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Trade policy and wage inequality : a structural analysis with occupational and sectoral mobility

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  • Artuc, Erhan
  • McLaren, John

Abstract

A number of authors have argued that a worker's occupation of employment is at least as important as the worker's industry of employment in determining whether the worker will be hurt or helped by international trade. This paper investigates the role of occupational mobility on the effects of trade shocks on wage inequality in a dynamic, structural econometric model of worker adjustment. Each worker in the model can switch either industry, occupation, or both, paying a time-varying cost to do so in a rational-expectations optimizing environment. The authors find that the costs of switching industry and occupation are both high, and of similar magnitude, but in simulations they find that a worker's industry of employment is much more important than either the worker's occupation or skill class in determining whether he or she is harmed by a trade shock.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6194.

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Date of creation: 01 Sep 2012
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Handle: RePEc:wbk:wbrwps:6194

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Keywords: Labor Markets; Labor Policies; Economic Theory&Research; Housing&Human Habitats; Work&Working Conditions;

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References

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  1. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
  2. Erhan Artu� & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-45, June.
  3. Runjuan Liu & Daniel Trefler, 2011. "A Sorted Tale of Globalization: White Collar Jobs and the Rise of Service Offshoring," NBER Working Papers 17559, National Bureau of Economic Research, Inc.
  4. John McLaren & Shushanik Hakobyan, 2010. "Looking for Local Labor Market Effects of NAFTA," NBER Working Papers 16535, National Bureau of Economic Research, Inc.
  5. Artuç, Erhan & Chaudhuri, Shubham & McLaren, John, 2008. "Delay and dynamics in labor market adjustment: Simulation results," Journal of International Economics, Elsevier, vol. 75(1), pages 1-13, May.
  6. Stephen Cameron & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: Theory," NBER Working Papers 13463, National Bureau of Economic Research, Inc.
  7. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
  8. Revenga, Ana L, 1992. "Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 255-84, February.
  9. George J. Borjas & Richard B. Freeman, 1992. "Immigration and the Workforce: Economic Consequences for the United States and Source Areas," NBER Books, National Bureau of Economic Research, Inc, number borj92-1, octubre-d.
  10. Shubham Chaudhuri & John McLaren, 2007. "Some Simple Analytics of Trade and Labor Mobility," NBER Working Papers 13464, National Bureau of Economic Research, Inc.
  11. Brian K. Kovak, 2010. "Regional Labor Market Effects of Trade Policy: Evidence from Brazilian Liberalization," Working Papers 605, Research Seminar in International Economics, University of Michigan.
  12. Moritz Ritter, 2012. "Trade and Inequality in a Directed Search Model with Firm and Worker Heterogeneity," DETU Working Papers 1202, Department of Economics, Temple University.
  13. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Specificity Of Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 63-115, 02.
  14. Artuc, Erhan, 2012. "Workers'age and the impact of trade shocks," Policy Research Working Paper Series 6035, The World Bank.
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Cited by:
  1. Artuc, Erhan, 2013. "PPML estimation of dynamic discrete choice models with aggregate shocks," Policy Research Working Paper Series 6480, The World Bank.
  2. Arias, Javier & Artuc, Erhan & Lederman, Daniel & Rojas, Diego, 2013. "Trade, informal employment and labor adjustment costs," Policy Research Working Paper Series 6614, The World Bank.
  3. Flückiger, Matthias & Ludwig, Markus, 2013. "Chinese Export Competition, Declining Exports and Adjustments at the Industry and Regional Level in Europe," MPRA Paper 48878, University Library of Munich, Germany.
  4. Laura Márquez-Ramos, 2013. "The effect of fragmentation on skill and industry wage premiums: Evidence from the European Union," Working Papers 2013/18, Economics Department, Universitat Jaume I, Castellón (Spain).

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