Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement

Caliendo, Lorenzo; Opromolla, Luca David; Parro, Fernando; Sforza, Alessandro

doi:10.3386/w23695

“…Others, in particular, Dix-Carneiro (2014); Artuç, Chaudhuri, and McLaren (2010); Artuç and McLaren (2015); and Caliendo, Dvorkin, and Parro (2019), have used dynamic discrete choice models to study worker dynamics, often in a general equilibrium trade model. This literature has spilled over into more general spatial equilibrium models studying the dynamics of immigration (Caliendo et al 2017), educational opportunities (Eckert and Kleineberg 2019), and infrastructure (Balboni 2019). My contribution to this literature is twofold.…”

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confidence: 99%

Occupations and Import Competition: Evidence from Denmark

Traiberman

¹

2019

American Economic Review

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I argue that the winners and losers from trade are decided primarily by occupation. In addition to fixed adjustment costs, workers build up specific human capital over time that is destroyed when they must change occupations. I show that ignoring human capital biases estimates of adjustment costs upward by a factor of 3. Estimating an occupational choice model of the Danish labor market, I show that 57 percent of the dispersion in worker outcomes is accounted for by occupations, and only 16 percent by sectors. Finally, the model suggests that rising import competition from 1995–2005 reduced lifetime earnings for 5 percent of workers. (JEL F14, F16, J24, J31)

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“…Kaplan and Schulholfer-Whol (2017) show that mobility in the U.S. is declining. 8 Going one step further, Fogli and Guerrieri (2018) argue that spatial segregation is related to income inequality because it a¤ects the returns to human capital and therefore o¤spring's education.…”

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confidence: 99%

“…7 See Wilson (1987), Denton and Massey (1993), Cutler and Glaeser (1997), Desmet and Rossi-Hansberg (2013), Altonji and Mans…eld (2014), and Hsieh and Moretti (2018) among many other. 8 Kaplan and Schulhofer-Wohl (2017) link the decline in U.S. mobility to falling wage di¤erentials within occupations.…”

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confidence: 99%

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Location as an Asset

Bilal¹,

2018

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The location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset.' This asset has a cost equal to the location's rent, and a payoff through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Differently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and confirm the core predictions of our theory with French individual panel data from tax returns. AbstractThe location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset'. This asset has a cost equal to the location's rent, and a payo¤ through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that o¤er few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Di¤erently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and con…rm the core predictions of our theory with French individual panel data from tax returns.

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“…Kaplan and Schulholfer-Whol (2017) show that mobility in the U.S. is declining. 8 Going one step further, Fogli and Guerrieri (2018) argue that spatial segregation is related to income inequality because it a¤ects the returns to human capital and therefore o¤spring's education.…”

Section: Introductionmentioning

confidence: 99%

Location as an Asset

Bilal¹,

Rossi‐Hansberg²

2018

Preprint

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The location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset'. This asset has a cost equal to the location's rent, and a payo¤ through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that o¤er few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Di¤erently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and con…rm the core predictions of our theory with French individual panel data from tax returns.

show abstract

Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement

Cited by 30 publications

References 38 publications

Occupations and Import Competition: Evidence from Denmark

Occupations and Import Competition: Evidence from Denmark

Location as an Asset

Location as an Asset

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