Trade, Labor Market Concentration, and Wages

Mayara Felix
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Mayara Felix: Yale University

No 2510, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: I estimate the effect of trade on local labor market concentration and its implications for wages using employer-employee linked data and tariff shocks from BrazilÕs trade liberalization. Trade increased concentration by 7%, an effect driven by firm exit and worker flows to surviving import-competing firms. Increased concentration reduced wage take-home sharesÑestimated at 50 cents on the dollar pre-shockÑenough to offset small wage gains from reallocation, but did not meaningfully reduce wages on net. Most of the wage declines attributed to BrazilÕs trade liberalization resulted instead from reductions in the marginal revenue product of labor. Incorporating informality reveals substantial regional heterogeneity.

Pages: 130 pages
Date: 2026-03-01
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