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Distributional Impacts of Trade

This is a list of papers on the distributional impacts of trade in no particular order.

  1. Autor, David H., David Dorn, and Gordon H. Hanson. 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States." American Economic Review, 103 (6): 2121-68. DOI: 10.1257/aer.103.6.2121
    - They examine the impact of Chinese import competition on US commuting zones (CZs), drawing on data from the US Census, the American Community Survey, and the County Business Patterns for 1990-2007.
    - CZs are clusters of counties that have the commuting structure of a local labor market.
    - By analyzing local labor markets that are subject to differential trade shocks according to initial patterns of industry specialization, they extend the analysis of the consequences of trade beyond wage and employment changes in manufacturing.
    - They relate changes in manufacturing and nonmanufacturing employment, earnings, and transfer payments across US local labor markets to changes in market exposure to Chinese import competition.
    - CZs that were more exposed to increased import competition from China experienced substantially larger reductions in manufacturing employment.
    - This led to increased unemployment, decreased labor-force participation, and increased use of disability and other transfer benefits, as well as lower wages.
    - This finding holds for both college and noncollege adults (adults with high school or lower education), the effects are much more pronounced for noncollege adults.
    - For noncollege workers increased trade exposure also predicts significant reductions in CZ employment in nonmanufacturing industries, suggesting the presence of negative local demand spillovers.
    - Import competition has modest effects on the size of the working-age population in CZs, there is little geographic migration in response to the trade shock.
    - Import shocks trigger a decline in wages that is primarily observed outside of the manufacturing sector. Reductions in both employment and wage levels lead to a steep drop in the average earnings of households. These changes contribute to rising transfer payments through multiple federal and state programs, revealing an important margin of adjustment to trade that the literature has largely overlooked.
    - Estimates of the net impact of aggregate demand and reallocation effects imply that import growth from China between 1999 and 2011 led to an employment reduction of 2.4 million workers.
  2. Autor, David H., David Dorn, and Gordon H. Hanson. 2013. "The Geography of Trade and Technology Shocks in the United States." American Economic Review, 103 (3): 220-25. DOI: 10.1257/aer.103.3.220
    - Motivation:
    • Technological change and expanding international trade have led to changing skill demands and growing inequality or polarization of labor market outcomes in the US and other rich countries.
    • They explore the geographic overlap of trade and technology shocks in US local labor markets.
    • If the overlap is extensive, there would be a strong case for viewing trade and technology as phenomena whose consequences cannot be distinguished.
    • However, if the evidence reveals only limited overlap, trade and technology may be playing substantively different roles in shaping labor-market developments.
    - Results:
    • Regional exposure to technological change, as measured by specialization in routine task–intensive production and clerical occupations, is largely uncorrelated with regional exposure to trade competition from China.
    • The impacts of technology are present throughout the US, but the impacts of trade tend to be more geographically concentrated, owing in part to the strong spatial agglomeration of labor-intensive manufacturing.
    • It should be possible to separately identify the impacts of recent changes in trade and technology on US regionla economies.
  3. David H. Autor, David Dorn, Gordon H. Hanson, Jae Song. 2014. “Trade Adjustment: Worker-Level Evidence”, The Quarterly Journal of Economics, 129 (4), 1799–1860.
    - They examine the impact of import competition from China on the careers of individual workers using longitudinal data from the US Social Security Administration.
    - Their analysis contrasts the labor-market outcomes of workers who were ex ante observationally similar except for their initial industry of employment.
    - Workers whose 1991 industry subsequently became exposed to higher import penetration accumulate substantially lower earnings over the period of 1992 to 2007, compared to their peers with similar demographic characteristics and previous labor-market outcomes.
    - These workers also experience greater job churning. They spend fewer years working for their initial firm, more years working outside their initial industry, and more years receiving Social Security Disability Insurance.
    - This trade-induced job mobility is however not sufficient to equilibrate career earnings between more and less trade-exposed workers.
  4. Acemoglu D, Autor DH, Dorn D, Hanson GH, Price B. 2016. Import competition and the Great U.S. Employment Sag of the 2000s. Journal of Labor Economics 34(S1):S141–98
    - US manufacturing employment declined by 18.7% between 2000 and 2007.
    - They explore how much of the US employment sag of the 2000s can be attributed to rising import competition from China.
    - Central estimates suggest job losses from rising Chinese import competition over 1999–2011 in the range of 2.0–2.4 million.
    - They first estimate the direct effect of trade competition on employment in manufacturing industries that are differentially exposed to growing Chinese import penetration.
    - Then they expand the analysis to include multiple general equilibrium channels through which trade exposure may affect employment:
    a. other sectors might be affected because they are related to the affected sectors through input-output linkages;
    b. employment may reallocate away from trade-exposed industries toward nonexposed in-dustries;
    c. Keynesian-type aggregate demand spillovers may significantly magnify the direct competition effect.
    - They estimate upstream and downstream trade effects for both manufacturing and nonmanufacturing sectors.
    - They also assess the impact of Chinese trade on US commuting zones to jointly estimate reallocation and aggregate demand effects at the local level.
    - Their estimates show sizable job losses in exposed industries and few, if any, offsetting job gains in nonexposed industries, a pattern that is consistent with substantial job loss due to aggregate demand spillovers.
    - Their analysis of the aggregate employment consequences of import competition builds on Autor et al. (2013, 2015) by expanding their CZ-level analysis to include analysis at the level of national industries and by characterizing the alternative mechanisms — reallocation versus changes in aggregate demand — through which trade induces employment decline at the local level.
  5. Autor, David H., David Dorn, and Gordon H. Hanson. 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade". Annual Review of Economics, 2016. 8:205-240. DOI: 10.1146/annurev-economics-080315-015041
    - Review: discussion of findings from the rapidly growing literature on China’s rise relating to the impact of trade shocks on developed countries.
    - Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences.
    - The mobility costs that rationalize slow adjustment imply that short-run trade gains may be much smaller than long-run gains and that spatial heterogeneity in the magnitudes of the net benefits may be much greater than previously thought.
    - Exposed workers experience greater job churning and reduced lifetime income.
    - At the national level, employment has fallen in the US industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize.
    - Trade not only has benefits but also significant costs. These include distributional costs, which theory has long recognized, and adjustment costs, which the literature has tended to downplay.
    - They present evidence on how trade shocks originating in China have affected industries and plants, local labor markets housing those plants, and individual workers employed (or formerly employed) in those industries and local markets.
    - They argue that having failed to anticipate how significant the dislocations from trade might be, it is incumbent on the literature to more convincingly estimate the gains from trade, such that the case for free trade is not based on the sway of theory alone, but on a foundation of evidence that illuminates who gains, who loses, by how much, and under what conditions.
    - China’s growth has represented a large positive net global supply shock for manufacturing and a large positive net global demand shock for raw materials.
    - Contrary to the canonical understanding of US labor markets as fluid and flexible, trade-induced manufacturing declines in CZs (commuting zones, local labor markets) are not, over the course of a decade, largely offset by sectoral reallocation or labor mobility. Instead, overall CZ employment-to-population rates fall at least one-for-one with the decline in manufacturing employment, and generally by slightly more.
    - Employment is not the only margin of labor-market response to trade shocks. There are also wage effects: more trade-exposed CZs experience larger reductions in average weekly wages.
    - A direct consequence of reduced employment and wages in trade-exposed local labor markets is an increase in transfer benefits.
    - Because trade-induced declines in local employment and wages appear persistent, a larger fraction of households in a CZ is likely to qualify for means-tested entitlements.
    - Trade exposure also contributes to an increase in disability benefits, whose take-up is typically associated with permanent exit from the labor force.
    - On the whole there appears to be limited regional redistribution of trade gains from winners to losers.
    - Comparing the residents of CZs at the 75th and 25th percentile of import exposure, those in the more exposed location experience a reduction in annual household wage and salary income per adult of $549, whereas per capita transfer income rises by approximately $58, thereby offsetting just a small portion of the earnings loss.
    - Workers in import-competing sectors bear differential adjustment costs in reaction to the China trade shock.
  6. Wolfgang Dauth, Sebastian Findeisen, Jens Suedekum. 2014. The Rise of the East and the Far East: German Labor Markets and Trade Integration, Journal of the European Economic Association, Volume 12, Issue 6, 1 December 2014, Pages 1643–1675.
    - Similar analysis like Autor et al. (2013), but for Germany for 1988-2008.
    - Looks at imports and exports from/to Eastern Europe and China.
    - They find that rising import exposure from China had negligible labor market effects. The reason seems to be that Germany already tended to import those labor-intensive goods in the 1980s, in which China subsequently became the world’s dominant supplier. Germany simply diverted its import flows from other countries (such as Italy or Greece) to China. - However, they find substantial displacement effects from rising Eastern European import penetration across German regions.
    - German manufacturers sharply increased exports to these lower-wage countries, resulting in a modest trade deficit with China and a trade surplus with Eastern Europe.
    - The employment gains related to the export opportunities to Eastern Europe actually raised German employment.
  7. Balsvik R, Jensen S, Salvanes KG. 2015. Made in China, sold in Norway: local labor market effects of an import shock. Journal of Public Economics 127:137–44
    - Based on Autor et al. (2013) for Norway, 1996-2007.
    - They find a negative impact of exposure to competition from China on the manufacturing employment share in Norwegian local labor markets. This effect is related to imports of intermediate products, rather than imports of products for final consumption.
    - The effect is caused by exposure to imports from China to Norway, and not competition from China in Norwegian export markets.
    - The reduction in manufacturing employment primarily affects workers without a college degree, who find themselves partly pushed into unemployment, partly out ofthe labor force, and partly into employment in other private sectors.
    - They find no evidence of wage effects.
    - They partly expect these efefcts in a Nordic model where firms are flexible at the employment margin, while centralized wage bargaining provides less flexibility at the wage margin.
  8. Donoso V, Martín V, Minondo A. 2014. Do differences in exposure to Chinese imports lead to differences in local labour market outcomes? An analysis for Spanish provinces. Regional Studies 49:46–64
    - Based on Autor et al. (2013), for Spain 1999–2007.
    - They analyze whether the massive increase in imports from China impacted the labour markets of Spanish provinces to differing degrees, given differences in their initial productive specialization.
    - The results show that Spanish provinces with a higher exposure to Chinese imports experienced larger drops in manufacturing employment as a share of the working-age population.
    - However, this reduction was compensated for by increases in non-manufacturing employment.
  9. Francisco Costa, Jason Garred and João Paulo Pessoa. 2016. Winners and losers from a commodities-for-manufactures trade boom, Journal of International Ecnomics, Vol 102, Sep 2016, pages 50-69.
    - Uses theoretical framework of Autor et al. (2013) for Brazil for 2000-2010.
    - Considers the heterogeneous effects of supply-side and demand-side ‘China shocks' on labour market.
    - Examines the changing labour market outcomes of regions producing manufactures affected by rising Chinese import supply and localities specializing in raw materials demanded by China.
    - Finds that labour markets in ‘loser’ regions appear to have suffered from Chinese import competition via slower growth in manufacturing wages; ‘winner’ regions have gained from Chinese export demand, through faster wage growth and shifts in the local economy towards formal jobs.
    - Considers wages, employment rates, sectoral composition, informality and migration.
  10. Chetverikov D, Larsen B, Palmer C. 2016. "IV Quantile Regression for Group-level Treatments, with an Application to the Distributional Effects of Trade", Econometrica 84(2):809–33.
    - They build on the framework of Autor et al. (2013) to analyze whether low-wage earners were more adversely affected than high-wage earners by Chinese import competition.
    - Their point estimates suggest that the (commuting zone) average negative effect of Chinese import penetration estimated by Autor et al. (2013) is primarily driven by large negative effects for those in the bottom tercile, where the effect is twice as large as the average effect.
    - Wages not in the bottom tercile were less affected than the average.
  11. Pierce, Justin R., and Peter K. Schott. 2016. "The Surprisingly Swift Decline of US Manufacturing Employment." American Economic Review, 106 (7): 1632-62. DOI: 10.1257/aer.20131578.
    - They find a relationship between the sharp decline in US manufacturing employment after 2000 and the United States’ conferral of permanent normal trade relations on China.
  12. Kovak, Brian K. 2013. “Regional Effects of Trade Reform: What is the Correct Measure of Liberalization?” The American Economic Review, 103 (5), 1960–1976.
    - Develops a specific-factors model of regional economies that yields a weighted-average relationship between regional wage changes and trade liberalization-induced price changes across industries.
    - The model shows that liberalization in a particular industry will have a larger effect on local wages when:
    a. liberalization has a larger effect on the prices faced by producers,
    b. the industry accounts for a larger share of local employment, and
    c. labor demand in the industry is more elastic.
    - The model also incorporates the nontraded sector, showing that nontraded prices move with traded goods prices during liberalization.
    - Applies the model’s predictions by measuring the effects of Brazil’s trade liberalization in the early 1900s on regional wages.
  13. Caliendo L, Dvorkin M, Parro F. 2015. "The Impact of Trade on Labor Market Dynamics", NBER Working Paper 21149. DOI: 10.3386/w21149.
    - Find that in the immediate aftermath of a trade shock, constructed to mimic the effects of growth in US imports from China, US net welfare gains are close to zero.
    - The ultimate and sizable net gains are realized only once workers are able to reallocate across regions to move from declining to expanding industries.
  14. Stefano Federico 2014. "Industry Dynamics and Competition from Low-Wage Countries: Evidence on Italy". Oxford Buletin of Economics and Statistics, 76(3):389–410
    - Analyses the effects of competition from low-wage countries on employment and other measures of sector activity in Italy.
    - Estimates the effects by using a panel of 230 manufacturing sectors over the years 1995–2007 and employing variation in import penetration across industries and over time.
    - Italy’s specialization in sectors such as garments, leather and footwear makes it particularly exposed to competition from low-wage countries.
    - Results:
    1. An increase in low-wage import penetration is associated with a decrease in employment, output, the wage bill and the number of firms.
    2. The decrease in employment tends to be smaller in more skill, capital and R&D-intensive sectors.
    3. There is evidence of significant inter-industr yeffects of import penetration through upstream and downstream channels.
  15. Rafael Dix-Carneiro and Brian K. Kovak. 2017. Trade Liberalization and Regional Dynamics, American Economic Review 2017, 107(10): 2908–2946.
    - Brazil
    - "Short-run effects vastly underestimate the long-run effects, indicating that the costs and benefits of (trade) liberalization remain sharply unevenly distributed across geography, even 20 years after the policy began."
  16. Goldberg, Pinelopi, Koujianou, and Nina Pavcnik. 2007. "Distributional Effects of Globalization in Developing Countries." Journal of Economic Literature, 45 (1): 39-82. DOI: 10.1257/jel.45.1.39.
    - Data from Mexico, Colombia, Argentina, Brazil, Chile, India and Hong Kong during the 1980s and 1990s.
    - They focus on inequality (skill premium, wage inequality) not poverty. - The exposure of developing countries to international markets has increased substantially in recent years. It is measured by the degree of trade protection, the share of imports and/or exports in GDP, the magnitude of capital flows — foreign direct investment (FDI) in particular, and exchange rate fluctuations.
    - While inequality has many different dimensions, all existing measures for inequality in developing countries seem to point to an increase in inequality, which in some cases is severe.
    - The evidence suggests a contemporaneous increase in globalization and inequality in most developing countries. Establishing a causal link between these two trends has proven challenging.
    - The evidence has provided little support for the conventional wisdom that trade openness in developing countries would favor the less fortunate.
    - There is little support for the premise that adjustment to changing economic conditions would occur through labor reallocation from declining to growing sectors of the economy, at least at the aggregate industry level usually considered in traditional international trade models of comparative advantage.
    - A common finding: the lack (or small magnitude) of sectoral labor reallocation.
    - In some instances, the data suggest that the wage response to trade barrier reduction is more pronounced than the employment response.
  17. Limão, N and A Panagariya. 2007. "Inequality and endogenous trade policy outcomes", Journal of International Economics, vol 72, issue 2, July 2007, pp 292-309.
    - They demonstrate that if the government objective reflects a preference for equity then its trade policy will exhibit an anti-trade bias (ATB) on average.
  18. Luis San Vicente Portes. 2008. "On the distributional effects of trade policy: Dynamics of household saving and asset prices", The Quartely Review of Ecnomics and Finance, vol. 49, issue 3, pp 944-970.
    - He concentrates on the impact of lower tariffs on capital income (consumption-saving decision, precautionary savings) and changes in asset prices.
    - The contribution of this paper is to develop a theoretical framework that
    • generates economy-wide distributions of wealth and income for different levels of trade protection, and
    • assesses the associated changes in welfare and inequality.
    - The proposed model provides new insights into the trade–inequality relation since it also allows to determine a household’s stance on free trade depending on its specific characteristics, such as relative wealth (poor or rich), source of income (labor, capital or both), and portfolio composition (degree of diversification).
    - The model is a two-sector small-open economy; it is calibrated to resemble the Mexican economy.
    - He shows that while lower relative agriculture protection reduces the price of food, it is also associated with a fall in the value of land.
    - A lower price of food can modify saving behavior in a way that leads to larger inequality in the long-term, as households reduce their buffer savings to insure against hitting a subsistence floor.
    - In the short-term the impact of liberalization on inequality is primarily determined by the capital loss associated to the fall in the value of land. The higher the share of land in a household’s portfolio the larger the capital loss due to freer trade.
    - One of the main findings is that increasing inequality may be the outcome of the agents’ response to a welfare enhancing policy.
  19. Petia Topalova 2010. Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India, American Economic Journal: Applied Economics 2 (October 2010): 1–41.
    - Effects of trade liberalization on poverty in India.
    - There is no evidence in the data for factor mobility across sectors and geographic regions.
  20. Brian McCaig 2011. Exporting out of poverty: Provincial poverty in Vietnam and U.S. market access. Journal of International Economics, Vol. 85, issue 1, Sep 2011, pp 102-113.
    - Vietnam, exports.
    - Shows that the most exposed provinces experienced faster wage growth for workers with low levels of education, but not for highly educated workers.
  21. Ebenstein, Avraham, Ann Harrison, Margaret McMillan, and Shannon Phillips. 2014. “Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys.” The Review of Economics and Statistics, vol 96, no 4, Oct 2014.
    - US economy, 1982-2002.
    - They examine the impact of trade and offshoring, two primary measures of globalization, on US workers.
    - They focus on potential wage impacts across occupations, both within manufacturing and across the broader economy.
    - They use CPS data, which they merge with data on exports, imports, and BEA data on offshoring.
    - Main contributions:
    1. They draw a distinction between the impact of globalization on industrial wage differentials and on occupation wage differentials. Globalization has had small or insignificant effects on industry wage differentials but significant effects on occupation wage differentials.
    2. They extend previous analyses that focused exclusively on manufacturing sector workers to explore the impact of trade and offshoring on all workers.
    3. They use a two-stage approach to show that one important avenue through which globalization affects wages is by pushing workers out of the manufacturing sector to take lower-paying jobs elsewhere. Using a CPS panel of workers and the exposure of an occupation to trade as an instrument for whether a worker switched occupations, they find that occupation switching due to trade led to real wage losses of 12 to 17 percentage points between 1983 and 2002.
  22. Fajgelbaum, Pablo, and Amit K. Khandelwal. 2016. “Measuring the Unequal Gains from Trade.” Quarterly Journal of Economics 131:1113–1180. doi:10.1093/qje/qjw013.
    - Studies the distributional effects of trade through the expenditure channel.
    - Develops a methodology to measure the unequal gains from trade across consumers within countries.
    - The approach is based on aggregate statistics and model parameters that can be estimated from readily available bilateral trade and production data.
    - Estimates model parameters from a nonhomothetic gravity equation (the elasticity of imports with respect to both trade costs and income) to calculate the impact of trade on the real income of consumers with different expenditures within the economy.
    - The premise of the analysis is that consumers at different income levels within an economy may have different expenditure shares in goods from different origins or in different sectors.
    - Larger expenditures in more tradeable sectors and a lower rate of substitution between imports and domestic goods lead to larger gains from trade for the poor than the rich.
    - On average, the real income loss from closing off trade is 63% at the 10th percentile of the income distribution and 28% for the 90th percentile.
  23. Krishna, Pravin, Jennifer P. Poole, and Mine Zeynep Senses. 2012. "Trade, Labor Market Frictions, and Residual Wage Inequality across Worker Groups." American Economic Review, 102 (3): 417-23.
    - Studies the effects of trade liberalization on wage dispersion in Brazil across heterogeneous worker groups using a matched employer-employee data set.
    - Finds differential effects of trade reform on residual wage inequality across worker groups. High education workers experience greater increases in wage dispersion relative to low education workers following trade liberalization.
  24. Elhanan Helpman, Oleg Itskhoki, Marc-Andreas Muendler, Stephen J. Redding. 2017. Trade and Inequality: From Theory to Estimation, The Review of Economic Studies, Volume 84, Issue 1, January 2017, Pages 357–405.
    - Uses linked employer–employee data from Brazil.
    - Shows that much of overall wage inequality related to trade arises within sector–occupations and for workers with similar observable characteristics; that this within component is driven by wage dispersion between firms; and that wage dispersion between firms is related to firm employment size and trade participation.
  25. Amiti, M. and D. R. Davis. 2012. “Trade, firms, and wages: Theory and evidence.” Review of Economic Studies,79(1), 1–36.
    - Indonesia 1991-2000
    - The Indonesian data set has firm-level data on individual inputs, making it possible to construct highly disaggregated input tariffs.
    - The contribution of this paper is to examine, theoretically and empirically, the impact of trade liberalization on wages while taking explicit account of firm heterogeneity, trade in final and intermediate products, and firm-specific wages.
    - The model predicts that a fall in output tariffs lowers wages at import-competing firms but boosts wages at exporting firms. Similarly, a fall in input tariffs raises wages at import-using firms relative to those at firms that only source inputs locally. The data supports the model's predictions.
    - This is the first paper to show an empirical link between input tariffs and wages, and the first to show differential effects from reducing output tariffs on exporters and non-exporters.
  26. Shushanik Hakobyan and John Mclaren. 2016. "Looking for local labor market effects of NAFTA", Review of Economics and Statistics Volume 98 | Issue 4 | October 2016 p.728-741. DOI: 10.1162/REST_a_00587.
    - They try to identify within-country income distribution effects of the tariff reductions brought about by NAFTA, using publicly available U.S. Census data from 1990 and 2000, taken from the IPUMS project at the Minnesota Population Center.
    - Limitations on the mobility of workers both geographically and across industries appear to be very important, they find statistically and economically significant effects of both local employment-weighted average tariffs and industry tariffs on wages.
    - They find that reductions in the local average tariff are associated with substantial reductions in the locality’s blue-collar wages, even for workers in the service sector.
    - The main finding: the distributional effects of NAFTA are large for a highly affected minority of workers. Whether they define highly affected industries as industries that had been protected by a high tariff against Mexican imports or as industries whose Mexican share of imports rose quickly, the result is the same: Blue-collar workers in highly affected industries saw substantially lower wage growth than workers in other industries.
    - Studies of aggregate welfare effects of NAFTA such as Romalis (2007)and Caliendo and Parro (2015) find at most very small aggregate U.S. welfare gains from NAFTA, so these distributional effects suggest strongly that blue-collar workers in vulnerable industries suffered large absolute declines in real wages as a result of NAFTA.
  27. Jingting Fan. 2019. "Internal Geography, Labor Mobility,and the Distributional Impacts of Trade" American Economic Journal: Macroeconomics 11(3): 252–288
    - Focuses on China.
    - Develops a spatial-equilibrium model to quantify the distributional impacts of international trade in an economy with intranational trade and migration costs.
    - Finds that international trade increases both between-region inequality among workers with similar skills and within-region inequality between skilled and unskilled workers, with the former accounting for 75% of the overall inequality increase.
  28. Arnaud Costinot and Jonathan Vogel. 2010. “Matching and Inequality in the World Economy,” Journal of Political Economy, 118 (4).
    - They develop tools and techniques to analyze the determinants of factor allocation and factor prices in economies with a large number of goods and factors. Then they illustrate how these tools and techniques can be applied to generate new insights about the consequences of globalization: the effects of North-South trade, North-North trade, global technological change, and offshoring.
    - North-South trade integration induces a pervasive rise in inequality in the North and a pervasive fall in inequality in the South.
    - Consequences of global technological change and offshoring: global skill-biased technological change increases inequality between countries and offshoring induces skill down-grading and a pervasive rise in inequality in both countries.
  29. Grossman G., Helpman E. and Kircher P. 2016. "Matching, Sorting and the Distributional Effects of International Trade" Journal of Political Economy, 2017, vol. 125, no. 1.
    - Model has two industries, two heterogeneous factors of production and perfect competition.
    - Productivity in each production unit reflects the ability of the manager and the abilities of the workers, with complementarity between the two.
    - They begin by examining the forces that govern the sorting of worker and manager types to industries and the matching of workers and managers within industries.
    - Then they consider how changes in relative output prices generated by changes in the trading environment affect sorting, matching, and the distributions of wages and salaries.
    - Redistribution within occupations and industries occurs in response to relative price changes whenever technologies exhibit strong complementarities between the types of the various factors that are employed together in a production unit.
    - A broad implication of their theory is that, whenever a change in the terms of trade induces improved matches in an industry for some factor, the within-occupation-and-industry earnings inequality in the group increases.
  30. Feler, Leo, and Mine Z. Senses. 2017. "Trade Shocks and the Provision of Local Public Goods." American Economic Journal: Economic Policy, 9 (4): 101-43. DOI: 10.1257/pol.20150578.
    - Effects of local income shocks due to increased imports from China (1990-2007) on local government finances and the provision of local of public services in the US.
    - Key findings:
    1. Increased competition from Chinese imports negatively affects local finances and the provision of public services across US localities. A $1000 increase in Chinese imports per worker results in a relative decline in per capita expenditures on public welfare (by 7.7%), on public transport (by 2.4%), on public housing (by 6.8%), and on public education (by 0.9%); public safety spending remains unchanged.
    2. The demand for local public goods such as education, public safety, and public welfare is increasing more in trade-affected localities when resources for these services are declining or remaining constant. Public safety expenditures remain constant at a time when local poverty and unemployment rates are rising, resulting in higher property crime rates (by 3.5%). A relative decline in education spending coincides with an increase in the demand for education as students respond to a deterioration in employment prospects for low-skilled workersby remaining in school longer.
    3. State and federal intergovernmental transfers incompletely insure against trade-induced income shocks, especially when local shocks are correlated with shocks in the rest of the state. As intergovernmental transfers do not buffer against local income shocks, there is greater inequality not only in incomes but also in the quality of public services and amenities across US jurisdictions.
  31. Borusyak, Kirill and Jaravel, Xavier. 2018. "The Distributional Effects of Trade: Theory and Evidence from the United States" (October 6, 2018). Available at SSRN.
    - They provide new evidence on the distributional effects of trade through both consumer prices (expenditure channel) and wages (earnings channel), and thus on the net distributional effects in the US.
    - Analysis is differentiated by skill (workers with and without college degree) and income, but not by geographic location.
    - Expenditure channel:
    • Takes into account imports of both final and intermediate goods.
    • Spending shares on imports are similar across education and income groups, implying a neutral expenditure channel.
    - Earnings channel:
    • Considers import penetration, export shares, usage of imported intermediate inputs, and income elasticities for different industries.
    • Estimated differences in workers’ exposure to import competition, exporting, and income effects indicate that the earnings channel favors college graduates.
    • Overall, a uniform trade cost reduction generates welfare gains that are 25% larger for college graduates.
  32. Costinot, Arnaud and Andrés Rodríguez-Clare. 2014. “Trade Theory with Numbers: Quantifying the Consequences of Globalization", Handbook of International Economics, 4, 197
    - They review a recent body of theoretical work that aims to put numbers on the consequences of globalization.
    - A unifying theme of their survey is methodological. They rely on gravity models and demonstrate how they can be used for counterfactual analysis.
    - They highlight how various economic considerations like market structure, firm-level heterogeneity, multiple sectors, intermediate goods, and multiple factors of production affect the magnitude of the gains from trade liberalization.
    - They conclude by discussing a number of outstanding issues in the literature as well as alternative approaches for quantifying the consequences of globalization.
  33. Galle, S., Rodríguez-Clare, A. and Yi M. 2017. "Slicing the Pie: Quantifying the Aggregate and Distributional Effects of Trade", Working Paper 23737, NBER.
    - Inspired by Autor et al. (2013), they analyze the effect of the China shock (2000-2011) on US workers grouped according to commuting zone and education level.
    - They find that the average effect is positive, that some groups experience losses as high as five times the average gain, and that those groups tend to be concentrated in certain geographic regions.
    - They provide choropleth maps on commuting zone level to show the geographical distribution of welfare gains from the rise of China for low-educated and high-educated workers (at least an Associate’s degree).
    - They think of their paper establishes a bridge between two separate literatures:
    • Empirical work exemplified most prominently by Autor et al. (2013) has shown that trade shocks have important distributional implications, but without deriving welfare effects.
    • Research surveyed in Costinot and Rodríguez-Clare (2014) shows how to quantify the welfare effects of trade for a wide class of gravity models, but with so far little to say about distributional implications.
    - They extend the multi-sector gravity model of trade to allow for heterogeneous labor as in Roy (1951) and Lagakos and Waugh (2013) and with multiple groups of ex-ante identical workers as in Burstein et al. (2015), and use the resulting framework to derive a simple approach to computing group-level and aggregate welfare effects of trade shocks.
    - They borrow the identification strategy proposed by Autor et al. (2013), but use it to estimate the model’s key parameter governing the degree of labor heterogeneity and the distributional implications of trade shocks.
  34. Harrison, Ann, John McLaren, and Margaret McMillan (2010). “Recent Findings on Trade and Inequality.” NBER Working Paper No. 16425.
    - Review.
  35. Hummels, David, Jakob R. Munch, and Chong Xiang. 2018. "Offshoring and Labor Markets." Journal of Economic Literature, 56 (3): 981-1028. DOI: 10.1257/jel.20161150.
    - Literature survey.
  36. Bai, Liang, and Sebastian Stumpner. 2019. "Estimating US Consumer Gains from Chinese Imports." American Economic Review: Insights, 1 (2): 209-24. DOI: 10.1257/aeri.20180358.
    - Time period: 2004–2015.
    - They use data from the Nielsen’s Homescan Panel, which has barcode-level price and expenditure data, to construct inflation rates under CES preferences, and they use Chinese exports to Europe as an instrument.
    - They construct directly cost-of-living inflation rates from micro data, investigate the various margins of adjustment, and estimates heterogeneous effects of the China trade shock for different consumer groups.
    - They find significant negative effects of Chinese imports on US prices.
    - Results show that two thirds of the effect is driven by lower inflation among existing goods (intensive margin) and one third by the introduction of new goods and disappearance of old goods (extensive margin).
    - In contrast to the gains from final-good imports, results for intermediate-goods are inconclusive.
    - They find no evidence of heterogeneous effects across consumer groups by income or region.
  37. Melissa Dell, Benjamin Feigenberg and Kensuke Teshima. 2019. "The Violent Consequences of Trade-Induced Worker Displacement in Mexico", AER: Insights 1(1): 43–58
    - Mexico
    - This study examines how trade-induced job loss in Mexico impacts urban crime.