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The Local Incidence of Trade Shocks

Author

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  • Ferdinando Monte

    (Georgetown University)

Abstract

The welfare implications of trade integration across areas of a country rely on local real wages, typically unmeasured in ex-post analyses and unavailable in counterfactual exercises. I develop and estimate a general equilibrium framework where local labor markets interact via commuting ties and overlaps in sectoral specialization. Changes in real wages are poorly predicted by standard measures of exposure to trade because, first, the price of local services co-moves with local workplace wages, and, second, residents adjust commuting patterns chasing higher wages. While more exposure to trade in comparative disadvantage sectors tends to lower nominal wages, all real wages grow.

Suggested Citation

  • Ferdinando Monte, 2016. "The Local Incidence of Trade Shocks," 2016 Meeting Papers 1682, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:1682
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    Cited by:

    1. Ferdinando Monte & Stephen J. Redding & Esteban Rossi-Hansberg, 2018. "Commuting, Migration, and Local Employment Elasticities," American Economic Review, American Economic Association, vol. 108(12), pages 3855-3890, December.
    2. Facchini, Giovanni & Liu, Maggie Y. & Mayda, Anna Maria & Zhou, Minghai, 2019. "China's “Great Migration”: The impact of the reduction in trade policy uncertainty," Journal of International Economics, Elsevier, vol. 120(C), pages 126-144.
    3. Brülhart, Marius & Carrère, Céline & Robert-Nicoud, Frédéric, 2018. "Trade and towns: Heterogeneous adjustment to a border shock," Journal of Urban Economics, Elsevier, vol. 105(C), pages 162-175.
    4. Rafael Dix-Carneiro & Brian K. Kovak, 2017. "Trade Liberalization and Regional Dynamics," American Economic Review, American Economic Association, vol. 107(10), pages 2908-2946, October.

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