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We provide a new measure of automation based on patents and study its employment effects. Classifying all U.S. patents granted between 1976 and 2014 as automation or nonautomation patents, we document a strong rise in the number and share of automation patents. We link patents to their industries of use and to commuting zones. To estimate the effect of automation, we use an instrumental variables strategy that relies on innovations developed independently from U.S. labor market trends. We find that automation technology has a positive effect on employment in local labor markets, driven by job growth in the service sector.

This paper takes a fresh look at the determinants of the holding of reserves with the aim of highlighting similarities and differences among emerging markets (EMs), advanced economies (AEs), and low-income countries (LICs). We apply two panel estimation techniques: fixed effects (FE) and common correlated effects pooled mean group (CCEPMG). FE regression results suggest that precautionary savings' motives, both current account-and capital account-related, are generally the most important determinants of reserves' holding for all country groups. Nonetheless, there is considerable heterogeneity across country groups and over time. The intertemporal motive, a novelty of this paper, has gained importance everywhere. The CCEPMG results confirm the importance of precautionary motives and suggest that current account motives matter only for EMs and LICs and capital account motives matter for all groups while being more relevant for EMs.The CCEPMG results also point to the importance of taking into account the heterogeneous impact of unobserved common factors that affect coefficient estimates and the dynamic process through which reserves adjust to changes. J E L C L A S S I F I C A T I O NC23, E58, F31, G01 | I N T RO DUCTIONSince the early 2000s, the amount of reserve assets held by countries' monetary authorities has been rising all over the world, and so has researchers' interest in the topic. A large literature has tried to | 823 BHATTACHARYA eT Al.determine the optimal amount of reserves or to explain the actual amounts held by countries, but since the GFC, empirical studies had been mostly focused on emerging markets (EMs). 1 The importance of holding adequate reserves for advanced economies (AEs) and, low-income countries (LICs) with limited access to international financial markets was not featured prominently in analyses. Research papers that extend their analyses beyond EMs either consider EMs jointly with other countries or distinguish between country groups along a different dimension than we do. 2 The literature puts forth a number of arguments to rationalize the greater focus on reserves' holding in EMs relative to the remaining two country groups (see International Monetary Fund [IMF], 2011, and further references therein). It suggests that the EMs' country group has both the need to hold reserves, facing frequent balance of payments disruptions, and the means to acquire reserves in international markets. For countries in the AEs' group, it is argued that their external positions are too large to be insurable and that they do not need to hold a large amount of reserves in the first place, given that their trade and capital flows are more stable and their financial markets are more liquid. Moreover, these countries can rely upon other forms of insurance, for example swap lines. Some of the AEs are reserve issuers themselves, and hence the traditional motives of reserves' holding do not apply to them. 3 For LICs, it is argued that they have limited access to financial markets and that the balance of paym...

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This paper asks whether financial integration leads to a more efficient allocation of capital within economies. I build a model of a small economy with an investment and a consumption goods sector. Financial frictions impede capital from allocating optimally between the two sectors. Capital account opening has positive allocation effects if the economy is financially less developed than the rest of the world, but negative effects otherwise. I test the model predictions on a sample of 113 countries, using the relative price of consumption and investment goods as a measure of allocation efficiency. I find that international capital flows indeed have adverse effects in highly developed countries, whereas there is less evidence of positive effects in low‐development countries. Overall, financial integration leads to more similar capital allocations across countries.