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Intergenerational Effects of Trade Liberalization

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  • Erhan Artuc

    (Koc University, Istanbul)

Abstract

2002 Pew Global Attitudes survey shows that workers’ support for free trade decreases with age, which is a phenomenon previously unexplored by economists. We explore distributional effects of trade liberalization in particular age and gains from free trade, using a dynamic structural general equilibrium model. The model we develop here is in the same spirit as Artuc, Chaudhuri and McLaren (2007), but allows for a much richer treatment of both ex-ante and endogenous worker heterogeneity. This feature 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 are either moderately better off or moderately worse off, while older workers are either extremely better off or extremely worse off depending on their sectors.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 870.

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Date of creation: 2009
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Handle: RePEc:red:sed009:870

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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. Andrei A Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: A Quantitative Assessment," IMF Economic Review, Palgrave Macmillan, vol. 61(3), pages 479-519, August.
  2. Ritter, Moritz, 2009. "Offshoring and Occupational Specificity of Human Capital," MPRA Paper 19671, University Library of Munich, Germany.
  3. 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.
  4. Willmann, Gerald & Blanchard, Emily J., 2007. "Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy," Economics Working Papers 2007,21, Christian-Albrechts-University of Kiel, Department of Economics.
  5. Ann Harrison & John McLaren & Margaret S. McMillan, 2010. "Recent Findings on Trade and Inequality," NBER Working Papers 16425, National Bureau of Economic Research, Inc.

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