Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data
This paper empirically studies the dynamics of labor market adjustment following the Brazilian trade reform of the 1990s. The paper uses variation in industry-specific tariff cuts interacted with initial regional industry mix to measure trade-induced local labor demand shocks and examines regional an...
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| Format: | Working Paper |
| Language: | en_US |
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World Bank Group, Washington, DC
2015
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| Online Access: | http://hdl.handle.net/10986/21644 |
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okr-10986-21644 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
en_US |
| topic |
trade liberalization transitional dynamics industry wages jobs employment household survey employment rate rights export markets accounting wage gap production earnings regressions skilled workers employment share informal sector minimum wage income protected industry perfect competition labor allocation exchange information labor force political economy job effects incentives labor economics trade reforms labor statistics factors of production retail trade labor market policies free trade wage growth developing country domestic workers labor market training development economics unemployed workers industry wage worker outputs job information productivity unemployed attrition program consisting adjustment process financial institutions formal labor market job market markets organizations household surveys open economy unemployment insurance labor earnings growth liberalization minimum wages unemployment skill premium factor markets human capital formal sector workers previous work workers job destruction rates displaced workers wages policies informal labor markets international trade barriers local labor markets real wage labor demand value cross-sectional data plant size paying job labor studies wage premium labor adjustment occupation private services income distribution employment status earnings regression labor market outcomes employment growth job creation labor mobility high wage formal sector wages economic theory trade liberalization worker heterogeneity economics leather industries insurance wage structure manufacturing industries trade job destruction pension account theory working conditions investment contracting labor market regulations laborers supply foreign workers employee employment dynamics labor supply labor market adjustment consumer price index world trade informal employment local labor market unskilled workers arbitrage labour capital investment labor markets economic shocks outcomes prices labor regulations labor reallocation employees |
| spellingShingle |
trade liberalization transitional dynamics industry wages jobs employment household survey employment rate rights export markets accounting wage gap production earnings regressions skilled workers employment share informal sector minimum wage income protected industry perfect competition labor allocation exchange information labor force political economy job effects incentives labor economics trade reforms labor statistics factors of production retail trade labor market policies free trade wage growth developing country domestic workers labor market training development economics unemployed workers industry wage worker outputs job information productivity unemployed attrition program consisting adjustment process financial institutions formal labor market job market markets organizations household surveys open economy unemployment insurance labor earnings growth liberalization minimum wages unemployment skill premium factor markets human capital formal sector workers previous work workers job destruction rates displaced workers wages policies informal labor markets international trade barriers local labor markets real wage labor demand value cross-sectional data plant size paying job labor studies wage premium labor adjustment occupation private services income distribution employment status earnings regression labor market outcomes employment growth job creation labor mobility high wage formal sector wages economic theory trade liberalization worker heterogeneity economics leather industries insurance wage structure manufacturing industries trade job destruction pension account theory working conditions investment contracting labor market regulations laborers supply foreign workers employee employment dynamics labor supply labor market adjustment consumer price index world trade informal employment local labor market unskilled workers arbitrage labour capital investment labor markets economic shocks outcomes prices labor regulations labor reallocation employees Dix-Carneiro, Rafael Kovak, Brian K. Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data |
| geographic_facet |
Latin America & Caribbean Brazil |
| relation |
Policy Research Working Paper;No. 7205 |
| description |
This paper empirically studies the dynamics of labor market adjustment following the Brazilian trade reform of the 1990s. The paper uses variation in industry-specific tariff cuts interacted with initial regional industry mix to measure trade-induced local labor demand shocks and examines regional and individual labor market responses to those one-time shocks over two decades. Contrary to conventional wisdom, the analysis does not find that the impact of local shocks is dissipated over time through wage-equalizing migration. Instead, it finds steadily growing effects of local shocks on regional formal sector wages and employment for 20 years. This finding can be rationalized in a simple equilibrium model with two complementary factors of production, labor and industry-specific factors such as capital, that adjust slowly and imperfectly to shocks. Next, the paper documents rich margins of adjustment induced by the trade reform at the regional and individual levels. Workers initially employed in harder hit regions face continuously deteriorating formal labor market outcomes relative to workers employed in less affected regions, and this gap persists even 20 years after the beginning of trade liberalization. Negative local trade shocks induce workers to shift out of the formal tradable sector and into the formal nontradable sector. Non-employment strongly increases in harder hit regions in the medium run, but in the longer run, non-employed workers eventually find re-employment in the informal sector. Working age population does not react to these local shocks, but formal sector net migration does, consistent with the relative decline of the formal sector and growth of the informal sector in adversely affected regions. |
| format |
Working Paper |
| author |
Dix-Carneiro, Rafael Kovak, Brian K. |
| author_facet |
Dix-Carneiro, Rafael Kovak, Brian K. |
| author_sort |
Dix-Carneiro, Rafael |
| title |
Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data |
| title_short |
Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data |
| title_full |
Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data |
| title_fullStr |
Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data |
| title_full_unstemmed |
Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data |
| title_sort |
trade reform and regional dynamics : evidence from 25 years of brazilian matched employer-employee data |
| publisher |
World Bank Group, Washington, DC |
| publishDate |
2015 |
| url |
http://hdl.handle.net/10986/21644 |
| _version_ |
1764448860987457536 |
| spelling |
okr-10986-216442021-04-23T14:04:03Z Trade Reform and Regional Dynamics : Evidence From 25 Years of Brazilian Matched Employer-Employee Data Dix-Carneiro, Rafael Kovak, Brian K. trade liberalization transitional dynamics industry wages jobs employment household survey employment rate rights export markets accounting wage gap production earnings regressions skilled workers employment share informal sector minimum wage income protected industry perfect competition labor allocation exchange information labor force political economy job effects incentives labor economics trade reforms labor statistics factors of production retail trade labor market policies free trade wage growth developing country domestic workers labor market training development economics unemployed workers industry wage worker outputs job information productivity unemployed attrition program consisting adjustment process financial institutions formal labor market job market markets organizations household surveys open economy unemployment insurance labor earnings growth liberalization minimum wages unemployment skill premium factor markets human capital formal sector workers previous work workers job destruction rates displaced workers wages policies informal labor markets international trade barriers local labor markets real wage labor demand value cross-sectional data plant size paying job labor studies wage premium labor adjustment occupation private services income distribution employment status earnings regression labor market outcomes employment growth job creation labor mobility high wage formal sector wages economic theory trade liberalization worker heterogeneity economics leather industries insurance wage structure manufacturing industries trade job destruction pension account theory working conditions investment contracting labor market regulations laborers supply foreign workers employee employment dynamics labor supply labor market adjustment consumer price index world trade informal employment local labor market unskilled workers arbitrage labour capital investment labor markets economic shocks outcomes prices labor regulations labor reallocation employees This paper empirically studies the dynamics of labor market adjustment following the Brazilian trade reform of the 1990s. The paper uses variation in industry-specific tariff cuts interacted with initial regional industry mix to measure trade-induced local labor demand shocks and examines regional and individual labor market responses to those one-time shocks over two decades. Contrary to conventional wisdom, the analysis does not find that the impact of local shocks is dissipated over time through wage-equalizing migration. Instead, it finds steadily growing effects of local shocks on regional formal sector wages and employment for 20 years. This finding can be rationalized in a simple equilibrium model with two complementary factors of production, labor and industry-specific factors such as capital, that adjust slowly and imperfectly to shocks. Next, the paper documents rich margins of adjustment induced by the trade reform at the regional and individual levels. Workers initially employed in harder hit regions face continuously deteriorating formal labor market outcomes relative to workers employed in less affected regions, and this gap persists even 20 years after the beginning of trade liberalization. Negative local trade shocks induce workers to shift out of the formal tradable sector and into the formal nontradable sector. Non-employment strongly increases in harder hit regions in the medium run, but in the longer run, non-employed workers eventually find re-employment in the informal sector. Working age population does not react to these local shocks, but formal sector net migration does, consistent with the relative decline of the formal sector and growth of the informal sector in adversely affected regions. 2015-03-30T19:45:23Z 2015-03-30T19:45:23Z 2015-03 Working Paper http://hdl.handle.net/10986/21644 en_US Policy Research Working Paper;No. 7205 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank Group, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Brazil |