Isabela Manelici

Welcome to my website! I am an Assistant Professor in the Department of Economics at the London School of Economics. I work mainly on topics in international trade and development economics (both broadly defined). 

For the 2020-2021 academic year, I was an International Economics Section Postdoctoral Research Associate in the Department of Economics at Princeton University. In 2020, I graduated with a Ph.D. in Economics from UC Berkeley. Prior to that, I studied Economics at CEMFI and Civil Engineering at École Polytechnique and École des Ponts ParisTech. I also worked for two years at the World Bank in the Infrastructure Unit.


Working Papers

The Effects of Joining Multinational Supply Chains: New Evidence from Firm-to-Firm Linkages (link)

with Alonso Alfaro-Ureña and José P. Vasquez

Status: New December 2020 draft. Second-round revise and resubmit at the Quarterly Journal of Economics

VoxDev summary, IGC summary, "The Visible Hand" Podcast

Abstract: We study the effects of becoming a supplier to multinational corporations (MNCs) using tax data tracking firm-to-firm transactions in Costa Rica. Event-study estimates reveal that domestic firms experience strong and persistent gains in performance after supplying to a first MNC buyer. Four years after, domestic firms employ 26% more workers and have a 4 to 9% higher total factor productivity (TFP). These effects are unlikely to be explained by demand effects or changes in tax compliance. Moreover, suppliers experience a large drop in their sales to all other buyers except the first MNC buyer in the year of the event, followed by a gradual recovery. The dynamics of adjustment in sales to others suggests that firms face short-run capacity constraints that relax over time. Four years later, the sales to others grow by 20%. Most of this growth comes from the acquisition of new buyers, which tend to be ``better buyers" (e.g., larger and with more stable supplier relationships). Finally, surveys of domestic firms and MNCs provide further insights into the wide-ranging benefits of supplying to MNCs. According to our surveys, these benefits range from better managerial practices to a better reputation.

The Effects of Multinationals on Workers: Evidence from Costa Rican Microdata (link)

with Alonso Alfaro-Ureña and José P. Vasquez

Status: New April 2021 draft available

Abstract: This paper estimates the effects of multinational corporations (MNCs) on workers. To that end, we combine microdata on all formal worker-firm and firm-firm relationships in Costa Rica with an instrumental variable approach that exploits shocks to the size of MNCs in the country. First, using an event-study design, we find an MNC wage premium of nine percent. This premium reflects above market wages rather than compensation for disamenities. Next, we study the effects of MNCs on workers in domestic firms. As MNCs bring jobs that pay a premium, they improve outside options by altering both the level and composition of labor demand. MNCs can also enhance the performance of domestic employers through input-output linkages. Shocks to firm performance may then pass through to wages. We show that the growth rate of annual earnings of a worker experiencing a one standard deviation increase in either her labor market or firm-level exposure to MNCs is one percentage point higher than that of an identical worker with no change in either MNC exposure. Finally, we develop a model to rationalize the reduced-form evidence and estimate structural parameters that govern wage setting in domestic firms. We model MNCs as paying a wage premium and buying inputs from domestic firms. When hiring workers, firms incur recruitment and training costs. We find that workers are sensitive to improvements in outside options. Moreover, we estimate that the marginal recruitment and training cost of the average domestic firm is 90% of the annual earnings of a worker earning the competitive market wage. This high cost allows incumbent workers to extract part of the increase in firm rents coming from intensified linkages with MNCs.

Selected Work in Progress

Responsible Sourcing? Theory and Evidence from Costa Rica

with Alonso Alfaro-Ureña, Benjamin Faber, Cecile Gaubert and José P. Vasquez

The Impact of Multinationals on Informality: Evidence from Mexico

with José P. Vasquez and Román David Zárate


Industrial Policy at Work: Evidence from Romania's Income Tax Break for Workers in IT (link)

with Smaranda Pantea

European Economic Review, Volume 133, April 2021. Working Paper (link) w/ Online Appendix (link)

VoxEU summary, Video recording (minute 58) from the Structural Transformation and Economic Growth (STEG) 2021 Conference

Abstract: We study the firm and sector-level effects of an industrial policy designed to support the development of the IT sector in Romania. In 2001, Romania introduced an unexpected personal income tax break to programmers with eligible bachelor's degrees and who work on software development for firms in eligible IT sector codes. In 2013, policy-makers suddenly expanded the scope of the original tax break to cover more bachelor's degrees and sector codes in IT. We first use firm-level data and difference-in-difference designs around each policy episode to show that treated firms experience strong and long-lasting growth. We then employ sector-level data and a synthetic control design to show that after the introduction of this policy in 2001, the IT sector grew faster in Romania than in otherwise similar countries. Finally, downstream sectors relying more on IT services also grew faster in Romania after 2001. Our results suggest that this policy has been effective in promoting the development of the IT sector, a sector typically seen as key to the transition to a knowledge economy.


Terrorism and the Value of Proximity to Public Transportation: Evidence from the London Bombings (link)

Journal of Urban Economics, Volume 102, November 2017, Pages 52-75. Working Paper (link)

Abstract: Terrorism has become a primary concern for city dwellers around the world. This paper uses the 2005 attacks on the London Tube to provide causal evidence of the negative impact of terrorism on the value of proximity to public transportation. These attacks brought major transit stations into the spotlight as high-risk locations. As a result, surrounding communities became less attractive places in which to live and conduct business. I find that house prices closer to the major transit hubs of London fell by 6% for one year. This shock spread to Manchester as well: house prices closer to major transit hubs dropped by 9–14% for 3 to 4 years. I also show that new firms are less likely to locate near major stations after the attacks, particularly those relying on foot traffic. Among incumbent firms, those serving customers in person are most hurt by the attacks.