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Intergenerational Effects of Trade Liberalization

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  • Erhan Artuç

    () (Koc University)

Abstract

2002 Pew Global Attitudes survey shows that workers’ support for free trade decreases with age. The relation between age and supporting free trade is a phenomenon previously unexplored by economists. We study distributional effects of trade liberalization, in particular age and gains from free trade, using a dynamic structural general equilibrium model. The method we use here is complimentary to Artuc, Chaudhuri and McLaren (forthcoming), and can handle a much richer treatment of ex-ante, endogenous and unobserved worker heterogeneity. This more efficient method allows us to calculate distributional effects of trade liberalization in detail but it requires a completely different estimation strategy, which comes at a cost of more computation time and stronger assumptions on workers’ expectations. After estimating the structural model with U.S. data sets NLSY and CPS, we simulate a hypothetical trade liberalization in metal manufacturing sector (which has been especially vulnerable to trade shocks in the past, the steel industry in particular). We show gradual adjustment of labor allocation, wages and prices in response to this trade shock. We find a “mirror effect”where very young workers in the metal sector are moderately worse off and older workers are extremely worse off, while young workers in manufacturing sector are moderately better off and older workers are extremely better off.

Suggested Citation

  • Erhan Artuç, 2009. "Intergenerational Effects of Trade Liberalization," Koç University-TUSIAD Economic Research Forum Working Papers 0913, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:0913
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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_0913.pdf
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Workers’ support for free trade decreases with age
      by Ariel Goldring in Free Market Mojo on 2010-01-29 16:47:21

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    Cited by:

    1. Moritz Ritter, 2014. "Offshoring and occupational specificity of human capital," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 780-798, October.
    2. Andrei A Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: A Quantitative Assessment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(3), pages 479-519, August.
    3. Harrison, Ann & McLaren, John & McMillan, Margaret S., 2010. "Recent findings on trade and inequality:," IFPRI discussion papers 1047, International Food Policy Research Institute (IFPRI).
    4. 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.
    5. repec:mie:wpaper:6237 is not listed on IDEAS

    More about this item

    Keywords

    Trade Liberalization; Sectoral Mobility; Labor Market Equilibrium;

    JEL classification:

    • F1 - International Economics - - Trade
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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