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Effects of Tariffs and Real Exchange Rates on Job Reallocation:Evidence from Latin America

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Author Info
Haltiwanger, John
Kugler, Adriana
Kugler, Maurice
Micco, Alejandro
Pagés, Carmen

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Abstract

Openness to international competition can lead to enhanced resource allocation in the long-run. While factor reallocation is essential if net benefits are to be derived from trade liberalization, the process generates costs both for transitioning workers and for employers undergoing personnel turnover. Net welfare gains depend on adjustment costs. Understanding of these issues has been hampered by data limitations. In this paper, we overcome some of these limitations by using new, harmonized measures on job creation and destruction for a number of countries in Latin America. We use these new series to investigate the impact of the removal of protectionism on net employment and gross job reallocation in Latin America. We find a robust pattern showing that reductions in tariffs and exchange rate appreciations increase the pace of job reallocation within sectors. We also find, however, some evidence of declining net employment as trade exposure increases. For example, we find some evidence that in the wake of tariff reductions, there is lower net employment growth. Keywords; Tariff reduction, Currency appreciation, Trade exposure, Intra-industry reallocation JEL Classification: F160, F310, O240.

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Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0410.

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Date of creation: 01 Aug 2004
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Handle: RePEc:stn:sotoec:0410

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chiara Bentivogli & Patrizio Pagano, 1999. "Trade, Job Destruction and Job Creation in European Manufacturing," Open Economies Review, Springer, vol. 10(2), pages 165-184, May. [Downloadable!] (restricted)
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  3. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February. [Downloadable!] (restricted)
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  4. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S20-43, July. [Downloadable!] (restricted)
  5. Wacziarg, Romain & Wallack, Jessica Seddon, 2004. "Trade liberalization and intersectoral labor movements," Journal of International Economics, Elsevier, vol. 64(2), pages 411-439, December. [Downloadable!] (restricted)
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  6. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September. [Downloadable!] (restricted)
  7. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. EDUARDO PONTUAL RIBEIRO & CARLOS CORSEUIL & DANIEL SANTOS & PAULO FURTADO & BRUNU AMORIM & LUCIANA SERVO & ANDRÉ SOUZA, 2004. "Trade liberalization, the exchange rate and job flows in Brazil," Journal of Policy Reform, Taylor and Francis Journals, vol. 7(4), pages 209-223, December. [Downloadable!] (restricted)
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  10. Pierre-Olivier Gourinchas, 1998. "Exchange Rates and Jobs: What Do We Learn from Job Flows?," NBER Working Papers 6864, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Andrew B. Bernard & J. Bradford Jensen, 1999. "Exporting and Productivity," NBER Working Papers 7135, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Galindo, Arturo & Panizza, Ugo & Schiantarelli, Fabio, 2003. "Debt composition and balance sheet effects of currency depreciation: a summary of the micro evidence," Emerging Markets Review, Elsevier, vol. 4(4), pages 330-339, December. [Downloadable!] (restricted)
  13. Alejandro Micco - Carmen Pages, 2004. "Employment Protection and Gross Job Flows1," Econometric Society 2004 Latin American Meetings 295, Econometric Society. [Downloadable!]
  14. Burgess, Simon M & Knetter, Michael M, 1998. "An International Comparison of Employment Adjustment to Exchange Rate Fluctuations," Review of International Economics, Blackwell Publishing, vol. 6(1), pages 151-63, February.
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  15. Alejandro Micco & Carmen Pagés-Serra, 2004. "Employment Protection and Gross Job Flows: A Differences-in-Differences Approach," RES Working Papers 4365, Inter-American Development Bank, Research Department. [Downloadable!]
  16. repec:rus:hseeco:122439 is not listed on IDEAS
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  18. Aw, Bee Yan & Chung, Sukkyun & Roberts, Mark J, 2000. "Productivity and Turnover in the Export Market: Micro-level Evidence from the Republic of Korea and Taiwan (China)," World Bank Economic Review, Oxford University Press, vol. 14(1), pages 65-90, January.
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  20. Linda Goldberg & Joseph Tracy & Stephanie Aaronson, 1999. "Exchange Rates and Employment Instability: Evidence from Matched CPS Data," American Economic Review, American Economic Association, vol. 89(2), pages 204-210, May. [Downloadable!] (restricted)
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  22. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September. [Downloadable!] (restricted)
  23. Sofronis Clerides & Saul Lach & James Tybout, 1996. "Is "learning-by-exporting" important? Micro-dynamic evidence from Colombia, Mexico and Morocco," Finance and Economics Discussion Series 96-30, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  24. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier. [Downloadable!] (restricted)
  25. CARLOS CASACUBERTA & GABRIELA FACHOLA & NÉSTOR GANDELMAN, 2004. "The impact of trade liberalization on employment, capital, and productivity dynamics: evidence from the uruguayan manufacturing sector," Journal of Policy Reform, Taylor and Francis Journals, vol. 7(4), pages 225-248, December. [Downloadable!] (restricted)
  26. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 245-76, January.
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  27. Klein, Michael W. & Schuh, Scott & Triest, Robert K., 2003. "Job creation, job destruction, and the real exchange rate," Journal of International Economics, Elsevier, vol. 59(2), pages 239-265, March. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marc-Andreas Muendler, 2007. "Trade and Workforce Changeover in Brazil," University of California at San Diego, Economics Working Paper Series 2007-01, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  2. Giovanni Gallipoli & Gianluigi Pelloni, 2008. "Aggregate Shocks vs Reallocation Shocks: an Appraisal of the Applied Literature," Working Paper Series 27-08, Rimini Centre for Economic Analysis, revised Jan 2008. [Downloadable!]
  3. Reinhart, Carmen, 2006. "For better or for worse? Job and earnings mobility in nine middle- low-income countries: A comment," MPRA Paper 13198, University Library of Munich, Germany. [Downloadable!]
  4. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank. [Downloadable!]
    Other versions:
  5. Arturo Galindo & Alejandro Izquierdo & José M. Montero, 2006. "Real exchange rates, dollarization and industrial employment in Latin America," Banco de España Working Papers 0601, Banco de España. [Downloadable!]
    Other versions:
  6. Castro, Lucio & Olarreaga, Marcelo & Saslavsky, Daniel, 2007. "The impact of trade with China and India on Argentina's manufacturing employment," Policy Research Working Paper Series 4153, The World Bank. [Downloadable!]
    Other versions:
  7. Novella Bottini & Michael Gasiorek, 2009. "Trade and Job Reallocation: Evidence for Morocco," LIUC Papers in Economics 224, Cattaneo University (LIUC). [Downloadable!]
  8. Lucio Castro & Daniel Saslavsky, 2005. "Trade, Poverty and Employment: The Social Consequences of Integration with China," International Trade 0512017, EconWPA. [Downloadable!]
  9. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," NBER Working Papers 12885, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Ekholm, Karolina & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2008. "Manufacturing restructuring and the role of Real exchange rate shocks: A firm level analysis," CEPR Discussion Papers 6904, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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