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

Author

Listed:
  • Andrei A. Levchenko

    (University of Michigan and NBER)

  • Jing Zhang

    (Federal Reserve Bank of Chicago)

Abstract

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.

Suggested Citation

  • Andrei A. Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: a Quantitative Assessment," Working Papers 637, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:637
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    File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers626-650/r637.pdf
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    References listed on IDEAS

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    Cited by:

    1. Pessoa, João Paulo, 2016. "International competition and labor market adjustment," LSE Research Online Documents on Economics 66426, London School of Economics and Political Science, LSE Library.
    2. Henrik Braconier & Giuseppe Nicoletti & Ben Westmore, 2015. "Policy challenges for the next 50 years," OECD Journal: Economic Studies, OECD Publishing, vol. 2015(1), pages 9-66.
    3. Caselli, Francesco & Koren, Miklos & Lisicky, Milan & Tenreyroy, Silvana, 2015. "Diversification through trade," LSE Research Online Documents on Economics 86293, London School of Economics and Political Science, LSE Library.
    4. Silvana Tenreyro & Miklos Koren & Francesco Caselli, 2012. "Diversification through Trade," 2012 Meeting Papers 539, Society for Economic Dynamics.

    More about this item

    Keywords

    factor markets; Ricardian models of trade; welfare; distributional impact;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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