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Some simple analytics of trade and labor mobility

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  • Artuc,Erhan
  • Chaudhuri,Shubham
  • Mclaren,John Edward
  • Artuc,Erhan
  • Chaudhuri,Shubham
  • Mclaren,John Edward

Abstract

This paper studies a simple, tractable model of labor adjustment in a trade model that allows researchers to analyze the economy's dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, duality techniques can be employed to study the equilibrium and, despite its simplicity, a rich variety of properties emerge. The model generates gross flows of labor across industries, even in the steady state; persistent wage differentials across industries; gradual adjustment to a liberalization; and anticipatory adjustment to a pre-announced liberalization. Pre-announcement induces anticipatory flight from the liberalizing sector, driving up wages there temporarily and giving workers remaining there what this paper calls"anticipation rents."By this process, pre-announcement makes liberalization less attractive to export-sector workers and more attractive to import-sector workers, eventually making workers unanimous either in favor of or in opposition to liberalization. Based on these results, the paper identifies many pitfalls to conventional methods of empirical study of trade liberalization that are based on static models.

Suggested Citation

  • Artuc,Erhan & Chaudhuri,Shubham & Mclaren,John Edward & Artuc,Erhan & Chaudhuri,Shubham & Mclaren,John Edward, 2014. "Some simple analytics of trade and labor mobility," Policy Research Working Paper Series 7089, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7089
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    Cited by:

    1. Ann Harrison & John McLaren & Margaret McMillan, 2011. "Recent Perspectives on Trade and Inequality," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 261-289, September.
    2. Arnaud Costinot, 2009. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1011-1041, September.
    3. Artuc, Erhan & Lederman, Daniel & Porto, Guido, 2015. "A mapping of labor mobility costs in the developing world," Journal of International Economics, Elsevier, vol. 95(1), pages 28-41.
    4. Ann Harrison & John McLaren & Margaret S. McMillan, 2010. "Recent Findings on Trade and Inequality," NBER Working Papers 16425, National Bureau of Economic Research, Inc.
    5. Matthew J. Notowidigdo, 2011. "The Incidence of Local Labor Demand Shocks," 2011 Meeting Papers 629, Society for Economic Dynamics.
    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. Artuç, Erhan & McLaren, John, 2015. "Trade policy and wage inequality: A structural analysis with occupational and sectoral mobility," Journal of International Economics, Elsevier, vol. 97(2), pages 278-294.
    8. 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.
    9. Zhenshan Yang & Xunhaoyue Zeng, 2019. "Envisioning the Impact of the Belt and Road Initiative on Regional Labor Markets," Sustainability, MDPI, vol. 11(8), pages 1-17, April.
    10. Braun, Sebastian & Lechthaler, Wolfgang & Mileva, Mariya, 2014. "The effects of globalization on wage inequality: New insights from a dynamic trade model with heterogeneous firms," Kiel Policy Brief 70, Kiel Institute for the World Economy (IfW Kiel).
    11. Mariya Mileva & Sebastian Braun & Wolfgang Lechthaler, 2013. "The Effects of Globalisation on Wage Inequality: New Insights from a Dynamic Trade Model with Heterogeneous Firms. WWWforEurope Working Paper No. 49," WIFO Studies, WIFO, number 47093, April.

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    More about this item

    Keywords

    International Trade and Trade Rules; Labor Markets; Rules of Origin; Trade Policy; Trade and Multilateral Issues;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J7 - Labor and Demographic Economics - - Labor Discrimination

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