DP16009 Trade, Jobs, and Worker Welfare

Author(s): Erhan Artuc, Paulo Bastos, Eunhee Lee
Publication Date: April 2021
Keyword(s): adjustment costs, jobs, Labor Mobility, Trade Shocks, worker welfare
JEL(s): F16, F66, J6
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16009

We study the welfare effects of international trade on workers in a new dynamic general equilibrium discrete choice model of labor mobility, where the workers' choice set of jobs is endogenous. We exploit differential exposure of sectors and regions to destination-specific demand shocks to estimate the impacts of exports on wages, employment, and labor mobility, using employer-employee panel data for Brazil. We employ the same empirical strategy to estimate structural parameters and the different components of changes in model-implied worker welfare. Counterfactual simulations show that the endogenous number of job options significantly magnifies the welfare effects of trade shocks.