BREAD Working Paper No. 517, July 2017

Margins of Labor Market Adjustment to Trade

Rafael Dix-Carneiro, Brian Kovak

Abstract

We use both longitudinal administrative data and cross-sectional household survey data to study the margins of labor market adjustment following Brazil's early 1990s trade liberalization. We document how workers and regional labor markets adjust to trade-induced changes in local labor demand, examining various adjustment margins, including earnings and wage changes; interregional migration; shifts between tradable and nontradable employment; and shifts between formal employment, informal employment, and non-employment. Our results provide insight into the regional labor market effects of trade, and have important implications for policies that address informal employment and that assist trade-displaced workers.

Keywords: Trade Liberalization, Labor Market Adjustment, Informal Sector

JEL classification codes: F14, F16, J46, J61

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