Globalization and Labor Market Dynamics

Posted: 14 Aug 2017

See all articles by John McLaren

John McLaren

University of Virginia; NBER

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Date Written: August 2017


Historically, the trade research field has usually ignored dynamic adjustment of workers, but a recent wave of work has developed a rich set of theoretical and empirical tools to analyze this factor. Empirical approaches have ranged from reduced-form regressions to the structural estimation of underlying parameters, which is necessary to understand welfare effects. A major distinction is that between models that do and those that do not allow for unobserved heterogeneity across workers; these models are useful for different purposes. Consistent findings across methods and countries indicate that costs of switching sectors and occupations are high and that both switching costs and option value are crucial in computing the welfare effects of globalization for workers.

Suggested Citation

McLaren, John, Globalization and Labor Market Dynamics (August 2017). Annual Review of Economics, Vol. 9, pp. 177-200, 2017. Available at SSRN: or

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