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Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy

Author

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  • Cosar, A. Kerem

    (University of Chicago Booth School of Business)

  • Guner, Nezih

    (CEMFI)

  • Tybout, James

    (Pennsylvania State University)

Abstract

This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows in a new way. The fitted model captures key features of Colombian firm dynamics and labor market outcomes, as well changes in these features during the past 25 years. Counterfactual experiments imply that integration with global product markets has increased both average income and job turnover in Colombia. In contrast, the experiments find little role for this country's labor market reforms in driving these variables. The results speak more generally to the effects of globalization on labor markets in Latin America and elsewhere.

Suggested Citation

  • Cosar, A. Kerem & Guner, Nezih & Tybout, James, 2013. "Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy," IZA Discussion Papers 7718, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7718
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    More about this item

    Keywords

    size distribution; firm dynamics; international trade; labor market frictions; inequality;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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