Some Simple Analytics of Trade and Labor Mobility

This paper studies a simple, tractable model of labor adjustment in a trade model that allows researchers to analyze the economy's dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, duality techniques c...

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Main Authors: Artuc, Erhan, Chaudhuri, Shubham, McLaren, John
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank Group, Washington, DC 2014
Subjects:
GDP
WTO
Online Access:http://documents.worldbank.org/curated/en/2014/11/20349473/some-simple-analytics-trade-labor-mobility
http://hdl.handle.net/10986/20627
id okr-10986-20627
recordtype oai_dc
spelling okr-10986-206272021-04-23T14:03:59Z Some Simple Analytics of Trade and Labor Mobility Artuc, Erhan Chaudhuri, Shubham McLaren, John ADJUSTMENT ASSISTANCE ADJUSTMENT COST ADJUSTMENT COSTS ADJUSTMENT PROCESS AFFECTED WORKERS AVERAGE WAGES BENCHMARK CETERIS PARIBUS COMPENSATING WAGE DIFFERENTIALS CONSUMER PRICE INDEX DEMAND CURVES DEVELOPING COUNTRIES DEVELOPMENT POLICY DISCOUNTED VALUE DISTRIBUTION OF INCOME DOMESTIC PRICE DOWNWARD PRESSURE ECONOMIC ACTIVITY ECONOMIC INEQUALITY ECONOMIC THEORY ECONOMICS ELASTICITY ELASTICITY OF LABOR SUPPLY ELASTICITY OF SUBSTITUTION EMPLOYMENT EFFECTS EMPLOYMENT LEVELS EMPLOYMENT RESEARCH EQUILIBRIUM EQUILIBRIUM UNEMPLOYMENT EXPECTED VALUE EXPECTED WAGE EXPORT MARKETS EXPORT SECTOR EXPORT SUBSIDY EXPORTS FEDERAL RESERVE SYSTEM FREE TRADE FREE TRADE AGREEMENT GDP GENERAL EQUILIBRIUM GLOBALIZATION HIGH WAGES HUMAN CAPITAL IMPORT COMPETITION IMPORTS INDUSTRY WAGE INTERNATIONAL ECONOMICS INTERNATIONAL TRADE JOB SEPARATION JOBS LABOR ADJUSTMENT LABOR ALLOCATION LABOR ALLOCATIONS LABOR DEMAND LABOR FORCE LABOR MARKET LABOR MARKET RIGIDITIES LABOR MARKETS LABOR MOBILITY LABOR REALLOCATION LABOR SUPPLIES LABOUR LOCAL LABOR MARKET LOCAL LABOR MARKETS MANUFACTURING INDUSTRIES MANUFACTURING WAGE MANUFACTURING WAGES MARGINAL COST MARGINAL PRODUCTS MARGINAL VALUE NATIONAL INCOME NEOCLASSICAL MODELS OCCUPATION OCCUPATIONAL MOBILITY OPEN ECONOMY OPTIMAL ALLOCATION OPTIMIZATION POLITICAL ECONOMY POLITICAL ECONOMY OF TRADE PREFERENTIAL AGREEMENT PRESENT VALUE PRODUCT PRICES PRODUCTION FUNCTION PRODUCTION FUNCTIONS PROTECTIONISM REAL WAGE REAL WAGES RENTS RISK NEUTRAL TARIFF BINDINGS TARIFF PROTECTION TARIFF REDUCTION TARIFF REDUCTIONS TERMS OF TRADE TRADE ADJUSTMENT TRADE ADJUSTMENT ASSISTANCE TRADE BLOCK TRADE BLOCKS TRADE DIVERSION TRADE LIBERALIZATION TRADE MODEL TRADE MODELS TRADE POLICY TRADE REGIME TRAINING COSTS UNEMPLOYMENT URUGUAY ROUND WAGE DIFFERENTIAL WAGE DIFFERENTIALS WAGE EFFECTS WAGE INCREASE WAGE INEQUALITY WAGE LEVELS WAGE LOSS WAGES WORKER WORKERS WTO This paper studies a simple, tractable model of labor adjustment in a trade model that allows researchers to analyze the economy's dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, duality techniques can be employed 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 induces anticipatory flight from the liberalizing sector, driving up wages there temporarily and giving workers remaining there what this paper calls "anticipation rents." By this process, 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, the paper identifies many pitfalls to conventional methods of empirical study of trade liberalization that are based on static models. 2014-12-03T19:43:59Z 2014-12-03T19:43:59Z 2014-11 http://documents.worldbank.org/curated/en/2014/11/20349473/some-simple-analytics-trade-labor-mobility http://hdl.handle.net/10986/20627 English en_US Policy Research Working Paper;No. 7089 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic ADJUSTMENT ASSISTANCE
ADJUSTMENT COST
ADJUSTMENT COSTS
ADJUSTMENT PROCESS
AFFECTED WORKERS
AVERAGE WAGES
BENCHMARK
CETERIS PARIBUS
COMPENSATING WAGE DIFFERENTIALS
CONSUMER PRICE INDEX
DEMAND CURVES
DEVELOPING COUNTRIES
DEVELOPMENT POLICY
DISCOUNTED VALUE
DISTRIBUTION OF INCOME
DOMESTIC PRICE
DOWNWARD PRESSURE
ECONOMIC ACTIVITY
ECONOMIC INEQUALITY
ECONOMIC THEORY
ECONOMICS
ELASTICITY
ELASTICITY OF LABOR SUPPLY
ELASTICITY OF SUBSTITUTION
EMPLOYMENT EFFECTS
EMPLOYMENT LEVELS
EMPLOYMENT RESEARCH
EQUILIBRIUM
EQUILIBRIUM UNEMPLOYMENT
EXPECTED VALUE
EXPECTED WAGE
EXPORT MARKETS
EXPORT SECTOR
EXPORT SUBSIDY
EXPORTS
FEDERAL RESERVE SYSTEM
FREE TRADE
FREE TRADE AGREEMENT
GDP
GENERAL EQUILIBRIUM
GLOBALIZATION
HIGH WAGES
HUMAN CAPITAL
IMPORT COMPETITION
IMPORTS
INDUSTRY WAGE
INTERNATIONAL ECONOMICS
INTERNATIONAL TRADE
JOB SEPARATION
JOBS
LABOR ADJUSTMENT
LABOR ALLOCATION
LABOR ALLOCATIONS
LABOR DEMAND
LABOR FORCE
LABOR MARKET
LABOR MARKET RIGIDITIES
LABOR MARKETS
LABOR MOBILITY
LABOR REALLOCATION
LABOR SUPPLIES
LABOUR
LOCAL LABOR MARKET
LOCAL LABOR MARKETS
MANUFACTURING INDUSTRIES
MANUFACTURING WAGE
MANUFACTURING WAGES
MARGINAL COST
MARGINAL PRODUCTS
MARGINAL VALUE
NATIONAL INCOME
NEOCLASSICAL MODELS
OCCUPATION
OCCUPATIONAL MOBILITY
OPEN ECONOMY
OPTIMAL ALLOCATION
OPTIMIZATION
POLITICAL ECONOMY
POLITICAL ECONOMY OF TRADE
PREFERENTIAL AGREEMENT
PRESENT VALUE
PRODUCT PRICES
PRODUCTION FUNCTION
PRODUCTION FUNCTIONS
PROTECTIONISM
REAL WAGE
REAL WAGES
RENTS
RISK NEUTRAL
TARIFF BINDINGS
TARIFF PROTECTION
TARIFF REDUCTION
TARIFF REDUCTIONS
TERMS OF TRADE
TRADE ADJUSTMENT
TRADE ADJUSTMENT ASSISTANCE
TRADE BLOCK
TRADE BLOCKS
TRADE DIVERSION
TRADE LIBERALIZATION
TRADE MODEL
TRADE MODELS
TRADE POLICY
TRADE REGIME
TRAINING COSTS
UNEMPLOYMENT
URUGUAY ROUND
WAGE DIFFERENTIAL
WAGE DIFFERENTIALS
WAGE EFFECTS
WAGE INCREASE
WAGE INEQUALITY
WAGE LEVELS
WAGE LOSS
WAGES
WORKER
WORKERS
WTO
spellingShingle ADJUSTMENT ASSISTANCE
ADJUSTMENT COST
ADJUSTMENT COSTS
ADJUSTMENT PROCESS
AFFECTED WORKERS
AVERAGE WAGES
BENCHMARK
CETERIS PARIBUS
COMPENSATING WAGE DIFFERENTIALS
CONSUMER PRICE INDEX
DEMAND CURVES
DEVELOPING COUNTRIES
DEVELOPMENT POLICY
DISCOUNTED VALUE
DISTRIBUTION OF INCOME
DOMESTIC PRICE
DOWNWARD PRESSURE
ECONOMIC ACTIVITY
ECONOMIC INEQUALITY
ECONOMIC THEORY
ECONOMICS
ELASTICITY
ELASTICITY OF LABOR SUPPLY
ELASTICITY OF SUBSTITUTION
EMPLOYMENT EFFECTS
EMPLOYMENT LEVELS
EMPLOYMENT RESEARCH
EQUILIBRIUM
EQUILIBRIUM UNEMPLOYMENT
EXPECTED VALUE
EXPECTED WAGE
EXPORT MARKETS
EXPORT SECTOR
EXPORT SUBSIDY
EXPORTS
FEDERAL RESERVE SYSTEM
FREE TRADE
FREE TRADE AGREEMENT
GDP
GENERAL EQUILIBRIUM
GLOBALIZATION
HIGH WAGES
HUMAN CAPITAL
IMPORT COMPETITION
IMPORTS
INDUSTRY WAGE
INTERNATIONAL ECONOMICS
INTERNATIONAL TRADE
JOB SEPARATION
JOBS
LABOR ADJUSTMENT
LABOR ALLOCATION
LABOR ALLOCATIONS
LABOR DEMAND
LABOR FORCE
LABOR MARKET
LABOR MARKET RIGIDITIES
LABOR MARKETS
LABOR MOBILITY
LABOR REALLOCATION
LABOR SUPPLIES
LABOUR
LOCAL LABOR MARKET
LOCAL LABOR MARKETS
MANUFACTURING INDUSTRIES
MANUFACTURING WAGE
MANUFACTURING WAGES
MARGINAL COST
MARGINAL PRODUCTS
MARGINAL VALUE
NATIONAL INCOME
NEOCLASSICAL MODELS
OCCUPATION
OCCUPATIONAL MOBILITY
OPEN ECONOMY
OPTIMAL ALLOCATION
OPTIMIZATION
POLITICAL ECONOMY
POLITICAL ECONOMY OF TRADE
PREFERENTIAL AGREEMENT
PRESENT VALUE
PRODUCT PRICES
PRODUCTION FUNCTION
PRODUCTION FUNCTIONS
PROTECTIONISM
REAL WAGE
REAL WAGES
RENTS
RISK NEUTRAL
TARIFF BINDINGS
TARIFF PROTECTION
TARIFF REDUCTION
TARIFF REDUCTIONS
TERMS OF TRADE
TRADE ADJUSTMENT
TRADE ADJUSTMENT ASSISTANCE
TRADE BLOCK
TRADE BLOCKS
TRADE DIVERSION
TRADE LIBERALIZATION
TRADE MODEL
TRADE MODELS
TRADE POLICY
TRADE REGIME
TRAINING COSTS
UNEMPLOYMENT
URUGUAY ROUND
WAGE DIFFERENTIAL
WAGE DIFFERENTIALS
WAGE EFFECTS
WAGE INCREASE
WAGE INEQUALITY
WAGE LEVELS
WAGE LOSS
WAGES
WORKER
WORKERS
WTO
Artuc, Erhan
Chaudhuri, Shubham
McLaren, John
Some Simple Analytics of Trade and Labor Mobility
relation Policy Research Working Paper;No. 7089
description This paper studies a simple, tractable model of labor adjustment in a trade model that allows researchers to analyze the economy's dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, duality techniques can be employed 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 induces anticipatory flight from the liberalizing sector, driving up wages there temporarily and giving workers remaining there what this paper calls "anticipation rents." By this process, 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, the paper identifies many pitfalls to conventional methods of empirical study of trade liberalization that are based on static models.
format Publications & Research :: Policy Research Working Paper
author Artuc, Erhan
Chaudhuri, Shubham
McLaren, John
author_facet Artuc, Erhan
Chaudhuri, Shubham
McLaren, John
author_sort Artuc, Erhan
title Some Simple Analytics of Trade and Labor Mobility
title_short Some Simple Analytics of Trade and Labor Mobility
title_full Some Simple Analytics of Trade and Labor Mobility
title_fullStr Some Simple Analytics of Trade and Labor Mobility
title_full_unstemmed Some Simple Analytics of Trade and Labor Mobility
title_sort some simple analytics of trade and labor mobility
publisher World Bank Group, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2014/11/20349473/some-simple-analytics-trade-labor-mobility
http://hdl.handle.net/10986/20627
_version_ 1764446874370048000