in Table A2 to compute the baseline between-market mobility frictions. With this baseline mobility friction, estimated _ν_ , labor allocation data, and the wage data for the base year, we solve for the labor allocation and values at the initial steady state as described in Appendix A.5.<sup>45</sup> We calibrate the cost share of labor ( _γl_ for Brazil and _γ_ ̄ _n,l_ for all other countries), the cost share of intermediate inputs ( _γm_ for Brazil) to the base year using the World Input-Output Database (WIOD) and the share of fixed factors in value-added of Brazil from CDP. We also allow these cost shares to vary by sector.<sup>46</sup> In addition, we calibrate labor income of each labor market of Brazil ( _w_ �1<sup>_k_</sup> _,_ 0<sup>_L_</sup> 1<sup>_k_</sup> _,_ 0<sup>);</sup> GDP of each country other than Brazil ( _w_ � _n,_ 0 _Ln,_ 0); trade shares, _λ_ ’s; and sectoral expenditure shares in preference, _φ_ ’s, to exactly match the data of the base year. We further allow for _φ_ ’s to vary by country in the calibrated model. We calibrate the initial employment share of the residual market to be 0 _._ 2659 to match the informal employment share of the data in 2003. Lastly, we set _β_ = 0 _._ 95 and set the trade elasticity _θ_ = 4 following Simonovska and Waugh (2014).

Once the baseline economy is specified, we use the simulated data from the model to calibrate the ̃ elasticity of substitution between tasks, _σ_ . Since this parameter is related to the love for variety of tasks, we calibrate it to match the elasticity of the number of job options to exports in Table 5.<sup>47</sup> First, we simulate the model with a 20% decline in trade costs from Brazil to each partner country uniformly for all sectors. We then run the same regression described in Section 4.3 with the simulated data for changes in exports and the number of job options following the shock. The calibrated value of _σ_ ̃ is 2.4429 with which the elasticity of job options in Table 5, 0.652, is matched exactly. The calibrated value of _σ_ ̃ is larger than one and thus confirms the love for variety of tasks channel.

# **5.4 Counterfactual Exercises**

The benchmark counterfactual shock we explore is a 20% permanent decline in iceberg trade costs _d_ in the manufacturing sector from Brazil to each of its trading partners. This shock can be interpreted as a positive export shock to all manufacturing labor markets in Brazil. For the baseline counterfactuals, all the other model parameters are fixed. We then shut down our job options channel by setting the cost of task operation to be infinite and compare this alternative model to the baseline. Lastly, we simulate the benchmark shock with different levels of between-market moving costs to understand the role of mobility frictions in the transmission of trade shocks on workers’ welfare. We focus our analysis on Brazil for the of the counterfactual shock on outcomes of interest.

> 45As in Section 2, we use the residual wage after controlling for observable worker characteristics.

> 46These cost shares are assumed to be the same across Brazilian regions within the same sector, because the inputoutput data are not available at the detailed region level in Brazil.

> 47In addition to the reason related to the interpretation of this parameter, we do not match the other three elasticities in the table because they also depend on the labor supply elasticity _ν_ .

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