Labor market effects of technology shocks biased toward the traded sector

Luisito Bertinelli, Olivier Cardi and Romain Restout

Journal of International Economics, 2022, vol. 138, issue C

Abstract: Our VAR evidence for OECD countries reveals that the non-traded sector alone drives the increase in hours worked following a technology shock that increases permanently traded relative to non-traded TFP. The shock generates a reallocation of labor toward the non-traded sector which contributes to 35% of the rise in non-traded hours worked. Both labor reallocation and variations in labor income shares are found empirically connected with factor-biased technological change. Our quantitative analysis shows that a two-sector open economy model with flexible prices can reproduce the labor market effects we document empirically once we allow for imperfect mobility of labor, a demand for home-produced traded goods which is elastic enough w.r.t. the terms of trade, and factor-biased technological change. When calibrating the model to country-specific data, its ability to account for the cross-country reallocation and redistributive effects we estimate increases once we let factor-biased technological change vary between sectors and countries.

Keywords: Sector-biased technology shocks; Factor-augmenting efficiency; Open economy; Labor reallocation; CES production function; Labor income share (search for similar items in EconPapers)
JEL-codes: E25 E32 F11 F41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Labor market effects of technology shocks biased toward the traded sector (2022)
Working Paper: Labor Market Effects of Technology Shocks Biased toward the Traded Sector (2021)
Working Paper: Labor Market Effects of Technology Shocks Biased Toward the Traded Sector (2021)
Working Paper: Labor Market Effects of Technology Shocks Biased toward the Traded Sector (2019)
Working Paper: Labor Market Effects of Technology Shocks Biased Toward the Traded Sector (2019)
Working Paper: Labor Market Effects of Technology Shocks BiasedToward the Traded Sector (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:138:y:2022:i:c:s0022199622000770

DOI: 10.1016/j.jinteco.2022.103645

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