The Local Incidence of Trade Shocks

Ferdinando Monte

No 1682, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: The welfare implications of trade integration across areas of a country rely on local real wages, typically unmeasured in ex-post analyses and unavailable in counterfactual exercises. I develop and estimate a general equilibrium framework where local labor markets interact via commuting ties and overlaps in sectoral specialization. Changes in real wages are poorly predicted by standard measures of exposure to trade because, first, the price of local services co-moves with local workplace wages, and, second, residents adjust commuting patterns chasing higher wages. While more exposure to trade in comparative disadvantage sectors tends to lower nominal wages, all real wages grow.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:1682

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