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International Trade and Labor Income Risk in the United States

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Author Info
Pravin Krishna
Mine Zeynep Senses

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Abstract

This paper studies empirically the links between international trade and labor income risk faced by workers in the United States. We use longitudinal data on workers to estimate time-varying individual income risk at the industry level. We then combine our estimates of persistent labor income risk with measures of exposure to international trade to analyze the relationship between trade and labor income risk. Importantly, by contrasting estimates from various sub-samples of workers, such as those who switched to a different industry (or sector) with those who remained in the same industry throughout the sample, we study the relative importance of the different channels through which international trade affects individual income risk. Finally, we use these estimates to conduct a welfare analysis evaluating the benefits or costs of trade through the income risk channel. We find import penetration to have a statistically significant association with labor income risk in the United States, with economically significant welfare effects.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14992.

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Date of creation: May 2009
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Handle: RePEc:nbr:nberwo:14992

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Find related papers by JEL classification:
F1 - International Economics - - Trade
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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