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Labour Market Effects of International Trade When Mobility is Costly

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  • Damoun Ashournia

Abstract

I build and estimate a dynamic structural model of sectoral choices with heterogeneous workers accumulating human capital that is imperfectly transferable across sectors. Utility costs of switching sectors provides an additional barrier to mobility. Estimating the utility costs by Simulated Minimum Distance on administrative data covering the population of Danish workers and firms, costs are found to be in the range of 10% to 18% of average annual wages. By conducting counterfactual policy experiments, it is shown that the both the imperfect transferability of human capital and the utility costs are important for explaining the slow adjustment of the labour market following shocks to the economy.

Suggested Citation

  • Damoun Ashournia, 2015. "Labour Market Effects of International Trade When Mobility is Costly," Economics Series Working Papers 751, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:751
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    References listed on IDEAS

    as
    1. Elhanan Helpman & Oleg Itskhoki, 2010. "Labour Market Rigidities, Trade and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(3), pages 1100-1137.
    2. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, July.
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    Cited by:

    1. Mr. Alessandro Cantelmo & Mr. Giovanni Melina, 2017. "Sectoral Labor Mobility and Optimal Monetary Policy," IMF Working Papers 2017/040, International Monetary Fund.
    2. José L. Groizard & Xisco Oliver & María Sard, 2022. "An account of the exporter wage gap: Wage structure and composition effects across the wage distribution," The World Economy, Wiley Blackwell, vol. 45(5), pages 1528-1563, May.
    3. Dorn, David & Levell, Peter, 2021. "Trade and Inequality in Europe and the US," CEPR Discussion Papers 16780, C.E.P.R. Discussion Papers.
    4. David Hummels & Jakob R. Munch & Chong Xiang, 2018. "Offshoring and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 56(3), pages 981-1028, September.
    5. Mark Colas, 2018. "Dynamic Responses to Immigration," Opportunity and Inclusive Growth Institute Working Papers 6, Federal Reserve Bank of Minneapolis.
    6. Benz, Sebastian & Johannesson, Louise, 2019. "Job characteristics, job transitions and services trade: Evidence from the EU Labour Force Survey," Conference papers 333093, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. David Pierce & Simon Shepherd & Daniel Johnson, 2019. "Modelling the Impacts of Inter-City Connectivity on City Specialisation," International Journal of System Dynamics Applications (IJSDA), IGI Global, vol. 8(4), pages 47-70, October.
    8. Boddin, Dominik & Kroeger, Thilo, 2021. "Structural change revisited: The rise of manufacturing jobs in the service sector," Discussion Papers 38/2021, Deutsche Bundesbank.
    9. Wenxiao Wang & Christopher Findlay & Shandre Thangavelu, 2021. "Trade, technology, and the labour market: impacts on wage inequality within countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(1), pages 19-35, May.
    10. Ben Yahmed, Sarra, 2023. "Gender wage discrimination with employer prejudice and trade openness," World Development, Elsevier, vol. 170(C).

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    More about this item

    Keywords

    Globalisation; Adjustment costs; Worker heterogeneity;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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