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Trade Policy and Wage Inequality: A Structural Analysis with Occupational and Sectoral Mobility

  • Erhan Artuç
  • John McLaren

A number of authors have argued that a worker's occupation of employment is at least as important as the worker's industry of employment in determining whether the worker will be hurt or helped by international trade. We investigate the role of occupational mobility on the effects of trade shocks on wage inequality in a dynamic, structural econometric model of worker adjustment. Each worker in our specification can switch either industry, occupation, or both, paying a time-varying cost to do so in a rational-expectations optimizing environment. We find that the costs of switching industry and occupation are both high, and of similar magnitude, but in simulations we find that a worker's industry of employment is much more important than either the worker's occupation or skill class in determining whether or not she is harmed by a trade shock.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18503.

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Date of creation: Nov 2012
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Handle: RePEc:nbr:nberwo:18503
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  1. Erhan Artuc & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," NBER Working Papers 13465, National Bureau of Economic Research, Inc.
  2. Brian K. Kovak, 2010. "Regional Labor Market Effects of Trade Policy: Evidence from Brazilian Liberalization," Working Papers 605, Research Seminar in International Economics, University of Michigan.
  3. Attanasio, Orazio & Goldberg, Pinelopi & Pavcnik, Nina, 2003. "Trade Reforms and Wage Inequality in Colombia," CEPR Discussion Papers 4023, C.E.P.R. Discussion Papers.
  4. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
  5. George J. Borjas & Richard B. Freeman, 1992. "Immigration and the Workforce: Economic Consequences for the United States and Source Areas," NBER Books, National Bureau of Economic Research, Inc, number borj92-1, October.
  6. John McLaren & Shushanik Hakobyan, 2010. "Looking for Local Labor Market Effects of NAFTA," NBER Working Papers 16535, National Bureau of Economic Research, Inc.
  7. Runjuan Liu & Daniel Trefler, 2011. "A Sorted Tale of Globalization: White Collar Jobs and the Rise of Service Offshoring," NBER Working Papers 17559, National Bureau of Economic Research, Inc.
  8. Shubham Chaudhuri & Erhan Artuç & John McLaren, 2003. "Delay and dynamics in labor market adjustment: Simulation results," Discussion Papers 0304-07, Columbia University, Department of Economics.
  9. Artuc, Erhan, 2012. "Workers'age and the impact of trade shocks," Policy Research Working Paper Series 6035, The World Bank.
  10. Revenga, Ana L, 1992. "Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 255-84, February.
  11. Stephen Cameron & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: Theory," NBER Working Papers 13463, National Bureau of Economic Research, Inc.
  12. Shubham Chaudhuri & John McLaren, 2007. "Some Simple Analytics of Trade and Labor Mobility," NBER Working Papers 13464, National Bureau of Economic Research, Inc.
  13. Moritz Ritter, 2012. "Trade and Inequality in a Directed Search Model with Firm and Worker Heterogeneity," DETU Working Papers 1202, Department of Economics, Temple University.
  14. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Specificity Of Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 63-115, 02.
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