Trade and Towns: Heterogeneous Adjustment to a Border Shock

Brülhart, Marius, Frederic Robert-Nicoud and Carrère, Céline
Authors registered in the RePEc Author Service: Marius Brülhart and Celine Carrere

No 10886, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the effects of changes in trade openness on wages and employment of different-sized towns. To this end, we develop a multi-region model of intra-national adjustment to trade shocks. In equilibrium, small towns have more elastic labor-force responses than large towns. We test this prediction using fine-grained regional data for Austria and the fall of the Iron Curtain as a quasi-experimental setting for the exploration of trade-induced spatial effects. We find improved access to foreign markets to boost both employment and nominal wages, but large towns tend to have larger wage responses and smaller employment responses than small towns. The welfare gains of immobile factors are estimated to be 40% higher in border towns compared to interior towns.

Keywords: City size; Natural experiment; Spatial adjustment; Trade liberalization (search for similar items in EconPapers)
JEL-codes: F15 R11 R12 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-geo, nep-int and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Trade and towns: Heterogeneous adjustment to a border shock (2018)
Working Paper: Trade and Towns:Heterogeneous Adjustment to a Border Shock (2015)
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