TRADE SHOCKS AND HIGHER‐ORDER EARNINGS RISK IN LOCAL LABOR MARKETS

Tomas Martinez and Ursula Mello

International Economic Review, 2024, vol. 65, issue 4, 1717-1746

Abstract: This article investigates the relationship between international trade and asymmetrical labor income risk. Using the case study of Brazil, we inspect how an increase in import penetration following the China shock impacted the distribution of idiosyncratic earnings changes across the country's local labor markets. We find that an increase in import penetration leads to a more dispersed and negatively skewed distribution. These effects can be explained by an increase in the volatility of hours worked following job and industry transitions, particularly from involuntary job separations.

Date: 2024
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