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Occupations and Import Competition

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  • Sharon Traiberman

    (Princeton)

Abstract

There is a growing concern that many workers do not share in the gains from trade. In this paper, I argue that occupational reallocation plays a crucial role in determining the winners and losers from trade liberalization: what specific workers do \emph{within} an industry or a firm matters. Adjustment to trade liberalization can be protracted and costly, especially when workers need to switch occupations. To quantify these effects, I build and estimate a dynamic model of the Danish labor market. The model features nearly forty occupations, complicating estimation. To reduce dimensionality I project occupations onto a lower-dimensional task space. This parameter reduction coupled with conditional choice probability techniques yields a tractable nonlinear least squares problem. I find that for the median worker, a 1% decrease in income, holding the income in other occupations fixed, raises the probability of switching occupations by .3%. However, adjustment frictions can be large---on the order of five years of income---so that workers tend to move in a narrow band of similar occupations. To quantify the importance of these forces for understanding import competition, I simulate the economy with and without observed changes in import prices. In the short-run, import competition can cost workers up to one half percent of lifetime earnings. Moreover, the variance in earnings outcomes is twice the size of the total gains from trade.

Suggested Citation

  • Sharon Traiberman, 2017. "Occupations and Import Competition," 2017 Meeting Papers 1237, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:1237
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    File URL: https://economicdynamics.org/meetpapers/2017/paper_1237.pdf
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    Cited by:

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    2. Rafael Dix-Carneiro & Ricardo Reyes-Heroles & Sharon Traiberman, 2018. "Globalization, Trade Imbalances, and Labor Market Adjustment," 2018 Meeting Papers 890, Society for Economic Dynamics.
    3. vom Lehn, Christian & Ellsworth, Cache & Kroff, Zachary, 2020. "Reconciling Occupational Mobility in the Current Population Survey," IZA Discussion Papers 13509, Institute of Labor Economics (IZA).
    4. Bräuer, Richard & Hungerland, Wolf-Fabian & Kersting, Felix, 2021. "Trade Shocks, Labor Markets and Elections in the First Globalization," Rationality and Competition Discussion Paper Series 285, CRC TRR 190 Rationality and Competition.
    5. Azar, José & Marinescu, Ioana & Steinbaum, Marshall & Taska, Bledi, 2020. "Concentration in US labor markets: Evidence from online vacancy data," Labour Economics, Elsevier, vol. 66(C).
    6. Stephen J. Redding, 2020. "Trade and geography," CEP Discussion Papers dp1718, Centre for Economic Performance, LSE.
    7. Victor Aguirregabiria & Allan Collard-Wexler & Stephen P. Ryan, 2021. "Dynamic Games in Empirical Industrial Organization," Papers 2109.01725, arXiv.org, revised Sep 2021.
    8. Kirill Borusyak & Xavier Jaravel, 2018. "The Distributional Effects of Trade: Theory and Evidence from the United States," 2018 Meeting Papers 284, Society for Economic Dynamics.
    9. Erhan Artuc & Gladys Lopez-Acevedo & Raymond Robertson & Daniel Samaan, 2019. "Exports to Jobs," World Bank Publications - Books, The World Bank Group, number 31274, October.
    10. Rafael Dix-Carneiro & Brian K. Kovak, 2017. "Trade Liberalization and Regional Dynamics," American Economic Review, American Economic Association, vol. 107(10), pages 2908-2946, October.
    11. Kalouptsidi, Myrto & Scott, Paul T. & Souza-Rodrigues, Eduardo, 2018. "Linear IV Regression Estimators for Structural Dynamic Discrete Choice Models," CEPR Discussion Papers 13240, C.E.P.R. Discussion Papers.
    12. Myrto Kalouptsidi & Paul T. Scott & Eduardo Souza-Rodrigues, 2018. "Linear IV Regression Estimators for Structural Dynamic Discrete Choice Models," NBER Working Papers 25134, National Bureau of Economic Research, Inc.
    13. Maximiliano Dvorkin, 2017. "Skills, Occupations, and the Allocation of Talent over the Business Cycle," 2017 Meeting Papers 1527, Society for Economic Dynamics.
    14. German Cubas & Pedro Silos & Vesa Soini, 2021. "Risk and the Misallocation of Human Capital," DETU Working Papers 2103, Department of Economics, Temple University.
    15. Andreas Gulyas, 2018. "Identifying Labor Market Sorting with Firm Dynamics," 2018 Meeting Papers 856, Society for Economic Dynamics.
    16. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.

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