Trade with Nominal Rigidities: Understanding the Unemployment and Welfare Effects of the China Shock

Andres Rodriguez-Clare, Mauricio Ulate and Jose Vasquez

No 9982, CESifo Working Paper Series from CESifo

Abstract: We present a dynamic quantitative trade and migration model that incorporates downward nominal wage rigidities and show how this framework can generate changes in unemployment and labor participation that match those uncovered by the empirical literature studying the “China shock.” We find that the China shock leads to average welfare increases in most U.S. states, including many that experience unemployment during the transition. However, nominal rigidities reduce the overall U.S. gains by around one fourth. In addition, there are seven states that experience welfare losses in the presence of downward nominal wage rigidity that would have experienced gains without it.

Keywords: trade; unemployment; China shock; downward nominal wage rigidity (search for similar items in EconPapers)
JEL-codes: F10 J20 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cna, nep-dge, nep-int and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Trade with Nominal Rigidities: Understanding the Employment and Welfare Effects of the China Shock (2024)
Working Paper: Trade with Nominal Rigidities: Understanding the Unemployment and Welfare Effects of the China Shock (2022)
Working Paper: Trade with Nominal Rigidities: Understanding the Unemployment and Welfare Effects of the China Shock (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9982

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