Trade and Welfare (Across Local Labor Markets)

34 Pages Posted: 12 May 2020 Last revised: 20 Feb 2022

See all articles by Ryan Kim

Ryan Kim

Johns Hopkins University

Jonathan Vogel

UCLA; NBER

Date Written: May 2020

Abstract

What are the welfare implications of trade shocks? We provide a sufficient statistic that measures changes in welfare, to a first-order approximation, taking into account adjustment in labor supply, in frictional unemployment, and in the sectors to which workers apply while allowing for arbitrary heterogeneity in worker productivity and nonpecuniary returns across sectors. We apply these insights to measure changes in welfare across commuting zones (CZs) in the U.S. between 2000-2007. We find that granting China permanent normal trade relations lowers the welfare of a CZ at the 90th percentile of exposure by 3.1 percentage points relative to a CZ at the 10th percentile; of this, approximately 65 percent is due to changes in unemployment and much of this is driven by the non-pecuniary costs of unemployment.

Suggested Citation

Kim, Ryan and Vogel, Jonathan, Trade and Welfare (Across Local Labor Markets) (May 2020). NBER Working Paper No. w27133, Available at SSRN: https://ssrn.com/abstract=3597865

Ryan Kim (Contact Author)

Johns Hopkins University ( email )

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Jonathan Vogel

UCLA ( email )

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United States

NBER ( email )

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