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Who's afraid of Virginia WU? The labor composition and labor gains of trade

Timon Bohn, Steven Brakman and Erik Dietzenbacher

No 7527, CESifo Working Paper Series from CESifo Group Munich

Abstract: There are various ways to indicate the importance of international trade. In this paper, we use the ‘labor footprint’ concept to gain new insights into the implications of trade for employment. We focus on the US, but also provide information on 39 other, mostly developed, countries for the period 1995-2008. We show that US consumption increasingly depends on foreign workers. At the same time, US labor has benefited from new jobs generated by the world economy, especially in the services sector. Next we compare labor footprints with labor endowments to evaluate the capacity of countries to be self-sufficient in terms of labor in a hypothetical situation of autarky and perfect labor mobility. This counterfactual exercise reveals that most countries in our study are able to produce all output for consumption themselves. However, once the assumption that labor is perfectly mobile across skill levels and that all unemployed workers accept a job when offered one is relaxed, most countries can no longer be self-sufficient. That is, these countries would not be able to sustain their current consumption pattern.

Keywords: factor content of trade; input-output analysis (search for similar items in EconPapers)
JEL-codes: F20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2019
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