UC Berkeley

Externalities of agents' behaviors on other individuals are a key concern of economic analysis. Moreover, from a policy perspective, the spillover effects of an intervention on those not targeted are paramount to understand its effects and evaluating its desirability. Spillovers propagate through social and economic interactions between individuals -- including within the household -- and through participation in common markets or institutions. The geographic clustering of social networks, markets and institutions as well as individuals' location choices through migration thus govern the spatial dispersion of externalities. In this dissertation, I study three examples of how social and economic networks shape the geography of economic interactions.

In the first chapter, joint with Daniel Auer and Johannes Kunz, we study the effects of migrant networks on the labor market integration of refugees, the performance of local firms, and the wages of their employees in Switzerland. To track outcomes of individuals and firms, we link six employer-employee matched administrative datasets covering the universe of residents (citizens, migrants, and refugees) and registered firms from 2008 to 2017. Leveraging the quasi-random placement of refugees across locations and a novel IV strategy, we show that larger local networks persistently increase employment and income of refugees. Network effects are large, accounting for 23% of the variation in incomes within nationality cohorts across cantons. In line with homophily, demographically similar networks and economically successful peers have larger positive impacts. Network effects are shaped by direct personal contacts: refugees who quasi-randomly lived in the same residential center are three times more likely to become co-workers at the same firm. Using a shift-share IV design, we then show that firms experiencing a positive shock to their employee's network hire both more migrants and natives. Their wage bill and the average wages of existing employees grow, and high-skilled natives rise within the firm hierarchy. This is consistent with referrals improving firm-worker match quality and productivity. Concerns about adverse economic impacts of spatially concentrated immigration are not borne out in the data, suggesting that existing migration policies in Switzerland and other high-income countries may need to be reconsidered.

In the second chapter, joint with Johannes Haushofer, Edward Miguel, Paul Niehaus and Michael Walker, we study impacts of unconditional cash transfers on local economies in Kenya. Tracing out the effect of large economic stimuli on the pattern of transactions in an integrated economy, and their aggregate implications, has long been a central goal of economic analysis, but until now has not been studied experimentally. This study was designed to study the aggregate consequences of cash transfer programs while accounting for multipliers and externalities. We carried out a large-scale experiment in rural Kenya that provided one-time cash transfers worth roughly USD 1000 across 653 villages with around 280,000 people, with a large implied fiscal shock of roughly 15% of local GDP, and deliberately randomized the intensity of cash transfers across geographic sublocations. We first document large direct impacts on households that received transfers, including increases in consumption expenditures and durable assets 18 months after transfers. Enterprises in areas that receive more cash transfers also experience meaningful gains in total revenues, in line with the increased household expenditures. Untreated households, too, show large consumption expenditure gains, by an amount comparable to recipients' gains. Through monthly measurement of scores of commodities and consumer and durable goods, we document positive but minimal local price inflation (0.1% on average) in areas that received additional cash. To assess aggregate implications, we compute a local fiscal multiplier, taking advantage of data on representative samples of treated and untreated households and firms. Both income data and consumption data yield large positive estimated local fiscal multipliers of approximately 2.3 to 2.5. A speculative possibility for how local output increases, despite no meaningful local price inflation or firm investment response, is that many local enterprises are characterized by substantial `slack' in their utilization of factors of production. Finally, we interpret the welfare implications of these results through the lens of a simple household optimization framework. In this framework, the fact observed consumption gains for untreated households are not driven by corresponding increases in labor supply, combined with a lack of local price inflation or of adverse spillovers along other non-market dimensions, suggest that non-recipients as well as recipients were made better off in this setting. This in turn suggests that some existing evaluations of cash transfer programs that ignore aggregate effects may be under-estimating overall program gains.

In the third chapter, together with Pierre Biscaye and Utz Pape, we study externalities arising not through social connections among residents of a local economy, or through their participation in the same market, but rather within the household as a result of the sharing of household economic and childcare activities by household members. We identify impact of childcare on adult labor supply in the context of COVID-19-related school closures in Kenya. We compare changes in employment after schools partially reopened in October 2020 for adults with children in a grade eligible to return against adults with children in adjacent grades. Using nationally-representative panel data, we find that a child returning to school increases adults' weekly labor hours by 22%. Contrary to evidence from high-income settings, effects are not significantly different by sex of the adult. This is explained by two offsetting mechanisms, driven by children's role as both childcare recipients and contributors to household childcare and agriculture. Women benefit relatively more from reductions in childcare burdens when children return to school, while men pick up a larger share of reduced child agricultural labor. Our results suggest policies increasing childcare accessibility could substantially increase adult labor supply in low- and middle-income countries.

While all three chapters are intended to answer a stand-alone set of research questions across different settings, they each shed light on ways in which the actions of economic agents, or the targeting of policies towards a subset of residents, affect others in their geographic vicinity.