Vilfredo Pareto Research Seminar
Isabela Manelici

Responsible Sourcing? Theory and Evidence from Costa Rica

Isabela Manelici, Assistant Professor of Economics at London School of Economics
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Maison de la paix (Geneva), Petal 1 Room S5

This seminar is held jointly with the Geneva Trade and Development Workshop (GTDW).

The Vilfredo Pareto Research Seminar is the Economics department's weekly seminar, featuring external speakers in all areas of economics.

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As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Isabela Manelici, Assistant Professor of Economics at London School of Economics.

She will present her work and paper, joint with Alonso Alfaro-Ureña, Benjamin Faber, Cecile Gaubert and José P. Vasquez, titled Responsible Sourcing? Theory and Evidence from Costa Rica.

Abstract: Responsible Sourcing (RS) requirements by multinational enterprises (MNEs) impose minimum standards on worker compensation, benefits, working conditions and other production practices at their suppliers worldwide. We develop a quantitative general equilibrium model to study the incidence of RS on firms and workers in sourcing origin countries. We show that the welfare implications of RS are a priori ambiguous and sensitive to alternative hypotheses about the motivation behind RS by MNEs and the market environment in which these policies are implemented. We derive testable comparative statics that help discriminate between the alternative hypotheses. We then build a unique database covering the near-universe of RS rollouts by more than 400 MNE affiliates in Costa Rica (CR) since 2009, and combine it with firm-to-firm transaction records and matched employer-employee administrative data for all CR firms. We use these data to provide new evidence on the effects of RS rollouts, discriminate between model assumptions, and calibrate the model for counterfactual analysis. We find that RS is not just "hot air", documenting significant negative effects on the sales and employment of exposed suppliers and positive effects on the earnings of their workers. Overall, we find that MNE RS policies in CR have increased domestic welfare, in particular for low-wage workers. The average effect on low-wage workers masks significant heterogeneity: those employed at MNE suppliers pre-rollout experience significant welfare gains that outweigh the welfare losses among low-wage workers at other firms.


About the speaker

Isabela Manelici is an Assistant Professor in the Department of Economics at the London School of Economics. She was an International Economics Section Postdoctoral Research Associate in the Department of Economics at Princeton University. Prior to this she studied Economics at CEMFI and Civil Engineering at École Polytechlnique and École des Ponts ParisTech and also worked for two years at the World bank Infrastructure Unit. Her current areas of research include international trade and development economics.