Working Paper: CEPR ID: DP16009
Authors: Erhan Artuc; Paulo Bastos; Eunhee Lee
Abstract: We study the welfare effects of international trade on workers in a new dynamic general equilibrium discrete choice model of labor mobility, where the workers' choice set of jobs is endogenous. We exploit differential exposure of sectors and regions to destination-specific demand shocks to estimate the impacts of exports on wages, employment, and labor mobility, using employer-employee panel data for Brazil. We employ the same empirical strategy to estimate structural parameters and the different components of changes in model-implied worker welfare. Counterfactual simulations show that the endogenous number of job options significantly magnifies the welfare effects of trade shocks.
Keywords: trade shocks; jobs; labor mobility; adjustment costs; worker welfare
JEL Codes: F16; F66; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Positive export shock (F41) | Increase in lifetime welfare of a median formal sector worker (J89) |
| 10% rise in exports (F10) | 24% increase in employment (J68) |
| 10% rise in exports (F10) | 33% increase in average residual wages (J39) |
| Export shocks (C59) | Decreased gross outflows of workers from labor markets (J69) |
| Export shocks (C59) | Increased gross inflows of workers (J69) |
| Export shocks (C59) | Significant rise in the number of workers switching jobs within the same labor market (J62) |
| Trade shocks (F14) | Increase in number of job options available to workers (J29) |