Dix-Carneiro, Rafael, Pessoa, João Paulo, Reyes-Heroles, Ricardo and Traiberman, Sharon (2023) Globalization, trade imbalances, and labor market adjustment. Quarterly Journal of Economics, 138 (2). pp. 1109-1171. ISSN 0033-5533
Full text not available from this repository.Abstract
We argue that modeling trade imbalances is crucial for understanding transitional dynamics in response to globalization shocks. We build and estimate a general equilibrium, multicountry, multisector model of trade with two key ingredients: (i) endogenous trade imbalances arising from households' consumption and saving decisions; (ii) labor market frictions across and within sectors. We use our model to perform several empirical exercises. We find that the "China shock"accounted for 28% of the decline in U.S. manufacturing between 2000 and 2014 - 1.65 times the magnitude predicted from a model imposing balanced trade. A concurrent rise in U.S. service employment led to a negligible aggregate unemployment response. We benchmark our model's predictions for the gains from trade against the popular ACR sufficient-statistics approach. We find that our predictions for the long-run gains from trade and consumption dynamics significantly diverge.
| Item Type: | Article |
|---|---|
| Additional Information: | © 2023 Published by Oxford University Press on behalf of the President and Fellows of Harvard College. |
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HB Economic Theory |
| Date Deposited: | 24 May 2023 15:24 |
| Last Modified: | 02 Dec 2024 18:30 |
| URI: | http://eprints.lse.ac.uk/id/eprint/119252 |
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