International trade and labor reallocation: misclassification errors, mobility, and switching costs

Maximiliano Dvorkin

No 2021-014, Working Papers from Federal Reserve Bank of St. Louis

Abstract: International trade has increased at a rapid pace in the last decades, altering production and labor demand in different sectors of the economy. The estimated effects of trade on employment and welfare critically depend on data about workers’ reallocation patterns, which is typically plagued with coding errors. I show that the estimated employment and welfare effects of international trade, and the estimated structural parameters of standard models are biased when the analysis uses data subject to misclassification errors. I develop an econometric framework to estimate misclassification probabilities, corrected mobility matrices, and structural parameters, and show that the estimated employment and welfare effects of a trade shock are different from those estimated with uncorrected data, raising an important warning about conclusions drawn from data with coding errors.

Keywords: international trade; labor markets; classification errors; mobility; worker reallocation; structural estimation (search for similar items in EconPapers)
JEL-codes: C25 F16 F66 J24 J62 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2021-12-03, Revised 2024-06
New Economics Papers: this item is included in nep-int and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.20955/wp.2021.014

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