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Title: The Unequal Reallocation of Trade-Induced Job Losses: Evidence from the U.S. Trade Adjustment Assistance
Citation Type: Miscellaneous
Publication Year: 2017
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Abstract: Administrative data on the U.S. Trade Adjustment Assistance (TAA) for workers reveals that locations with more trade-induced displacements not only shed more of their existing jobs but also create fewer new jobs to absorb these losses. Across locations, one extra TAA trade displaced worker is associated with the employment falling by about two workers: the more trade displaces, the less reallocation takes place. This finding is robust to industry-mix import penetration at the commuting-zone level, suggesting a role for within-industry heterogeneity. A multi-location heterogeneous-firms trade model with variable markups arising from head-to-head foreign competition can endogenize such unequal reallocation across locations. In the medium run following an unexpected trade liberalization, employment and earnings collapse in the least productive locations through both increased trade-induced job losses and reduced job creation. Employment increases in the aggregate despite muted population mobility while inequality in earnings rises and prompts trade adjustment transfers across locations.
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Authors: Kondo, Illenin O
Publisher: Federal Reserve Board
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure
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