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Slicing the Pie: Quantifying the Aggregate and Distributional Effects of Trade

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  • Simon Galle
  • Andrés Rodríguez-Clare
  • Moises Yi

Abstract

We develop a multi-sector gravity model with heterogeneous workers to quantify the aggregate and group-level welfare effects of trade. We estimate the model using the structural relationship between China-shock driven changes in manufacturing employment and average earnings across US groups defined by commuting zone and education. We find that the China shock increases average welfare but some groups experience losses as high as five times the average gain. Adjusted for plausible measures of inequality aversion, gains in social welfare are positive and only slightly lower than with the standard aggregation.

Suggested Citation

  • Simon Galle & Andrés Rodríguez-Clare & Moises Yi, 2017. "Slicing the Pie: Quantifying the Aggregate and Distributional Effects of Trade," NBER Working Papers 23737, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23737
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    References listed on IDEAS

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    JEL classification:

    • F1 - International Economics - - Trade

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