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Essays on Trade Liberalization and Labor Market Outcomes

Author : Zhe Jiang

Publisher :

Page : 159 pages

File Size : 19,66 MB

Release : 2020

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This dissertation studies trade liberalization and labor market outcomes. The first two chapters examine the impact of China's trade liberalization on the adjustment of U.S. labor market for skilled and unskilled workers in a dynamic general equilibrium framework with firm heterogeneity and factor proportions. In the first chapter, I most specifically look into the effect of trade cost reduction on U.S. skill premium in an environment which I abstract from labor market friction. Featuring labor market search and matching frictions, the second chapter is part of a broader agenda on the labor market effect of China's trade liberalization and U.S. firms' offshoring decisions, with a greater focus on the dynamics of unemployment of skilled and unskilled workers. The third chapter investigates the impact of the China's increased trade openness on its local labor market. It examines the effects of China's domestic migration policy change and trade liberalization on wage inequality in China using a dynamic general equilibrium model of international trade and internal migration across regions. This dissertation showcases some of the ways trade policy can interact with firms' endogenous offshoring and entry decisions, workers' mobility choices, and labor markets frictions in a dynamic fashion. More specifically, the first chapter studies how wage inequality between skilled and unskilled workers interact with multinational firms' decisions and countries' different factor endowments using a two-country dynamic stochastic model featuring task-offshoring, heterogeneous firms and factor proportions. It shows that besides the traditional Stolper-Samuelson mechanism that shifts factors of production towards a country's comparative advantage sectors, there also exist other firm-level adjustment mechanisms that widen the wage gap after trade liberalization. It finds that in the short run, offshoring widens wage inequality between skilled and unskilled workers through increasing high-skilled wage and lowering low-skilled wage. Such effect is more announced in the beginning phase of the adjustment, and slows down over time as low-skilled wage rises faster than the cool-down of high-skilled wage increase. The intensive margin and the extensive margin are both active in shaping rising wage gap in the home country, with the latter playing a more important role in the short to medium run compared to the beginning stage following the shock. The second chapter studies the dynamic effects of offshoring on the unemployment rates and wage inequality across the high-skilled and low-skilled workers through the dynamics of firms' production location and entry decisions in general equilibrium. First, I examine the dynamic effects of offshoring cost reduction due to China's trade liberalization. Estimates from vector autoregressions (VARs) show that a decrease in offshoring costs is associated with a short-lived increase in low-skilled unemployment, but a persistent decline in high-skilled unemployment and a less persistent expansion of wage gap in the source country. Second, I build a two-country trade-in-task model with firm heterogeneity, endogenous selection into entry and offshoring as well as search and matching frictions to study the channels through which offshoring cost reductions affect the labor market outcomes for different skill groups over time. The model successfully reproduces the VAR evidence and highlights the importance of endogenous firm entry and labor market frictions in generating the empirical dynamic responses of wage and unemployment across different skill groups. The third chapter investigates China's labor market's responses to its own trade liberalization, which is a relatively less explored topic compared to the relationship between the China shock and labor market changes in other countries. Using data from CHIP (Chinese Household Income Project), this chapter aims to fill this gap by estimating the effects of trade liberalization on Chinese local labor markets. In addition, it investigates changes in urban to rural wage inequality and skill premium in urban and rural areas separately with the availability of surveys conducted in urban and rural households. In the model, a dynamic general equilibrium framework with heterogeneous firms, heterogeneous workers and internal migration is employed to study the impact of policy-generated trade cost reduction and easing of migration restrictions on Chinese wage inequality. I focus on the role of labor mobility that characterizes the large rural-to-urban migration in the midst of trade liberalization in shaping skill premium and urban to rural wage inequality. Calibrating the changes in policy-generated migration cost reduction and trade cost decline, as well as productivity increase in the tradable sector, this paper analyzes the responses of different measures of wage inequality and other macroeconomics variables following these shocks. This dissertation highlights the role of interaction of firm dynamics, factor endowments and labor market frictions in shaping the labor market adjustments. The positive effects of offshoring on the labor market for workers regardless of skill levels suggest that more trade frictions designed to restrict offshoring is likely to hinder firm entry, which is a key driver that contributes to higher wages and lower unemployment rates of both skilled and unskilled workers over time. It also points to the importance of labor market reforms by showing that easing of migration restriction and search and matching frictions are both beneficial to exports and wages of all workers, with consequences of rising wage inequality though.







Three Essays in International Trade and Finance

Author : Huancheng Du

Publisher :

Page : 133 pages

File Size : 47,24 MB

Release : 2018

Category : Capital market

ISBN : 9780438718692

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Book Description

This dissertation explores the economic interactions and outcomes in the nexus of international trade and finance. The entire dissertation is divided into three chapters with each chapter addresses one specific economic problem that roots in the interaction of international trade and finance. In the first chapter, I attempt to draw theoretical implications on two particular questions. First, what is the trade liberalization effect on capital market outcomes? Second, how do trade liberalization and capital market conditions jointly affect labor market outcomes such as income inequality? The objective of this chapter is to integrate both labor market frictions and capital market imperfection into one coherent theoretical framework and study the important interactions of trade liberalization and financial market development, as well as their joint impacts on aggregate income inequality. In the second chapter, I aim to provide both theoretical foundation and empirical evidence in partially explaining country authorities' decisions on financial policies. In the third chapter, [w]e provide a novel way of extracting country-level fundamental news from the international trade network. Specifically, we show that sovereign CDS returns provide value-relevant information that slowly propagates through credit markets reflecting underreaction on a global scale.



Essays on Trade Shocks and Local Labor Markets

Author : Chan Yu

Publisher :

Page : 288 pages

File Size : 18,69 MB

Release : 2020

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The first two chapters of the dissertation study how local labor market adjusts to trade shocks. The last chapter explores the relationship between economic condition change and health outcomes. In what follows, I describe my three essays. The first chapter proposes a mechanism through which local labor markets adjust to trade shocks: immigrants’ mobility. I find that immigrants are more responsive than natives to trade shocks. A $1000 increase in the import exposure leads to a 2.6 percent decline in the immigrant population but has little change in the native population. Additionally, immigrant mobility reduces the negative effects of trade shocks on native employment and wages. The study ultimately shows that natives in areas with more immigrants experience smaller declines in employment and wages. The second chapter studies the disparate impacts of trade liberalization on U.S. workers according to gender and age. Focusing on US-China trade shocks that occurred between 1990-2007, I show that these trade shocks generated larger declines in manufacturing employment and wages for older women than for older men. In contrast to prior studies, I find that discrimination and gender differences in industrial employment play relatively small roles in explaining this pattern. Instead, I present evidence that women's career interruptions from marriage and motherhood provide a more promising explanation. Within an age cohort, trade shocks depress labor market outcomes more strongly for married women with children than their male counterparts. The last chapter estimates the impact on infant birth outcomes of the farm credit crisis that hit the U.S. Midwest in the 1980s. Exploiting county-level variation in agricultural loans before the crisis, I use a difference-in-differences methodology to show that counties with more pre-existing farmland loans (per acre) experienced relatively worse infant health outcomes as the crisis unfolded. My estimates indicate that a $100 dollar increase in farmland loan (per acre) increased the incidence of low birth weight by around 0.4 percentage points and reduced the birth weight by 19 grams. Other findings show that the credit crisis intensified financial distress and tightened financial constraints for affected households, economic pressures that potentially provide a mechanism for the impact on birth outcomes. Counties that had purchased more farmland prior to the crisis suffered larger declines in their farm earnings, higher delinquency rates, and more bank failures







Essays in Labor Economics and International Trade

Author : Moises Yi

Publisher :

Page : 128 pages

File Size : 36,43 MB

Release : 2016

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ISBN :

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This dissertation employs tools from Labor Economics and International Trade to study how workers and labor markets adjust to economic shocks arising from trade liberalization and technological change. It contributes to the existing literature by studying several economic mechanisms that determine the magnitudes of these adjustments. The first chapter of this dissertation analyzes the roles that skill transferability and the local industry mix have on the adjustment costs of workers affected by negative trade shocks. Using rich administrative data from Germany, we construct novel measures of economic distance between sectors based on the notion of skill transferability. We combine these distance measures with sectoral employment shares in German regions to construct an index of labor market flexibility. This index captures the degree to which workers from a particular industry will be able to reallocate into other jobs. We then study the role of labor market flexibility on the effect of import shocks on the earnings and the employment outcomes of German manufacturing workers. Among workers living in inflexible labor markets, the difference between a worker at the 75th percentile of industry import exposure and one at the 25th percentile of exposure amounts to an earnings loss of roughly 11% of initial annual income (over a 10 year period). The earning losses of workers living in flexible regions are negligible. These findings are robust to controlling for a wide array of region level characteristics, including region size and overall employment growth. Our findings indicate that the industry composition of local labor markets plays an important role on the adjustment processes of workers. In the second chapter, we develop and apply a framework to quantify the effect of trade on aggregate welfare as well as the distribution of this aggregate effect across different groups of workers. The framework combines a multi-sector gravity model of trade with a Roy-type model of the allocation of workers across sectors. By opening to trade, a country gains in the aggregate by specializing according to its comparative advantage, but the distribution of these gains is unequal as labor demand increases (decreases) for groups of workers specialized in export-oriented (import-oriented) sectors. The model generalizes the specific-factors intuition to a setting with labor reallocation, while maintaining analytical tractability for any number of groups and countries. Our new notion of "inequality-adjusted" welfare effect of trade captures the full cross-group distribution of welfare changes in one measure, as the counterfactual scenario is evaluated by a risk-averse agent behind the veil of ignorance regarding the group to which she belongs. The quantitative application uses trade and labor allocation data across regions in Germany to compute the aggregate and distributional effects of a shock to trade costs or foreign technology levels. For the extreme case in which the country moves back to autarky we find that inequality-adjusted gains from trade are larger than the aggregate gains for both countries, as between-group inequality falls with trade relative to autarky, but the opposite happens for the shock in which China expands in the world economy. In the third chapter, we use detailed production data from a large Latin American garment manufacturer to study the process of technology adoption and resulting productivity changes within a firm. We find that the adoption of modern manufacturing techniques increases productivity through two channels, a direct effect and a spillover effect across adjacent production units. By exploiting the gradual introduction of new manufacturing techniques across independent production units, we estimate a direct effect on productivity of roughly 30%. We also estimate large spillovers to neighboring untreated units which amount to a 25% increase in productivity. Both of these effects accumulate slowly over time. The timing and the magnitudes of the estimated spillover effects corroborate qualitative evidence consistent with knowledge diffusion, learning and imitation.



Economic Liberalization and Labor Markets

Author : Parviz Dabir-Alai

Publisher : Praeger

Page : 304 pages

File Size : 50,46 MB

Release : 1998-04-23

Category : Business & Economics

ISBN :

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Book Description

Contains 11 essays which discuss the impact of economic liberalization on employment and unemployment.



Essays on Trade Policies

Author : Mengqi Wang

Publisher :

Page : 0 pages

File Size : 15,85 MB

Release : 2024

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This dissertation aims to comprehensively analyze the influence of government policies in international markets on agent decisions, as well as the broader macroeconomic implications of these policies. Reducing trade costs significantly affects how resources and economic activities are distributed spatially. Yet, internal frictions, particularly common in developing countries, obstruct efficient resource allocation across regions. Developing nations address this by combining trade liberalization with internal reforms or subsidies. Understanding how these reductions in trade costs and the mitigation of internal frictions interact is crucial for assessing policy effectiveness, especially regarding export outcomes. In Chapter One, titled "Spatial Implications of Trade Cost Reduction with Resource Reallocation Frictions,'' a dynamic spatial general equilibrium model is developed to study how changes in external trade costs and internal frictions affect export growth. The model incorporates costs of goods trade within and across borders, labor migration, and firms' borrowing. Using China's early 2000s reforms for calibration, the analysis shows that both external and internal reforms significantly boosted export growth, with domestic financial frictions playing a key role. Additionally, the study identifies a complementary relationship between external and internal factors, emphasizing the importance of addressing financial frictions and capital accumulation to enhance the effectiveness of trade cost reduction. The redistribution of resources among firms is another reason economic frictions may impede export growth following reductions in external trade costs. Chapter Two, titled "Internal Reforms, Trade Liberalization, and Labor Market Outcomes in China,'' investigates how changes in trade costs and the size of the state-owned sector influence unemployment rates and job turnovers. Using a small open economy model, calibrated with early 2000s reforms in China, I find that reducing trade costs alone has minimal impact on labor markets without concurrent reductions in the state-owned sector size. This chapter underscores the complementary effect, emphasizing the enhanced labor market adjustments resulting from trade cost reductions combined with reductions in the state-owned sector size. Recent trade tensions have underscored the risks associated with policy-induced geoeconomic fragmentation, emphasizing the importance of understanding complex global supply chains and trade partnerships. Chapter Three, titled "Trade Diversion Effects from Global Tensions'' (co-authored with Swarnali Ahmed Hannan), estimates the trade diversion effect on Mexico's exports to the United States during the 2018 U.S.-China trade tensions. We find positive trade diversion effects, with the U.S. shifting imports from China to Mexico, particularly for products affected by U.S. tariffs on Chinese goods. However, limited evidence suggests significant transmission of the trade diversion effect through input-output linkages in the short run.