Some Simple Analytics of Trade and Labor Mobility

35 Pages Posted: 15 Oct 2007 Last revised: 30 Nov 2007

See all articles by Shubham Chaudhuri

Shubham Chaudhuri

Columbia University, Graduate School of Arts and Sciences, Department of Economics; World Bank - East Asia and Pacific Region

John McLaren

University of Virginia; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

We study a simple, tractable model of labor adjustment in a trade model that allows us to analyze the economy's dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, we can use duality techniques to study the equilibrium, and despite its simplicity a rich variety of properties emerge. The model generates gross flows of labor across industries, even in the steady state; persistent wage differentials across industries; gradual adjustment to a liberalization; and anticipatory adjustment to a pre-announced liberalization. Pre-announcement makes liberalization less attractive to export-sector workers and more attractive to import-sector workers, eventually making workers unanimous either in favor of or in opposition to liberalization. Based on these results, we identify many pitfalls to conventional methods of empirical study of trade liberalization that are based on static models.

Suggested Citation

Chaudhuri, Shubham and McLaren, John, Some Simple Analytics of Trade and Labor Mobility (October 2007). NBER Working Paper No. w13464. Available at SSRN: https://ssrn.com/abstract=1019762

Shubham Chaudhuri (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
MC-3308
New York, NY 10027
United States
212-854-4661 (Phone)
212-854-5765 (Fax)

World Bank - East Asia and Pacific Region ( email )

Washington, DC 20433
United States

John McLaren

University of Virginia ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
434-924-3994 (Phone)
434-982-2904 (Fax)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
24
Abstract Views
482
PlumX Metrics