Essays on labor economics and international trade

Squarize Chagas, Lucas

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https://hdl.handle.net/2142/115583 Copy

Description

Title

Essays on labor economics and international trade

Author(s)

Squarize Chagas, Lucas

Issue Date

2022-04-21

Director of Research (if dissertation) or Advisor (if thesis)

Bernhardt, Mark D

Doctoral Committee Chair(s)

Bernhardt, Mark D

Committee Member(s)

• Bartik, Alexander W
• Perry, Martin
• Lemus Encalada, Jorge

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

Labor Markets, Internation Trade

Abstract

In the first paper, we study the effect of the bilateral trade integration with China on wage inequality in Brazil. Previous studies have documented the contribution of trade opening to the decline in inequality since the 1990s, driven primarily by cross-firm pay differences. Using more recent data, we find a sharper reduction in wage inequality over the 2000s, parallel to China’s accession to the WTO. Our reduced-form analysis of the China shock suggests that some firms are harmed by import competition, while others profit from increased exports and cheaper inputs. We rationalize these patterns by extending Helpman et al. (2017) to include sector heterogeneity in trade exposure and firm-level selection into imports. Our calibrated model indicates that the rise of China leads to a reduction in cross-firm wage inequality in Brazil since the cross-sectoral effect - which tends to benefit low-wage sectors and hurt high-wage sectors - dominates the within-sector - increase in inequality due to a rise in importing and exporting firms. In the second paper, I study the worker-level effects of the China shock on the Brazilian formal labor market. Bilateral trade integration with China has a two-sided effect: import and export exposure. My estimates suggest that high exposure to import competition reduces earnings and formal employment, whereas high exposure to exports increases earnings and employment. Moreover, I use the concept of remoteness to analyze how workers adjust to trade shocks. Remoteness establishes a distance between workers and other occupations within the same region so that more remote workers face higher adjustment costs. As a result, remoteness amplifies earnings and employment, mainly on high-educated and high-experienced remote, who bear higher losses under import exposure and higher gains under export exposure. My findings suggest that remoteness and occupation-specific human capital are a source of attrition worth considering when formulating compensation policies for winners and losers from trade.

Graduation Semester

2022-05

Type of Resource

Thesis

Copyright and License Information

Copyright 2022 Lucas Squarize Chagas

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