Working Paper: CEPR ID: DP14859
Authors: Andrea Ariu
Abstract: This paper shows that international labor mobility attenuates information frictions, and leads to higher-quality products, more trade, and more effective global value chains. Exploiting the variation in the time and intensity at which Swiss postal codes were hit by the increasing availability of foreign workers due to the implementation of the Swiss-EU Agreement on the Free Movement of Persons, I find that the inflow of high-skilled European workers led to an upgrade in the quality of inputs imported from their origin countries. Better intermediates improved the quality of output, making Swiss products more appealing for international markets and boosting exports. Therefore, the efficacy of Swiss global value chains improved: upstream thanks to higher-quality intermediate inputs brought by the intensification of the existing buyer-seller relations; and downstream because higher-quality products eased increasing exports to existing buyers and helped finding new customers, especially in distant destinations.
Keywords: information frictions; labor mobility; innovation; trade; GVCs
JEL Codes: F14; F16; F22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Inflow of high-skilled European workers due to the AFMP (J61) | Upgrade in the quality of imported intermediate inputs (O49) |
| Upgrade in the quality of imported intermediate inputs (O49) | Quality of Swiss exports (L15) |
| Quality of Swiss exports (L15) | Higher exports (F10) |
| Inflow of high-skilled European workers due to the AFMP (J61) | Reduction of upstream information frictions (D89) |
| Quality upgrading of Swiss products (L15) | Export expansion (Y60) |
| Higher prices of inputs from foreign workers' origin countries (F16) | Quality of exported products (L15) |