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Trade Shocks and Labor Market Adjustment

Author

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  • Ryan Kim
  • Jonathan Vogel

Abstract

We develop a framework to analyze the impact of trade shocks on a range of labor market adjustment margins in economies with a large number of sectors and labor groups. We provide analytic results characterizing equilibria. We show that labor groups earning a greater share of wage income in sectors with relative price declines experience a relative increase in unemployment and nonparticipation and decrease in wages and welfare. Our framework provides a guide for quantitative and empirical investigations into the labor market impacts of trade shocks.

Suggested Citation

  • Ryan Kim & Jonathan Vogel, 2021. "Trade Shocks and Labor Market Adjustment," American Economic Review: Insights, American Economic Association, vol. 3(1), pages 115-130, March.
  • Handle: RePEc:aea:aerins:v:3:y:2021:i:1:p:115-30
    DOI: 10.1257/aeri.20200101
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    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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