Globalization, Trade Imbalances and Labor Market Adjustment / Rafael Dix-Carneiro, João Paulo Pessoa, Ricardo M. Reyes-Heroles, Sharon Traiberman.

Format:

Book

Author/Creator:

Dix-Carneiro, Rafael.

Contributor:

National Bureau of Economic Research.

Pessoa, João Paulo.

Reyes-Heroles, Ricardo M.

Traiberman, Sharon.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28315.

NBER working paper series no. w28315

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We argue that modeling trade imbalances is crucial to understanding transitional dynamics in response to globalization shocks. We build and estimate a general equilibrium, multi-country, multi-sector model of trade with two key ingredients: (a) endogenous trade imbalances arising from households' consumption and saving decisions; (b) labor market frictions across and within sectors. We use our model to perform several empirical exercises. We find that the "China shock" accounted for 25% of the decline in US manufacturing between 2000 and 2014--twice the magnitude predicted from a model imposing balanced trade. A concurrent rise in US service employment led to a negligible aggregate unemployment response. We then benchmark our model's predictions for the gains from trade against the popular "ACR" sufficient statistics approach. We find that our predictions for the long-run gains from trade and consumption dynamics significantly diverge.

Notes:

Print version record

January 2021.