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The Global Labor Market Impact of Emerging Giants: a Quantitative Assessment

Listed author(s):
  • Andrei A. Levchenko

    (University of Michigan and NBER)

  • Jing Zhang

    (Federal Reserve Bank of Chicago)

This paper investigates both aggregate and distributional impacts of the trade integration of China, India, and Central and Eastern Europe in a quantitative multi-country multi-sector model, comparing outcomes with and without factor market frictions. Under perfect within-country factor mobility, the gains to the rest of the world from trade integration of emerging giants are 0.37%, ranging from -0.37% for Honduras to 2.28% for Sri Lanka. Reallocation of factors across sectors contributes relatively little to the aggregate gains, but has large distributional effects. The aggregate gains to the rest of the world are only 0.065 percentage points lower when neither capital nor labor can move across sectors within a country. On the other hand, the distributional effects of the emerging giants' trade integration are an order of magnitude larger, with changes in real factor returns ranging from -5% to 5% across sectors in most countries. The workers and capital owners in emerging giants' comparative advantage sectors such as Textiles and Wearing Apparel experience greatest losses, while factor owners in Printing and Medical, Precision and Optical Instruments normally gain the most.

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File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers626-650/r637.pdf
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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 637.

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Length: 49 pages
Date of creation: 27 Jun 2013
Handle: RePEc:mie:wpaper:637
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