This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows in a new way. The fitted model captures key features of Colombian firm dynamics and labor market outcomes, as well changes in these features during the past 25 years. Counterfactual experiments imply that integration with global product markets has increased both average income and job turnover in Colombia. In contrast, the experiments find little role for this country's labor market reforms in driving these variables. The results speak more generally to the effects of globalization on labor markets in Latin America and elsewhere.A. Kerem Co şar

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractPoor domestic transportation infrastructure in developing countries is often cited as an important impediment for accessing international markets. Yet, evidence on how transportation infrastructure improvements affect the volume and composition of exports is scarce. Drawing on the large-scale public investment in expressways undertaken in Turkey during the 2000s, this paper contributes to our understanding of how internal trade costs affect regional exports and specialization. Two results emerge. First, we estimate that this road infrastructure project accounts for 15 percent of the export increase from interior regions, generating a 10-year discounted stream of additional export revenues that amount to between 9 and 14 percent of the value of the investment. Second, while the exports of all industries within a given region increase in response to improvements in connectivity to the international gateways of the country, the magnitude of this increase is larger the more time sensitive an industry is. Accordingly, we also observe an increase in the regional employment and revenue shares of such industries. Our results support the hypothesis that internal trade costs can be a determinant of international specialization and comparative advantage.JEL Codes: F14, R11, R41.

We introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The model features a dual-economy structure, in which locations near international gates specialize in export-oriented sectors while more distant locations do not trade with the rest of the world. The theory rationalizes patterns of specialization, employment, and relative incomes observed in developing countries that opened up to trade. We find regional specialization patterns consistent with the model in industry-level data from Chinese prefectures. (JEL F11, O18, P23, P25, P33, R12, R32) T he experience of many developing countries reveals uneven regional effects of international economic integration. For example, China's recent globalization process took place jointly with large movements of workers and export-oriented industries toward fast-growing coastal regions (World Bank 2009). The standard view in international trade theory interprets countries as points in space, missing this type of phenomenon. In this paper, we introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The theory rationalizes patterns of specialization, employment, and relative incomes observed in developing countries that opened up to trade. A key feature of the model is that comparative-advantage industries locate closer to international gates. We find evidence consistent with this pattern in industry-level data from Chinese prefectures, and document that alternative explanations based on economies of scale or location fundamentals do not fully account for it. We model a two-sector economy where locations are arbitrarily arranged on a map and differ in trade costs to international gates such as seaports, airports, or land crossings. Within the country, trade is costly and international shipments must

As Latin American countries have become more open, their job turnover rates have risen, their informal sectors have become larger, and their wage distributions have become less equal. We develop a dynamic general equilibrium trade model that explains these phenomena. The model combines standard search frictions in labor markets with heterogeneous …rms that experience ongoing productivity shocks. Each period, …rms decide whether to exit or continue producing.Those …rms that remain active choose their export volumes and adjust their employment levels through vacancy postings or lay-o¤s.Openness matters in our model because it makes pro…ts more sensitive to productivty shocks, as Rodrik (1997) argued. Thus when trade barriers are low, …rms drawing negative shocks shed labor relatively rapidly (and perhaps exit), while …rms drawing positive shocks acquire new workers relatively rapidly. Further, since openness decreases the rents of the former and increases the rents of the latter, it spreads the wage distribution. After …tting this model to Colombian micro data on establishments and households, we isolate the e¤ects of trade frictions on labor market outcomes using counter-factual simulations. Preliminary results suggest that the mechanisms highlighted by our model can be important.

In the automobile industry, as in many tradable goods markets, firms earn their highest market share within their domestic market. This home market advantage persists despite substantial integration of international markets during the past several decades. The goal of this paper is to quantify the supply-and demand-driven sources of the home market advantage and to understand their implications for international trade and investment. Building on the random coefficients demand model developed by Berry, Levinsohn, and Pakes (1995), we estimate demand and supply in the automobile industry for nine countries across three continents, allowing for unobserved taste and cost variation at the car model and market levels. While trade and foreign production costs as well as taste heterogeneity matter for market outcomes, we find that preference for domestic brands is the single most important driver of home market advantage -even after controlling for brand histories and dealer networks. A. Kerem Coşar