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Labor Market Responses to Tariffs: Frictions, Dynamics, and Policy Responses

Author

Listed:
  • Rafael Dix-Carneiro
  • Brian K. Kovak

Abstract

This article introduces the evidence and associated modeling frameworks contemporary economists use to understand the effects of trade and trade policy on labor markets, with a particular emphasis on labor-market frictions and adjustment dynamics. The effects of trade shocks differ across industries, regions, and occupations, implying the presence of important adjustment frictions in labor markets, and these effects evolve slowly over time, implying the need for dynamic frameworks rationalizing slow transitions. After reviewing the key insights from this literature, we discuss policies aimed at mitigating costs to workers and ensuring that the gains from trade are shared more equitably.

Suggested Citation

  • Rafael Dix-Carneiro & Brian K. Kovak, 2026. "Labor Market Responses to Tariffs: Frictions, Dynamics, and Policy Responses," Journal of Economic Perspectives, American Economic Association, vol. 40(3), pages 73-100, Summer.
    • Handle: RePEc:aea:jecper:v:40:y:2026:i:3:p:73-100
    DOI: 10.1257/jep.20251489
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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