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Internal Geography, Labor Mobility, and the Distributional Impacts of Trade

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  • Jingting Fan

Abstract

I develop a spatial-equilibrium model to quantify the distributional impacts of international trade in an economy with intranational trade and migration costs. Focusing on China, I find that international trade increases both between-region inequality among workers with similar skills and within-region inequality between skilled and unskilled workers, with the former accounting for 75 percent of the overall inequality increase. Ignoring spatial frictions will underestimate trade's impact on the overall inequality and overestimate its impact on the aggregate skill premium. I further study how internal trade and Hukou reforms affect the domestic economy and the impacts of international trade.

Suggested Citation

  • Jingting Fan, 2019. "Internal Geography, Labor Mobility, and the Distributional Impacts of Trade," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(3), pages 252-288, July.
    • Handle: RePEc:aea:aejmac:v:11:y:2019:i:3:p:252-88
    Note: DOI: 10.1257/mac.20150055
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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