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Trade, Agglomeration Effects, and Labor Markets: Theory and Evidence

Author

Listed:
  • Rodrigo Adao

    (University of Chicago)

  • Costas Arkolakis

    (Yale University)

  • Federico Esposito

    (Tufts University)

Abstract

We develop a generalized spatial competitive model with agglomeration effects and labor mobility across markets -regions and sectors-. In this environment, we characterize the key elasticities that fully determine the differential and aggregate impact of trade and other shocks on local labor markets. We show that our setup yields equivalent counterfactuals to a large class of neoclassical trade, new trade theory, new economic geography, and Roy assignment spatial models. To identify these key elasticities, we propose an empirical methodology that relies on the general equilibrium impact of exogenous trade cost shocks on trade and labor outcomes across local labor markets. We show that this methodology yields the most ecient estimator of the structural elasticities. We finally apply this estimator with disaggregated regional trade data to measure the impact of trade shocks on US local labor markets.

Suggested Citation

  • Rodrigo Adao & Costas Arkolakis & Federico Esposito, 2018. "Trade, Agglomeration Effects, and Labor Markets: Theory and Evidence," 2018 Meeting Papers 545, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:545
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    Cited by:

    1. Zhen Huo & Andrei A. Levchenko & Nitya Pandalai-Nayar, "undated". "The Global Business Cycle: Measurement and Transmission," Working Papers 669, Research Seminar in International Economics, University of Michigan.
    2. Sposi, Michael, 2022. "Demographics and the evolution of global imbalances," Journal of Monetary Economics, Elsevier, vol. 126(C), pages 1-14.
    3. Kerwin Kofi Charles & Erik Hurst & Mariel Schwartz, 2019. "The Transformation of Manufacturing and the Decline in US Employment," NBER Macroeconomics Annual, University of Chicago Press, vol. 33(1), pages 307-372.
    4. Ricardo Reyes-Heroles, 2018. "Globalization and Structural Change in the United States: A Quantitative Assessment," 2018 Meeting Papers 1027, Society for Economic Dynamics.
    5. Zhen Huo & Andrei A. Levchenko & Nitya Pandalai-Nayar, 2019. "International Comovement in the Global Production Network," NBER Working Papers 25978, National Bureau of Economic Research, Inc.
    6. Fabian Eckert & Michael Peters, 2018. "Spatial Structural Change," 2018 Meeting Papers 98, Society for Economic Dynamics.
    7. Andrei Levchenko & Nitya Pandalai Nayar, 2018. "Technology and Non-Technology Shocks: Measurement and Implications for International Comovement," 2018 Meeting Papers 449, Society for Economic Dynamics.
    8. Gaubert, Cécile & Faber, Benjamin, 2018. "Tourism and Economic Development: Evidence from Mexico’s Coastline," CEPR Discussion Papers 12644, C.E.P.R. Discussion Papers.
    9. Farid Farrokhi, 2019. "Skill, Agglomeration, and Inequality in the Spatial Economy," 2019 Meeting Papers 357, Society for Economic Dynamics.

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