Dix-Carneiro and Kovak Trade Reform and Regional Dynamics workers in every Brazilian municipality.<sup>11</sup> The dynamic patterns we document below would be unobservable using standard household survey or Census data. Second, a very rich set of labor market outcomes can be analyzed with such data, including how liberalization affected i) the duration of non-formal labor market spells; ii) job creation and job destruction rates; iii) the number of active establishments; and iv) the establishment size distribution. Third, the ability to follow workers over time and across establishments and municipalities allows us to analyze the short, medium- and long-run effects of the reform on individuals’ labor market trajectories controlling for observable worker characteristics, including individuals’ industry and region of employment just before the policy shock. Fourth, we study a discrete policy shock and observe outcomes for 20 years following the beginning of liberalization, allowing us to study the dynamic response to this well-defined trade policy shock. This contrasts with Autor et al. (forthcoming), who use U.S. panel data to study the effects of growing trade with China. They emphasize that the continuously evolving nature of Chinese trade confounds their ability to study the dynamic response to a trade shock at any given point in time.

As is typically the case in matched employer-employee datasets, the limitation of RAIS is a lack of information on workers who are not formally employed. It is therefore impossible to tell whether a worker is out of the labor force, unemployed, informally employed, or self-employed. This is important in the Brazilian context, with informality rates reaching over 50% of all employed workers during the period under scrutiny.<sup>12</sup> However, we can infer when the worker is not employed in the formal labor market and examine spells outside of formal employment.

To address this limitation, we supplement the RAIS data with five rounds of the Brazilian Demographic Census: 1970, 1980, 1991, 2000, and 2010. While these data provide much smaller samples and do not permit following individual workers over time, they cover all individuals, including the informally employed, unemployed, and those outside the labor force. This allows us to examine trade liberalization’s effect on informality, employment, and other outcomes for workers outside formal employment. Moreover, with the increasing availability and popularity of matched employer-employee data, it is useful to compare the empirical relationships in these types of data with those in more traditional cross-sectional surveys. When possible, we corroborate results from RAIS using the Demographic Census, finding very similar results across datasets.

To analyze outcomes by local labor market, we must define the boundaries of each market. We use the “microregion” definition of the Brazilian Statistical Agency (IBGE), which groups together economically integrated contiguous municipalities (counties) with similar geographic and productive characteristics (IBGE 2002), closely paralleling an intuitive notion of a local labor market. When necessary, we combine microregions whose boundaries changed during our sample period to ensure

> 11The National Household Survey ( _Pesquisa Nacional por Amostra de Domic ́ılios_ - PNAD) would be a natural alternative data source for a yearly analysis, but it only provides geographic information at the state level, does not allow one to follow individual workers over time, and provides a much smaller sample.

> 12Authors’ calculations using Brazilian Demographic Census.

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