Trade and Welfare (Across Local Labor Markets)

Ryan Kim and Jonathan Vogel

No 27133, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What are the welfare implications of trade shocks? We provide a sufficient statistic that measures changes in welfare, to a first-order approximation, taking into account adjustment in labor supply, in frictional unemployment, and in the sectors to which workers apply while allowing for arbitrary heterogeneity in worker productivity and nonpecuniary returns across sectors. We apply these insights to measure changes in welfare across commuting zones (CZs) in the U.S. between 2000-2007. We find that granting China permanent normal trade relations lowers the welfare of a CZ at the 90th percentile of exposure by 3.1 percentage points relative to a CZ at the 10th percentile; of this, approximately 65 percent is due to changes in unemployment and much of this is driven by the non-pecuniary costs of unemployment.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-int and nep-lab
Note: ITI
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Citations: View citations in EconPapers (14)

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