Escaping the Losses from Trade: The Impact of Heterogeneity on Skill Acquisition, with Gaston Navarro and Ricardo Reyes-Heroles
Future generations of workers can invest in education and avoid the negative consequences of trade openn ess for low-skilled workers. We exploit variation in exposure to import pen etration shocks across space in the United States to show that greater expo sure (i) deteriorated labor market conditions for workers without a college education and (ii) increased overall college enrollment, while (iii) the i ncrease in enrollment was entirely driven by students in richer households. To analyze the welfare implications of the effects of trade openness on co llege enrollment, we propose a dynamic multi-region model of international trade with heterogeneous agents. The model features incomplete credit marke ts and costly endogenous skill acquisition by new cohorts of workers. We ca librate the model to match trends in aggregate trade data for the United St ates between the late 1980s and 2010, and differential exposure to import p enetration across regions in 1990. A decline in import barriers generates i ncreased college enrollment and positive welfare gains for all workers in t he long-run. However, these gains are concentrated on workers with a colleg e education, whose welfare gains are twice as large as those of non-college workers. While all workers in the manufacturing sector lose from grater tr ade openness, a small number of college educated workers in manufacturing w ith low wealth experience the greatest losses. Increasing college enrollmen t for new cohorts over time plays a crucial role in allowing new generation of workers to escape the potential welfare losses form trade. However, low -wealth/low-income generations of households take the longest to acquire sk ills. They are therefore the last to experience positive gains from trade o penness, and in some cases may not realize any gains within a life-time.
DTSTAMP:20260404T094929Z DTSTART:20191202T163000Z DTEND:20191202T180000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR