Regional Labor Market Effects of Trade Policy: Evidence from Brazilian Liberalization
AbstractThis paper quantiÞes the effects of trade liberalization on local labor market outcomes and workers' migration patterns. I extend the classic specific-factors model to examine the impact of national price changes on local labor markets. The model describes how tariff changes across industries affect wages in local labor markets within the liberalizing country. In particular, wages will fall in regions whose workers are concentrated in industries facing the largest tariff cuts, and workers will then migrate away from these regions in favor of areas facing smaller tariff cuts. This result provides a theoretical foundation for a prevalent empirical approach in previous studies of local labor markets and lends economic interpretations to estimates that allow the researcher to evaluate the magnitude of results along with their direction. I then use these theoretical results to measure how BrazilÕs 1987-1995 trade liberalization affected wages and interstate migration within the country. I find that regions whose output faced a 10% larger liberalization-induced price decline experienced a 7% larger wage decline. In addition, liberalization resulted in a substantial shift in migration patterns. The most affected Brazilian states gained or lost approximately 2% of their populations as a result of liberalization- induced shifts in migration patterns. These results demonstrate the empirical value of the specific-factors framework developed here and represent the first systematic evaluation of the effects of liberalization on internal migration.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 605.
Length: 8 pages
Date of creation: Jul 2010
Date of revision:
Trade in Services;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Brian McCaig, 2009.
"Exporting Out of Poverty: Provincial Poverty in Vietnam and U.S. Market Access,"
ANU Working Papers in Economics and Econometrics
2009-502, Australian National University, College of Business and Economics, School of Economics.
- Brian, McCaig, 2011. "Exporting out of poverty: Provincial poverty in Vietnam and U.S. market access," Journal of International Economics, Elsevier, vol. 85(1), pages 102-113, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (FSPP Webmaster).
If references are entirely missing, you can add them using this form.