Foxes and Hedgehogs: The Role of Personality in Labor Market Adjustment
Early Career Research Award
We study the role of personality and non-cognitive skills in labor market adjustment in response to trade shocks. Specifically, we focus on how these traits mediate the adverse consequences for U.S. workers of rising Chinese imports. We identify plausibly exogenous variation in Chinese import competition across industries in the U.S. using the instrument of Pierce and Schott (2016) and find that personality characteristics (as identified by the Big Five personality test and measures of locus of control) are correlated with an individual’s propensity to switch industry, occupation, and transition out of employment in response to a trade shock. These results are important for understanding labor market adjustment costs, which are a key determinant of the welfare and distributional impacts of trade. For example, these traits can help explain the concurrent increase in mortality of workers dislocated by import competition. The efficacy of job retraining and trade-related retraining also hinge on understanding dislocated workers’ non-cognitive as well as cognitive traits.