TY  - JOUR
AU  - Chaudhuri,Shubham
AU  - McLaren,John
TI  - Some Simple Analytics of Trade and Labor Mobility
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13464
PY  - 2007
Y2  - October 2007
UR  - http://www.nber.org/papers/w13464
L1  - http://www.nber.org/papers/w13464.pdf
N1  - Author contact info:
Shubham Chaudhuri
The World Bank
1818 H Street, NW MS#MC8-808
Washington, DC 20433 USA
E-Mail: schaudhuri@worldbank.org

John McLaren
Department of Economics
University of Virginia
P.O. Box 400182
Charlottesville, VA  22904-4182
Tel: 434/924-3994
Fax: 434/982-2904
E-Mail: jmclaren@virginia.edu
AB  - We study a simple, tractable model of labor adjustment in a trade model that allows us to analyze the economy's dynamic response to trade liberalization.  Since it is a neoclassical market-clearing model, we can use duality techniques to study the equilibrium, and despite its simplicity a rich variety of properties emerge.  The model generates gross flows of labor across industries, even in the steady state; persistent wage differentials across industries; gradual adjustment to a liberalization; and anticipatory adjustment to a pre-announced liberalization. Pre-announcement makes liberalization less attractive to export-sector workers and more attractive to import-sector workers, eventually making workers unanimous either in favor of or in opposition to liberalization. Based on these results, we identify many pitfalls to conventional methods of empirical study of trade liberalization that are based on static models.
ER  -