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Trade, Human Capital, and Income Risk

Author

Listed:
  • Liuchun Deng
  • Pravin Krishna
  • Mine Zeynep Senses
  • Jens Stegmaier

Abstract

In this paper, we empirically assess the causal links between trade and individual income risk and study the role that human capital plays in this relationship using a rich, worker-level, longitudinal data set from Germany spanning 1976 to 2012. Our estimates suggest substantial heterogeneity in labor income risk across workers in different entry cohorts and across workers with different levels of industry- and occupation-specific human capital. Our findings suggest that within-industry changes in imports and exports are causally related to income risk: Imports increase risk and exports decrease risk, and they do so in an economically significant manner. Importantly, we find there to be a complex interplay between human capital and the linkage between trade and risk: While, on average, individuals with higher levels of industry- or occupation-specific human capital experience lower income risk, a given increase in net-imports exposure in an industry increases risk for workers with higher levels of industry tenure more than it does for workers with lower levels of industry tenure. High levels of industry-specific human capital can be costly for workers in highly trade-exposed industries. By contrast, we find no evidence of any interaction between risk, industry trade exposure, and occupation-specific human capital.

Suggested Citation

  • Liuchun Deng & Pravin Krishna & Mine Zeynep Senses & Jens Stegmaier, 2021. "Trade, Human Capital, and Income Risk," NBER Working Papers 29612, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:29612
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    Cited by:

    1. Justin R. Pierce & Peter K. Schott & Cristina Tello-Trillo, 2022. "Trade Liberalization and Labor-Market Outcomes: Evidence from US Matched Employer-Employee Data," Working Papers 22-42, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F6 - International Economics - - Economic Impacts of Globalization
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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