Federal Reserve Bank of St. Louis
P.O. Box 442
St. Louis, MO 63166-0442
Institutional Affiliation: Federal Reserve Bank of St. Louis
NBER Working Papers and Publications
|May 2015||The Impact of Trade on Labor Market Dynamics|
with Lorenzo Caliendo, Fernando Parro: w21149
We develop a dynamic labor search model where production and consumption take place in spatially distinct labor markets with varying exposure to domestic and international trade. The model recognizes the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model without estimating productivities, reallocation frictions, or trade frictions, which are usually difficult to identify. We use the model to study the dynamic labor market outcomes of aggregate trade shocks. We calibrate the model to 38 countries, 50 U.S. states and 22 sectors and use the rise in China's import competition to quantify the aggregate and disaggregate employment and welfare effects on...