Labor Reallocation in Response to Trade Reform

61 Pages Posted: 28 Mar 2007

See all articles by Naercio A. Menezes-Filho

Naercio A. Menezes-Filho

University of Sao Paulo

Marc-Andreas Muendler

University of California, San Diego (UCSD) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2007

Abstract

Tracking individual workers across employers and industries after Brazil's trade liberalization in the 1990s shows that foreign import penetration and tariff reductions trigger worker displacements but that neither comparative-advantage industries nor exporters absorb displaced workers for years. There are significantly more displacements and fewer accessions in comparative-advantage industries and at exporters. These findings are robust to instrumenting trade barriers and export status with product demand at Brazil's export destinations and real exchange rate components. Worker effects are important predictors of labor turnover. Trade liberalization is associated with significantly more transitions to informal work status and self-employment. Output is reallocated to more productive firms but, given fast labor-productivity growth, this product reallocation is not accompanied by similar labor reallocation.

Keywords: international trade, factor reallocation, labor demand and turnover, linked employer-employee data

JEL Classification: F14, F16, J23, J63

Suggested Citation

Menezes-Filho, Naercio A. and Muendler, Marc-Andreas, Labor Reallocation in Response to Trade Reform (March 2007). CESifo Working Paper Series No. 1936, Available at SSRN: https://ssrn.com/abstract=971455 or http://dx.doi.org/10.2139/ssrn.971455

Naercio A. Menezes-Filho

University of Sao Paulo ( email )

Rua Luciano Gualberto, 315
Sao Paulo 05508-900, 14800-901
Brazil

Marc-Andreas Muendler (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-534-4799 (Phone)
858-534-7040 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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