Labor Market Effects of Global Supply Chain Disruptions

Mauricio Ulate, Jose Vasquez and Roman D. Zarate

No 10311, CESifo Working Paper Series from CESifo

Abstract: We examine the labor market consequences of recent global supply chain disruptions induced by COVID-19. Specifically, we consider a temporary increase in international trade costs similar to the one observed during the pandemic and analyze its effects on labor market outcomes using a quantitative trade model with downward nominal wage rigidities. Even omitting any health-related impacts of the pandemic, the increase in trade costs leads to a temporary but prolonged decline in U.S. labor force participation. However, there is a temporary increase in manufacturing employment as the United States is a net importer of manufactured goods, which become costlier to obtain from abroad. By contrast, service and agricultural employment experience temporary declines. Nominal frictions lead to temporary unemployment when the shock dissipates, but this depends on the degree of monetary accommodation. Overall, the shock results in a 0.14% welfare loss for the United States. The impact on labor force participation and welfare across countries varies depending on the initial degree of openness and sectoral deficits.

Keywords: supply chain disruptions; trade costs; downward nominal wage rigidity (search for similar items in EconPapers)
JEL-codes: F10 F11 F16 F40 F66 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-int and nep-lab
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Related works:
Journal Article: Labor market effects of global supply chain disruptions (2025)
Working Paper: Labor Market Effects of Global Supply Chain Disruptions (2023)
Working Paper: Labor Market Effects of Global Supply Chain Disruptions (2023)
Working Paper: Labor Market Effects of Global Supply Chain Disruptions (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10311

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