The influence of changing trade patterns on displacements of labor

Abstract

Although there is extensive literature detailing the change in industrial employment resulting from changes in trading patterns, there is no significant literature that translates these changes in labor demand to actual worker hardship. This study provides evidence of the labor market effects of changes in import and export competition throughout the 1980s by focusing on the level of industry displacements, workers involuntarily separated from their industry of employment, rather than changes in the level of industry employment. The results therefore shed light on the number of workers who were measurably injured by changing trade patterns. The analysis is based on a general equilibrium specification that yields an equation describing the influence of specific industry measures of competitiveness, along with changes in the aggregate environment, on displacements. This equation is subsequently estimated using import and export transactions prices maintained by the U.S. Department of Labor in conjunction with data from a series of Displaced Workers Surveys. Counterfactual analysis provides an estimate of the number of displacements resulting from changes in international competitiveness. These counterfactuals reveal that, overall, changes in the competitive position of the United States reduced the number of workers dislocated throughout the 1980s.