Working Paper: CEPR ID: DP9732
Authors: A. Kerem Coar; Nezih Guner; James Tybout
Abstract: This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows in a new way. The fitted model captures key features of Colombian firm dynamics and labor market outcomes, as well changes in these features during the past 25 years. Counterfactual experiments imply that integration with global product markets has increased both average income and job turnover in Colombia. In contrast, the experiments find little role for this country's labor market reforms in driving these variables. The results speak more generally to the effects of globalization on labor markets in Latin America and elsewhere.
Keywords: firm dynamics; inequality; international trade; labor market frictions; size distribution
JEL Codes: E24; F12; F16; J64; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reductions in trade frictions (F19) | increased job turnover (J63) |
| reductions in trade frictions (F19) | increased wage inequality (J31) |
| globalization (F60) | increased average income (E25) |
| globalization (F60) | increased job turnover (J63) |
| labor market reforms (J48) | increased job turnover (J63) |
| labor market reforms (J48) | increased unemployment (J65) |
| decrease in trade frictions (F19) | concentration of workers in larger firms (J59) |
| concentration of workers in larger firms (J59) | reduced turnover (J63) |
| concentration of workers in larger firms (J59) | reduced wage inequality (J31) |