The Dynamics of Trade Adjustment: Evidence from 25 Years of Brazilian Matched Employer-Employee Data
Early Career Research Award
Policymakers and international and labor economists are increasingly focused on the dynamics of adjustment following trade policy reform and other trade shocks, such as the growing importance of China and other low-to-middle income countries in international trade. However, research on the topic has surprisingly little to say about the dynamics of adjustment of economies that went through large trade liberalization episodes. Understanding these dynamics is of key importance for governments interested in maximizing the gains from increasing openness, in identifying and compensating the losers from trade shocks, and for a more informed calculation of the cost and benefits of increasing trade integration. This project is the first providing evidence on short-, medium- and long-run effects of a large trade policy reform on the dynamics of adjustment of the labor market. Similarly, empirical research on the labor market effects of trade liberalization has had little to say about the transmission of trade shocks to non-tradable sectors. Understanding this transmission has broad implications on how quickly and through what mechanisms sector-specific shocks are transmitted throughout the economy.