Jesica Torres
My name is Jesica Torres and I work as an economist in the Office of the Chief Economist for the Middle East and North Africa of the World Bank. I received my PhD in Economics from the University of Chicago.
My analytical work has focused on understanding how special provisions such as size-dependent regulations, simplified tax regimes, or preferential labor regulations distort both the selection into entrepreneurship and the behavior of firms, and how that ultimately affects the allocation of resources in the economy. Before joining the World Bank, I worked as a Visiting Scholar in the Inter-American Development Bank, as an economic advisor in the Mexican federal government, and as a research-professor at Tecnologico de Monterrey in Mexico.
You can contact me at jesicatorrescoronado@gmail.com
Research
Publications
Size-dependent policies, talent misallocation, and the return to skill
We study the allocation of talent in knowledge-based hierarchies subject to a payroll tax that increases with establishment size. The tax distorts the allocation of talent across occupations, as well as the sorting of all infra-marginal agents, thus attenuating the strength of the positive sorting throughout the entire economy. This talent misallocation results in lower output, smaller plants, higher self-employment, less wage employment, and lower returns to skill. To quantify these effects, we first estimate a tax policy to match the establishment-level evidence on the size-dependent compliance of social security contributions in Mexico, and conduct two sets of numerical exercises. Introducing this size- dependent policy into an undistorted economy calibrated to the U.S. generates a reduction in average plant size and output losses of 10 percent. The returns to skill for wage workers decrease by 75 percent. When we isolate the margins of misallocation in our model, we find that slightly over half of the output losses are due to talent mismatch, whereas the rest is accounted for by the best wage workers turning into self-employment. Similarly, eliminating the labor distortion in Mexico increases average plant size by 12 percent, and output by 9 percent, while the average return to skill for workers increases by 14 percent. Perfect enforcement of the average effective tax accounts for one fifth of the output gains from removing the tax. Size-dependent policies in our model generate a reduction in average plant size that is only a fifth of that obtained using a standard span-of-control model, yet output losses are three times as large. The main losers from this type of policies are high-skill wage workers.
Policies to support businesses through the COVID-19 shock: a firm-level perspective
Relying on a novel dataset covering more than 120,000 firms in 60 countries, this paper contributes to the debate about policies to support businesses through the COVID-19 pandemic. While governments around the world have implemented a wide range of policy support measures, evidence on the reach of these policies, the alignment of measures with firm needs, and their targeting and effectiveness remains scarce. This paper provides the most comprehensive assessment to date of these issues, focusing primarily on the developing economies. It shows that policy reach has been limited, especially for the more vulnerable firms and countries, and identifies mismatches between policies provided and policies most sought. It also provides some indicative evidence regarding mistargeting of policies and their effectiveness in addressing liquidity constraints and preventing layoffs. This assessment provides some early guidance to policymakers on tailoring their COVID-19 business support packages and points to new directions in data and research efforts needed to guide policy responses to the current pandemic and future crises.
Working Papers
Labor regulations and resource misallocation in Mexico
We build on the work of Levy (2018) and examine the effects of the special provisions for non-salaried workers on the dynamics of establishments. We exploit the four waves of the Mexican establishment census available for 1998-2013 combined with the panel identifiers developed by Busso, Fentanes, and Levy (2018). We find that legally informal establishments are just as likely to survive as fully formal plants, but when an informal plant leaves, another informal plant enters. In other words, the net exit of legally informal establishments is zero. When we examine the balanced panel of surviving establishments, we find that when informal plants survive, they do not in general transition into formality nor do they add more workers over their life cycle. In contrast, the average 40-year-old fully formal plant employs four times more workers than its younger counterpart, but almost half of fully formal plants transition into informality (legal or illegal) when they survive. We also document that in Mexico in general the resource reallocation from the exit of high productivity establishments potentially offsets the reallocation from the exit of low productivity plants, while the reallocation from the entry of low productivity establishments likely offsets the resource reallocation from the entry of high productivity plants.
Unmasking the impact of COVID-19 on businesses: firm-level evidence from across the world
This paper provides a comprehensive assessment of the short-term impact of the COVID-19 pandemic on businesses worldwide with a focus on developing countries. The results are based on a novel data set collected by the World Bank Group and several partner institutions in 51 countries covering more than 100,000 businesses. The paper provides several stylized facts. First, the COVID-19 shock has been severe and widespread across firms, with persistent negative impact on sales. Second, the employment adjustment has operated mostly along the intensive margin (that is leave of absence and reduction in hours), with a small share of firms laying off workers. Third, smaller firms are disproportionately facing greater financial constraints. Fourth, firms are increasingly relying on digital solutions as a response to the shock. Fifth, there is great uncertainty about the future, especially among firms that have experienced a larger drop in sales, which is associated with job losses. These findings provide a better understanding of the magnitude and distribution of the shock, the main channels affecting businesses, and how firms are adjusting. The paper concludes by discussing some avenues for future research.
The impact of the COVID-19 shock on women-led businesses
The COVID-19 pandemic has struck businesses across the globe with unprecedented impacts. The world economy has been hit hard and firms have experienced a myriad of challenges, but these challenges have been heterogeneous across firms. This paper examines one important dimension of this heterogeneity: the differential effect of the pandemic on women-led and men-led businesses. The paper exploits a unique sample of close to 40,000 mainly formal businesses from 49 countries covering the months between April and September 2020. The findings show that women-led micro-businesses, women-led businesses in the hospitality industry, and women-led businesses in countries more severely affected by the COVID-19 shock were disproportionately hit compared with businesses led by men. At the same time, women-led micro-firms were markedly more likely to report increasing the use of digital platforms, but less likely to invest in software, equipment, or digital solutions. Finally, the findings also show that women-led businesses were less likely to have received some form of public support although they have been hit harder in some domains. In a crisis of the magnitude of the COVID-19 pandemic, evidence tracing the impact of the shock in a timely fashion is desperately needed to help inform the design of policy interventions. This real-time glimpse into women-led businesses fills this need for robust and policy-relevant evidence, and due to the large country coverage of the data, it is possible to identify patterns that extend beyond any one country, region, or sector, but at the cost of some granularity for testing more complex economic theories.
Technology and resilience
This paper estimates the impact of technology sophistication pre-COVID-19 on the performance of firms during the early stages of the pandemic. We exploit a unique data covering firms from Brazil, Senegal, and Vietnam using a treatment effect mediation framework to decompose the results into a direct and an indirect effect. Increasing pre-pandemic technology sophistication by one standard deviation is associated with 3.8pp higher sales. Both effects are positive, but the direct effect is about 5 times larger than the indirect effect. The total effect on sales is markedly nonlinear with significantly smaller estimates of the reduction in sales for firms with more sophisticated pre-pandemic technology. Our results are robust to different measures of digital responses and matching estimators.
Business expectations and uncertainty in developing and emerging economies
We study the properties of business expectations and uncertainty in 27 developing and emerging economies. Our evidence comes from 14,000 businesses responding to the World Bank Group Business Pulse and Enterprise Surveys. Each survey elicits three-point subjective probability distributions about future own-firm sales. We measure expectations and uncertainty using the first and second moments of those distributions and verify they predict future sales growth outcomes and absolute forecast errors. Our analysis reveals two new facts about business uncertainty across countries. (1) Uncertainty is higher in our sample than in advanced economies, and it declines with GDP per capita even after accounting for firm size, sector, and other firm- and country-level predictors of uncertainty. (2) Absolute forecast errors are larger than our survey-based measures of business uncertainty imply; namely, managerial beliefs are overprecise (understate sales volatility) and particularly so in lower-income countries.