Some simple analytics of trade and labor mobility
By: Shubham Chaudhuri, John McLaren.
Contributors: McLaren, John.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13464.; Working paper series (National Bureau of Economic Research) -- working paper no. 13464.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 29
Subjects: Labor market -- Econometric models; Free trade -- Econometric models
Description: We study a simple, tractable model of labor adjustment in a trade model that allows us to analyze the economy's dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, we can use duality techniques 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 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, we identify many pitfalls to conventional methods of empirical study of trade liberalization that are based on static models.
Notes: "October 2007"

Includes bibliographical references (p. 27-29).

Also available in PDF from the NBER world wide web site (www.nber.org).