Firm Trade Exposure, Labor Market Competition, and the Worker Incidence of Trade Shocks

Jeronimo Carballo and Richard K. Mansfield

No 33481, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines how the composition of firm exposure and competition among imperfectly substitutable workers mediate the earnings, welfare, and unemployment incidence of changes in the international trade environment. We merge LEHD job match records with firm-level import and export records from the LFTTD and use them to estimate a large-scale assignment model of the entire U.S. labor market. The model flexibly accommodates frictions from switching regions, industries, trade engagement status, and even particular employers. We construct firm-level estimates of the employment impact of China's WTO entry using exogenous tariff gap variation via four different channels, import and export competition and import and export access, and combine them with the model to evaluate the shock's worker-level incidence. Our results show that the firm composition of shock exposure does matter for medium-run worker-level earnings incidence, with workers at the highly exposed multinational manufacturing firms experiencing the largest shock-induced earnings losses. However, labor market competition causes the shock's impact to spread to seemingly unaffected sectors and trickle down the skill ladder, so that entry-level non-traded service workers and initially unemployed job-seekers account for a large share of earnings losses and particularly unemployment increases.

JEL-codes: F15 F16 F6 J23 J6 J62 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-cna, nep-com, nep-int and nep-lab
Note: ITI LS
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