm productivity enhancements.
We document a novel empirical finding: U.S. regions with higher pre-Great Recession ex-posure to automation experienced significantly faster employment recoveries after therecession. To explain this result, we develop a simple model of firm heterogeneity withcapital accumulation. The model predicts that, following a transitory negative TFP shock,economies with higher automation intensity recover more quickly than those with lowerautomation intensity. In less automation-intensive regions, firms start with relatively lowerlevels of automation capital, and this gap is exacerbated during the shock. As a result, these regions benefit less from the complementarity between automation capital and labour,leading to a slower employment recovery.