ESSAYS ON INTERNATIONAL TRADE, LABOR MARKETS AND HUMAN CAPITAL
Open Access
- Author:
- Cosar, Ahmet Kerem
- Graduate Program:
- Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- June 03, 2010
- Committee Members:
- Andres Rodriguez Clare & James R Tybout, Dissertation Advisor/Co-Advisor
Andres Rodriguez Clare, Committee Chair/Co-Chair
James R. Tybout, Committee Chair/Co-Chair
Edward James Green, Committee Member
Alexander Monge Naranjo, Committee Member
David Gerard Abler, Committee Member - Keywords:
- employment subsidy
liberalization
development
labor markets
human capital
trade - Abstract:
- This dissertation consists of three chapters. Chapter 2 analyzes the reallocation of labor following a trade liberalization. These episodes typically display three features: slow net absorption of labor by export-oriented sectors, large reallocation costs for displaced workers, and a disproportionate adjustment burden for older workers. To explain these facts and to study alternative policy responses, I develop a two-sector small open economy model with overlapping generations, labor market search and matching, and sector-specific human capital accumulated through learning-by-doing. The model is calibrated to Brazilian data in order to study the dynamics of an economy in transition after trade liberalization. The calibrated model shows that human capital plays a much bigger role than search frictions in generating the observed slow adjustment to reforms. I then use the model to compare the distributional and efficiency effects of alternative worker-assistance programs in general equilibrium. A targeted employment subsidy that rewards mobility not only improves the distribution of income but also enhances efficiency gains from trade by facilitating faster formation of necessary skills during the adjustment period. The market failure corrected by the policy is the disincentives of experienced workers to invest in new skills which is in turn caused by the interaction of rent-sharing and intra-sectoral transferability of human capital to future employers. The paper contributes to a better understanding of trade-induced transitional dynamics and the labor market policies aimed at compensating the losers from trade. Chapter 3, a joint work with Nezih Guner and James Tybout, develops a dynamic general equilibrium trade model to explore the interaction between openness, rm dynamics and labor markets. The motivation comes from the observation that in many liberalizing countries, job turnover rates have risen, informal sectors have become larger, and wage distributions have become less equal. The model combines standard search frictions in labor markets with heterogeneous firms that experience ongoing productivity shocks. Each period, firms decide whether to exit or continue producing. Those firms that remain active choose their export volumes and adjust their employment levels through vacancy postings or lay-o s. Openness affects labor markets in our model because it increases rents for efficient firms and reduces rents for inefficient firms, as in Melitz (2003). These well-known effects interact with idiosyncratic productivity shocks and with scale economies in hiring costs to induce adjustments in the equilibrium job turnover rate, unemployment rate and wage distribution as trade barriers are dismantled. After fitting this model to Colombian micro data on establishments and households, we isolate the effects of trade frictions on labor market outcomes using counter-factual simulations. The results suggest that the mechanisms highlighted by our model can be important. Chapter 4 presents a model of development in which skilled labor is an input in technology adoption. The model combines Nelson and Phelps (1966) type technology dynamics with a growth model in which intermediate goods are used to produce a final good. The intermediate good producers hire skilled labor to increase their productivity by adopting techniques from an exogenously evolving stock of world knowledge. I solve for the stationary equilibrium and derive analytic expressions for steady state income level and wage premium. In a quantitative exercise, I calibrate the model and compare its predictions with data. The model successfully accounts for cross-country income differences and within country wage premia on skilled labor. These results strengthen the idea that different types of human capital perform separate tasks and should not be aggregated into a single stock of human capital in development accounting exercises. The availability of skilled labor is potentially much more important for development than such aggregative exercises have so far suggested.