Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility

Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility

This paper explores how different investment frictions affect the patterns of responses of labor markets to tariff cuts. To investigate these patterns, this paper formulates a multi-sector dynamic model featuring capital and labor adjustment costs...

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Bibliographic Details
Main Authors: Artuc, Erhan, Brambilla, Irene, Porto, Guido
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2021
Subjects:
TRADE SHOCK
CAPITAL ADJUSTMENT
LABOR MOBILITY
LABOR MARKET DYNAMIC
TARIFF CUT
WAGES
Online Access:http://documents.worldbank.org/curated/undefined/878751631627450596/Patterns-of-Labor-Market-Adjustment-to-Trade-Shocks-with-Imperfect-Capital-Mobility
http://hdl.handle.net/10986/36283
id okr-10986-36283
recordtype oai_dc
spelling okr-10986-362832021-09-18T05:10:35Z Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility Artuc, Erhan Brambilla, Irene Porto, Guido TRADE SHOCK CAPITAL ADJUSTMENT LABOR MOBILITY LABOR MARKET DYNAMIC TARIFF CUT WAGES This paper explores how different investment frictions affect the patterns of responses of labor markets to tariff cuts. To investigate these patterns, this paper formulates a multi-sector dynamic model featuring capital and labor adjustment costs that is fitted to Argentine data. Counterfactual simulations of a tariff decline in the textile sector are used to show that capital adjustment can create long-run responses of real wages that are larger than the short-run responses. This happens as textile firms disinvest during the transition. This paper also shows that the reduction of tariffs on capital inputs boosts investment and real wages across sectors. This paper assesses the nature of capital adjustment costs, including fixed, convex, and irreversibility costs in determining these patterns of labor market responses to trade reforms. 2021-09-17T18:00:32Z 2021-09-17T18:00:32Z 2021-09 Working Paper http://documents.worldbank.org/curated/undefined/878751631627450596/Patterns-of-Labor-Market-Adjustment-to-Trade-Shocks-with-Imperfect-Capital-Mobility http://hdl.handle.net/10986/36283 English Policy Research Working Paper;No. 9775 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Argentina
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic TRADE SHOCK
CAPITAL ADJUSTMENT
LABOR MOBILITY
LABOR MARKET DYNAMIC
TARIFF CUT
WAGES
spellingShingle TRADE SHOCK
CAPITAL ADJUSTMENT
LABOR MOBILITY
LABOR MARKET DYNAMIC
TARIFF CUT
WAGES
Artuc, Erhan
Brambilla, Irene
Porto, Guido
Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility
geographic_facet Latin America & Caribbean
Argentina
relation Policy Research Working Paper;No. 9775
description This paper explores how different investment frictions affect the patterns of responses of labor markets to tariff cuts. To investigate these patterns, this paper formulates a multi-sector dynamic model featuring capital and labor adjustment costs that is fitted to Argentine data. Counterfactual simulations of a tariff decline in the textile sector are used to show that capital adjustment can create long-run responses of real wages that are larger than the short-run responses. This happens as textile firms disinvest during the transition. This paper also shows that the reduction of tariffs on capital inputs boosts investment and real wages across sectors. This paper assesses the nature of capital adjustment costs, including fixed, convex, and irreversibility costs in determining these patterns of labor market responses to trade reforms.
format Working Paper
author Artuc, Erhan
Brambilla, Irene
Porto, Guido
author_facet Artuc, Erhan
Brambilla, Irene
Porto, Guido
author_sort Artuc, Erhan
title Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility
title_short Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility
title_full Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility
title_fullStr Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility
title_full_unstemmed Patterns of Labor Market Adjustment to Trade Shocks with Imperfect Capital Mobility
title_sort patterns of labor market adjustment to trade shocks with imperfect capital mobility
publisher World Bank, Washington, DC
publishDate 2021
url http://documents.worldbank.org/curated/undefined/878751631627450596/Patterns-of-Labor-Market-Adjustment-to-Trade-Shocks-with-Imperfect-Capital-Mobility
http://hdl.handle.net/10986/36283
_version_ 1764484931152510976

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