Very excited with this new paper - with @ricardo_hausman and @pietrobelliC - forthcoming at the Journal of Business Research, on the contribution of place-specific factors – and in particular knowhow agglomeration – to large within country wage gaps (1/6) https://www.sciencedirect.com/science/article/pii/S0148296321000035?via%3Dihub

Within-country wage gaps are very interesting because they cannot be explained away by macroeconomic factors, legal framework, political representation system, trade agreements, labor regulations, or any other nation-wide factor affecting all states and municipalities (2/6)

We examined data at municipal level in Mexico, looking for explanations for the large wage gap between its poorest state Chiapas and the rest: Economic complexity –knowhow agglomeration– explains more than any individual factor, such as education, gender, or ethnicity (3/6)

The policy implications are clear: To overcome the income gaps the State should focus its efforts on developing the institutional capacity to gradually solve coordination and information failures that characterize the process of self-discovery and productive diversification (4/6)

As these capacities are hard to develop and usually do not involved significant investments, governments prefer to devote attention/resources to things they can “get done” (roads, airports, schools, hospitals) but are not the most binding constraints to economic growth (5/6)

Nowhere is this as evident as in Chiapas: 20 years after the Zapatista uprising the state has better roads, 3 airports and a port; lowered schooling gap and improved health indicators, but the productivity gap widened, suggesting that these were not the binding constraints (6/6)