Labor Reallocation in Response to Trade Reform
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.
This paper is a substantively extended version of the previously circulated CESifo working paper 1936. We thank Pinelopi Goldberg, Lori Kletzer, Adriana Kugler, Nina Pavcnik, Steve Redding, T.N. Srinivasan, and Lars Vilhuber for insightful discussions, and participants at various seminars and conferences for their helpful comments. We thank Paulo Furtado and the Brazilian Ministry of Labor for assistance with RAIS. We thank Alexandre Brandão and Aline Visconti at IBGE for tabulations of PIA, and Mary Amiti and Luis Servén for trade data. Jennifer Poole and Andrea Curi provided superb research assistance. Muendler acknowledges NSF support (SES-0550699) with gratitude. In-depth statistics that complement this paper are available in an online Data Supplement at URL econ.ucsd.edu/muendler/research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.