In November of 2007 a fire sale of Chilean stocks was triggered by a change in the constraints that regulate pension fund portfolios. This regulatory shock provided a cleanly identified fire sale unrelated to fundamentals. Stocks with more selling pressure from pension funds lost approximately 4% in November compared to other stocks. Although the selling pressure was temporary, prices reverted only after four to six months. Pension funds initially mitigated the impact of the fire sale by selling large index stocks in which demanding liquidity was less costly. Coordination across pension funds increased during the fire sale. We find no significant evidence of real effects on firm investment in the quarters after the fire sale.

This paper uses a policy implemented in Chile that obliges firms to fully fund childcare costs for their female employees, but only if they hire more than 19 women. Using plant level data from manufacturing firms, we first show that this policy has had a substantially detrimental impact on the hiring of women above that threshold, in particular since the policy has become more binding, in industrial sectors that hire fewer women and in larger firms. We then use the response of firms to study whether women workers are more or less complementary to capital than men. We find that firms that avoid the legislation by having just below 20 female workers are significantly more capital intensive than firms just above the threshold. This suggests that firms that want to avoid being subject to the regulation replace women with capital but in such a way that the capital to men ratio increases. We use our estimates to calibrate a production function and find that our results are consistent with a framework where women are weakly substitutes with capital (while men are complementary) in this emerging economy’s manufacturing sector. This does not seem to be driven by a change in skill composition of the workforce. We also find some evidence of other changes: average wages and total workforce are lower for firms who hire 20 women than those who hire just below that threshold but labor productivity is unaltered. PRELIMINARY, PLEASE DO NOT CITE ∗We thank comments from seminar participants at IADB, PUC Chile and Toronto. All remaining errors are our own. †Pontificia Universidad Catolica de Chile ‡Pontificia Universidad Catolica de Chile. §Pontificia Universidad Catolica de Chile and FinanceUC.

This paper estimates the elasticity of substitution between capital and skill in manufacturing using immigration-induced variation in skill mix across U.S. counties between 1860 and 1930. We find that capital initially complemented both high- and low-skill labor (determined by literacy) and, unlike today, was more complementary with low-skill labor. Around 1890, capital increased its relative complementarity with high-skill labor. Simulations calibrated to our estimates imply the level of capital-skill complementarity after 1890 allowed the manufacturing sector to absorb the large wave of Eastern and Southern European immigrants with only a modest decline in less-skilled relative wages. This would not have been possible under the older production technology.

We document a novel channel through which coordinated trading exerts externalities on financial markets. We study the impact of a financial advisory firm that recommends frequent reallocations between equity and bond funds to Chilean pension investors. The recommendations generate large and coordinated fund flows that are exacerbated by the strategic complementarity arising from fund trading restrictions. The recommendations generate significant price pressure and increased volatility in the stock market. In response to these large trade flows, pension funds shift their allocations to more liquid securities. Our findings suggest that giving retirement savers unconstrained reallocation opportunities can destabilize financial markets. Received March 11, 2016; editorial decision July 8, 2017 by Editor Itay Goldstein.