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Trade and Welfare (Across Local Labor Markets)

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  • Ryan Kim
  • Jonathan Vogel

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

  • Ryan Kim & Jonathan Vogel, 2020. "Trade and Welfare (Across Local Labor Markets)," NBER Working Papers 27133, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27133
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    Cited by:

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    2. Benny Kleinman & Ernest Liu & Stephen J. Redding, 2023. "Dynamic Spatial General Equilibrium," Econometrica, Econometric Society, vol. 91(2), pages 385-424, March.
    3. Benny Kleinman & Ernest Liu & Stephen J. Redding, 2020. "International Friends and Enemies," Working Papers 2020-29, Princeton University. Economics Department..
    4. Chang, Pao-Li & Chen, Yi-Fan & Hsu, Wen-Tai, 2022. "Labor Market Participation, Income Distribution, and Welfare Gains from Trade," Economics and Statistics Working Papers 6-2022, Singapore Management University, School of Economics.
    5. Qingen Gai & Naijia Guo & Bingjing Li & Qinghua Shi & Xiaodong Zhu, 2021. "Migration Costs, Sorting, and the Agricultural Productivity Gap," Working Papers tecipa-693, University of Toronto, Department of Economics.
    6. Wen-Tai Hsu & Lin Lu & Pierre M. Picard, 2023. "Income inequality, productivity, and international trade," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(1), pages 203-249, July.

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    JEL classification:

    • F1 - International Economics - - Trade

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