Non-traded Gains From Trade - Selection in the Non-Traded Sector: Evidence from Brazil
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Summary:
We investigate how trade shocks affect the allocation of labor across plants at the local labor market level. Using Brazil’s import liberalization as a quasi-natural experiment, we uncover a new margin for the gains from trade: the reallocation of labor from smaller to larger producers in the non-traded sector. We find that in response to liberalization, larger non-traded producers self-select into importing, expanding as they gain access to inputs from abroad. We then develop a parsimonious model of heterogeneous producers incorporating this mechanism. The theory is consistent with the empirical findings and show that reallocation among non-traded producers is welfare-enhancing. In contrast, this reallocation effect disappears when all nontraded producers make the same importing decision.
Series:
Working Paper No. 2023/265
Subject:
Employment Imports International trade Labor Labor markets Trade liberalization Trade policy
Frequency:
regular
English
Publication Date:
December 22, 2023
ISBN/ISSN:
9798400263033/1018-5941
Stock No:
WPIEA2023265
Format:
Paper
Pages:
45
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