NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Labor Reallocation in Response to Trade Reform

Naércio Aquino Menezes-Filho, Marc-Andreas Muendler

NBER Working Paper No. 17372
Issued in August 2011
NBER Program(s):   LS

Tracking individual workers across jobs after Brazil’s trade liberalization in the 1990s shows that tariff cuts trigger worker displacements, but neither exporters nor comparative-advantage sectors absorb trade-displaced labor. On the contrary, exporters separate from significantly more and hire fewer workers than the average employer. Trade liberalization increases transitions to services, unemployment, and out of the labor force. Results are consistent with faster labor productivity growth than sales expansions so that output shifts to more productive firms while labor does not. Higher rates of failed reallocations and longer durations of complete reallocations result, associated with a costly incidence of idle resources.

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Document Object Identifier (DOI): 10.3386/w17372

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