Trade with Nominal Rigidities: Understanding the Unemployment and Welfare Effects of the China Shock / Andrés Rodríguez-Clare, Mauricio Ulate, José P. Vásquez.

Format:

Book

Author/Creator:

Rodríguez-Clare, Andrés.

Contributor:

National Bureau of Economic Research.

Ulate, Mauricio.

Vásquez, José P.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27905.

NBER working paper series no. w27905

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

We present a dynamic quantitative trade and migration model that incorporates downward nominal wage rigidities and show how this framework can generate changes in unemployment and labor force participation that match those uncovered by the empirical literature studying the "China shock." We find that the China shock leads to average welfare increases in most U.S. states, including many that experience elevated unemployment during the transition. However, nominal rigidities reduce the overall U.S. gains by more than one fourth. In addition, there are seven states that experience welfare losses in the presence of downward nominal wage rigidity that would have experienced gains without it.

Notes:

Print version record

October 2020.