Working Paper: NBER ID: w18503
Authors: Erhan Artu; John McLaren
Abstract: A number of authors have argued that a worker's occupation of employment is at least as important as the worker's industry of employment in determining whether the worker will be hurt or helped by international trade. We investigate the role of occupational mobility on the effects of trade shocks on wage inequality in a dynamic, structural econometric model of worker adjustment. Each worker in our specification can switch either industry, occupation, or both, paying a time-varying cost to do so in a rational-expectations optimizing environment. We find that the costs of switching industry and occupation are both high, and of similar magnitude, but in simulations we find that a worker's industry of employment is much more important than either the worker's occupation or skill class in determining whether or not she is harmed by a trade shock.
Keywords: No keywords provided
JEL Codes: E24; F13; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| costs of switching industries and occupations (J62) | extent to which workers can adjust to trade shocks (F16) |
| industry of employment (L79) | welfare outcomes post-trade liberalization (F10) |
| occupation (J69) | welfare outcomes post-trade liberalization (F10) |
| idiosyncratic shocks (D89) | fraction of workers switching along both dimensions annually (J29) |
| potential future wages in other sectors (J39) | mitigate negative impacts of current wage reductions due to trade shocks (F66) |