Dix-Carneiro and Kovak Trade Reform and Regional Dynamics McCaig and Pavcnik (2014) find substantial shifts from household (informal) to enterprise (formal) employment in Vietnam in response to the U.S.-Vietnam Bilateral Trade Agreement, more closely paralleling our findings here.

Overall, geographic migration does not appear to respond to changing local labor demand conditions. However, when restricting attention to formally employed workers in the matched employer-employee data, we find that individuals who migrate tend to avoid adversely affected destinations. Together, these findings suggest that regional adjustment of formal employment occurs primarily through workers transitions into or out of formal employment, rather than by migrating across space.

In contrast to much of the trade literature, we focus on regional dynamics rather than frictions across industries or establishments. A recent literature on the local labor market effects of trade, pioneered by Topalova (2007) in the developing country context and Autor, Dorn and Hanson (2013) in the U.S., points toward significant mobility frictions across regions in both developing and developed countries.<sup>3</sup> When industries are concentrated in different regions, workers must overcome geographical mobility barriers in order to reallocate from contracting to expanding industries or establishments. This reallocation is essential for the economy to realize the production gains from trade. The distinction between geographic and industry mobility frictions is also important for policy, as the optimal policy prescriptions to minimize transitional costs, speed up reallocation, and compensate the losers from trade liberalization will be quite different.

Only recently have researchers begun measuring reallocation costs and the dynamics of labor market adjustment following trade policy reforms. Dix-Carneiro (2014) estimates a structural dynamic equilibrium model of the Brazilian labor market in which workers face various frictions in switching sectors of employment. He then simulates a counterfactual trade liberalization episode to study the quantitative implications of the model, including the dynamics of labor market transition and heterogeneous welfare effects on workers with different characteristics (such as age and education). Other papers follow a similar strategy of calibrating or estimating small open economy models in order to study their quantitative implications for welfare and their implied transitional dynamics when facing hypothetical changes in trade policy (see Kambourov (2009), Artu ̧c, Chaudhuri and McLaren (2010), and Co ̧sar (2013)). Importantly, the labor market dynamics studied in these papers derive from the estimated structural models under consideration rather than reflecting observed responses to liberalization in the data. Our paper is the first to empirically describe transitional dynamics induced by a real-world trade reform.

In related work, Autor, Dorn, Hanson and Song (forthcoming) use U.S. panel data to study the labor market effects of increased Chinese imports across industries. Our individual-level longitu-

> 3This growing literature includes Edmonds, Pavcnik and Topalova (2010), Hasan, Mitra and Ural (2006), Hasan, Mitra, Ranjan and Ahsan (2012), McCaig (2011), Topalova (2010), Topalova (2010), Kovak (2013), Hakobyan and McLaren (2012), Autor et al. (2013), Kondo (2014), Costa, Garred and Pessoa (2014) and others. All of these papers point to the presence of substantial barriers to regional mobility.

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