Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock

Caliendo, Lorenzo; Dvorkin, Maximiliano; Parro, Fernando

doi:10.3982/ecta13758

Cited by 412 publications

(375 citation statements)

References 71 publications

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“…There is a large literature documenting the large variation in income levels and other outcomes across locations. 7 Kennan and Walker (2011) argue forcefully that inter-state migration decisions are made based on income prospects, but are also in ‡uenced importantly by geographic di¤erences. In fact, Diamond (2016) and Giannone (2017) show that the U.S. has experienced increasing skill segregation, indicating that spatial gaps are not diminishing.…”

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confidence: 99%

“…We prove this result formally in Appendix B.2. 7 See Wilson (1987), Denton and Massey (1993), Cutler and Glaeser (1997), Desmet and Rossi-Hansberg (2013), Altonji and Mans…eld (2014), and Hsieh and Moretti (2018) among many other. 8 Kaplan and Schulhofer-Wohl (2017) link the decline in U.S. mobility to falling wage di¤erentials within occupations.…”

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confidence: 99%

“…Suppose only:7. Primitives are such that individuals choose location according to a matching function Z(y; s), where y is permanent income, and such that Z y (y; s) > 0 and Z s (y; s) > 0 , instead of Assumptions 1-6.…”

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confidence: 99%

“…7 In principle, specifying a given house rent schedule is without loss of generality, because we can …nd a skill distribution that would lead to this particular house rent schedule as an equilibrium outcome. Of course, endogenizing the house rent schedule is essential to perform aggregate counterfactual simulations.…”

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confidence: 99%

“…7 We present results with all non-employment transitions (as de…ned in the rest of the exercises) in Appendix D.5. The results are similar.…”

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confidence: 99%

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Location as an Asset

Bilal¹,

Rossi‐Hansberg²

2018

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The location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset.' This asset has a cost equal to the location's rent, and a payoff through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Differently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and confirm the core predictions of our theory with French individual panel data from tax returns. AbstractThe location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset'. This asset has a cost equal to the location's rent, and a payo¤ through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that o¤er few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Di¤erently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and con…rm the core predictions of our theory with French individual panel data from tax returns.

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confidence: 99%

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confidence: 99%

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confidence: 99%

“…7 We present results with all non-employment transitions (as de…ned in the rest of the exercises) in Appendix D.5. The results are similar.…”

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confidence: 99%