Rojas, DiegoHollweg, Claire H.Ruppert Bulmer, ElizabethLederman, Daniel2014-06-262014-06-262014-06-17978-1-4648-0263-810.1596/978-1-4648-0263-8https://hdl.handle.net/10986/18777This report analyzes the paths by which developing country labor markets adjust to permanent trade-related shocks. Trade shocks can bring about reallocation of labor between industries, but the presence of labor mobility costs implies economy-wide losses because they extend the period of economic adjustment. This report focuses primarily on the adjustment costs faced by workers after a trade shock, because of magnitude and welfare implications and policy relevance. From a policy viewpoint, understanding the relative magnitudes of labor mobility and adjustment costs can help policymakers design trade policies that are consistent with employment objectives, can be complemented by labor policies, or support programs to facilitate labor transitions, or both. To complement and validate the analysis based on structural choice models, the study designed a distinct empirical approach using reduced-form econometric estimation strategies. This approach examines the impact of structural reforms and worker displacement on labor market outcomes. This makes it possible to estimate the time required to adjust to a trade-related shock, but does not assume the rigid underlying relationship inherent in structural models. This report is organized as follows: chapter one gives introduction. Chapter two presents evidence from the literature on the relative magnitude of labor adjustment costs borne by workers and by firms. Chapter three presents a new database of country-level labor mobility cost estimates for both developing and developed economies. Chapter four showcases country case studies in which labor mobility costs vary by industry, firm size, and worker type (for example, informal versus. formal). Chapter five analyzes the impact of structural reforms on aggregate labor market outcomes across countries and the effect of worker displacement due to plant closings on the employment outcomes of individual workers in Mexico. Chapter six concludes with a summary of the main findings about the labor adjustment costs associated with trade-related shocks and a discussion of policy responses internationally.en-USCC BY 3.0 IGOACTIVE LABORACTIVE LABOR MARKETACTIVE LABOR MARKET POLICYADJUSTMENT ASSISTANCEADJUSTMENT COSTADJUSTMENT POLICIESAGGREGATE EMPLOYMENTAGGREGATE GROWTHAGGREGATE PRODUCTIVITYAGRICULTUREANALYTICAL APPROACHAVERAGE WAGEAVERAGE WAGESBUSINESS CYCLECAPITAL INVESTMENTCAPITAL MARKETSCREATIVE DESTRUCTIONCRISESDEREGULATIONDEVELOPMENT ECONOMICSDISCOUNTED VALUEDISPLACED WORKERDISPLACED WORKERSECONOMIC COOPERATIONECONOMIC COSTSECONOMIC FLUCTUATIONSECONOMIC GROWTHECONOMIC RESEARCHECONOMIC SHOCKSECONOMIC STABILITYEDUCATIONAL ATTAINMENTEMPLOYMENTEMPLOYMENT DYNAMICSEMPLOYMENT GROWTHEMPLOYMENT INCREASESEMPLOYMENT LEVELSEMPLOYMENT OPPORTUNITIESEMPLOYMENT OUTCOMESEMPLOYMENT SHAREENTRY COSTSEQUILIBRIUM ANALYSISEQUILIBRIUM UNEMPLOYMENTEXOGENOUS SHOCKEXPECTED WAGESEXPORT MARKETSFACTOR DEMANDFINANCIAL CRISESFINANCIAL CRISISFIRING COSTSFIRM DYNAMICSFIRM ENTRYFIRM SIZEFORMAL SECTOR WORKERSGDPGDP PER CAPITAGENERAL EQUILIBRIUMGOVERNMENT INTERVENTIONHOURS OF WORKHOUSEHOLD SURVEYHOUSEHOLD SURVEYSHUMAN CAPITALINCOMEINDUSTRY WAGEINDUSTRY WAGESINFORMAL EMPLOYMENTINFORMAL SECTORINSURANCEINTERNATIONAL MARKETINTERNATIONAL MARKETSINTERNATIONAL TRADEJOB CREATIONJOB DISPLACEMENTJOB SEARCHJOB SECURITYJOB SEPARATIONJOB TURNOVERJOBSLABOR ADJUSTMENTLABOR ADJUSTMENT COSTSLABOR ALLOCATIONLABOR ALLOCATIONSLABOR COSTSLABOR DEMANDLABOR ECONOMICSLABOR FORCELABOR MARKETLABOR MARKET ADJUSTMENTLABOR MARKET CHARACTERISTICSLABOR MARKET IMPACTLABOR MARKET OUTCOMESLABOR MARKET REGULATIONSLABOR MARKET RIGIDITIESLABOR MARKETSLABOR MOBILITYLABOR POLICIESLABOR REALLOCATIONLABOR REGULATIONLABOR REGULATIONSLABOR SHARELABOURLABOUR MARKETLABOUR MARKET REGULATIONSLAID-OFF WORKERSLAYOFFSLEGAL STATUSLOCAL GOVERNMENTSMACROECONOMIC ANALYSISMICROECONOMIC ANALYSISMIGRATIONNET EMPLOYMENTNEW ENTRANTSNOMINAL WAGESOCCUPATIONOCCUPATIONAL CHOICEON-THE-JOB TRAININGOPEN ECONOMYOPTIMIZATIONPASSIVE LABORPLANT CLOSINGPLANT CLOSUREPLANT CLOSURESPOLITICAL ECONOMYPREVIOUS STUDIESPREVIOUS WAGEPRODUCTION FUNCTIONPRODUCTION WORKERSPRODUCTIVE ACTIVITIESPRODUCTIVITY GAINSPROFITABILITYPURCHASING POWERREAL WAGEREAL WAGESREGRESSION ANALYSISRETRAINING PROGRAMSSAFETYSAFETY NETSSEARCH COSTSSERVICE SECTORSEVERANCE PAYSOCIAL CAPITALSOCIAL DEVELOPMENTSOCIAL SAFETY NETSTOTAL COSTSTRADE LIBERALIZATIONTRADE POLICIESTRADE POLICYTRADE REFORMSUNEMPLOYMENTUNEMPLOYMENT BENEFITSWAGE BILLWAGE DATAWAGE DIFFERENTIALWAGE DIFFERENTIALSWAGE EFFECTSWAGE GAPWAGE INCREASEWAGE LEVELWAGE SUBSIDIESWELL-FUNCTIONING LABOR MARKETSWORK EXPERIENCEWORKERWORKERSWORKING10.1596/978-1-4648-0263-8