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Trade Shocks and Labor Adjustment: A Structural Empirical Approach

Artuç, Erhan, Chaudhuri, Shubham, McLaren, John·2010·American Economic Review

Abstract

The welfare effects of trade shocks turn on the nature and magnitude of the costs workers face in moving between sectors. Using an Euler-type equilibrium condition derived from a rational expectations model of dynamic labor adjustment, we estimate the mean and variance of workers' switching costs from the US CPS. We estimate high values of both parameters, implying slow adjustment of the economy and sharp movements in wages in response to trade shocks. However, import-competing workers can still benefit from tariff removal; liberalization lowers their wages in the short and long run but raises their option value. (JEL E24, F13, F16)

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Metadata

Authors
Artuç, E., Chaudhuri, S., & McLaren, J.
Venue
American Economic Review
Published
2010-06-01
Volume
100
Issue
3
Pages
1008-1045
ISSN
0002-8282 (ISSN-L)
OpenAlex
W2095358888
Cited by
539
References
2
FWCI
43.78
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: Trade Shocks and Labor Adjustment: A Structural Empirical Approach. https://app.cochat.ai/papers/10.1257/aer.100.3.1008
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Artuç, E., Chaudhuri, S., & McLaren, J. (2010). Trade Shocks and Labor Adjustment: A Structural Empirical Approach. American Economic Review. https://doi.org/10.1257/aer.100.3.1008

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