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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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Publication status: published as Journal of International Economics Available online 23 June 2015 In Press, Accepted Manuscript — Note to users Cover image Trade Policy and Wage Inequality: A Structural Analysis with Occupational and Sectoral Mobility ☆ ☆☆ Erhan Artuça, , John McLarenb,
Handle: RePEc:nbr:nberwo:18503
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