Enriching U.S. Labor Results in a Multi-Regional CGE Model

Abstract

This paper proposes a new approach for enriching results for U.S. labor markets from the leading multi-regional CGE model, the GTAP model. Departing from the usual approach of expanding labor data in all economies in a model’s database, our method expands only the U.S. labor data. Additionally, we introduce a novel modification to primary factor demands, generating more realistic labor markets in which lower-skilled jobs substitute more easily with other primary factors than higher-skilled jobs. The advantages of our approach are that we can rely on the most recent and the most disaggregate U.S. labor data available; we build upon the most recently available GTAP database; and, when applied to other economies, our approach is the initial contribution to a database of detailed labor statistics for several economies.

Keywords: labor, trade, CGE model, GTAP, wage, labor structure, labor disaggregation

JEL Classification: C68, F16, J31