Economics, Econometrics and Finance
8 years ago

Trade liberalization leads to wage declines in regions with price drops.

American Economic Review
Regional Effects of Trade Reform: What is the Correct Measure of Liberalization?
Brian K. Kovak

Paper Summary

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Shift-Share Analysis

Trade reform in Brazil in the early 1990s led to different wage changes in regions based on how much prices dropped due to liberalization. Regions with bigger price declines saw larger wage decreases. This shows that how much prices fall affects how much wages go down.