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Local Labor Markets Dynamics and Export Shocks: Theory and Evidence from Indonesia

Author

Listed:
  • Góes, Carlos

    (University of San Diego)

  • Segnana, Juan

    (Tilburg University)

  • Robertson, Raymond

    (Texas A&M University)

  • Lopez-Acevedo, Gladys

    (World Bank)

Abstract

We study the dynamic effects of export exposure over local labor markets in Indonesia. We develop an empirical strategy to instrument exposure to exports using exposure to foreign demand shocks and validate it showing that the labor market responses are consistent with those expected from demand shocks in a spatial model. Export shocks unambiguously increase employment in Indonesia. While effects on average income per employee are ambiguous due to industry- and sectoral-compositional effects, our estimates of district-level welfare suggest that export shocks induce an increase in welfare.

Suggested Citation

  • Góes, Carlos & Segnana, Juan & Robertson, Raymond & Lopez-Acevedo, Gladys, 2023. "Local Labor Markets Dynamics and Export Shocks: Theory and Evidence from Indonesia," IZA Discussion Papers 16473, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16473
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    References listed on IDEAS

    as
    1. Amiti, Mary & Cameron, Lisa, 2012. "Trade Liberalization and the Wage Skill Premium: Evidence from Indonesia," Journal of International Economics, Elsevier, vol. 87(2), pages 277-287.
    2. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    3. Góes, Carlos & Lopez-Acevedo, Gladys & Robertson, Raymond, 2023. "Gender-Segmented Labor Markets and Trade Shocks," IZA Discussion Papers 15892, Institute of Labor Economics (IZA).
    4. Treb Allen & Costas Arkolakis, 2014. "Trade and the Topography of the Spatial Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1085-1140.
    5. Rafael Dix-Carneiro & Brian K. Kovak, 2015. "Trade Liberalization and the Skill Premium: A Local Labor Markets Approach," American Economic Review, American Economic Association, vol. 105(5), pages 551-557, May.
    6. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
    7. Carlos G'oes & Gladys Lopez-Acevedo & Raymond Robertson, 2023. "Gender-Segmented Labor Markets and Foreign Demand Shocks," Papers 2301.09252, arXiv.org, revised Dec 2023.
    8. Chodorow-Reich, Gabriel, 2020. "Regional data in macroeconomics: Some advice for practitioners," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    9. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 1-44.
    10. Philippe Aghion, Antonin Bergeaud, Matthieu Lequien, Marc J. Melitz, 2018. "The Impact of Exports on Innovation: Theory and Evidence," Working papers 678, Banque de France.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    international trade; labor markets; inequality; poverty; jobs;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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