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Intergenerational Effects of Trade Liberalization

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  • Erhan Artuç

    ()
    (Koc University)

Abstract

2002 Pew Global Attitudes survey shows that workers’ support for free trade decreases with age. The relation between age and supporting free trade is a phenomenon previously unexplored by economists. We study distributional effects of trade liberalization, in particular age and gains from free trade, using a dynamic structural general equilibrium model. The method we use here is complimentary to Artuc, Chaudhuri and McLaren (forthcoming), and can handle a much richer treatment of ex-ante, endogenous and unobserved worker heterogeneity. This more efficient method allows us to calculate distributional effects of trade liberalization in detail but it requires a completely different estimation strategy, which comes at a cost of more computation time and stronger assumptions on workers’ expectations. After estimating the structural model with U.S. data sets NLSY and CPS, we simulate a hypothetical trade liberalization in metal manufacturing sector (which has been especially vulnerable to trade shocks in the past, the steel industry in particular). We show gradual adjustment of labor allocation, wages and prices in response to this trade shock. We find a “mirror effect”where very young workers in the metal sector are moderately worse off and older workers are extremely worse off, while young workers in manufacturing sector are moderately better off and older workers are extremely better off.

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File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_0913.pdf
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Bibliographic Info

Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 0913.

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Length: 60 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:koc:wpaper:0913

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Keywords: Trade Liberalization; Sectoral Mobility; Labor Market Equilibrium;

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  1. Neal, Derek, 1999. "The Complexity of Job Mobility among Young Men," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 237-61, April.
  2. Eun-Yeong Na & John Duckitt, 2003. "Value Consensus and Diversity between Generations and Genders," Social Indicators Research, Springer, vol. 62(1), pages 411-435, April.
  3. Erhan Artuç & Shubham Chaudhuri & John McLaren, 2007. "Delay and Dynamics in Labor Market Adjustment: Simulation Results," Koç University-TUSIAD Economic Research Forum Working Papers 0703, Koc University-TUSIAD Economic Research Forum.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Workersâ?? support for free trade decreases with age
    by Ariel Goldring in Free Market Mojo on 2010-01-29 10:47:21
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Cited by:
  1. Emily Blanchard & Gerald Willmann, 2007. "Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy," CESifo Working Paper Series 2070, CESifo Group Munich.
  2. Ritter, Moritz, 2009. "Offshoring and Occupational Specificity of Human Capital," MPRA Paper 19671, University Library of Munich, Germany.
  3. Ann Harrison & John McLaren & Margaret S. McMillan, 2010. "Recent Findings on Trade and Inequality," NBER Working Papers 16425, National Bureau of Economic Research, Inc.
  4. Porto, Guido, 2012. "The cost of adjustment to green growth policies : lessons from trade adjustment costs," Policy Research Working Paper Series 6237, The World Bank.
  5. Andrei A. Levchenko & Jing Zhang, 2013. "The global labor market impact of rmerging giants: a quantitative assessment," Working Paper Series WP-2013-10, Federal Reserve Bank of Chicago.

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