Trade Shocks, Heterogenous Human Capital and Occupational Mobility

Despite the significant labor market effects from globalization and the importance of various margins of adjustment at the worker level, economists have devoted relatively little attention to formally modeling and rigorously quantifying the short to medium-term labor market dynamics that derive from globalization. In this project, we analyze the dynamic labor market effect of trade shocks. A dynamic model of occupational mobility and skill formation is developed. In the model, each occupation is conceived as a bundle of tasks and different occupations involve tasks at different levels of complexity. We estimate the model using administrative data from Norway between 1999 and 2007. The availability of matched employer-employee data from Norway allows us to analyze who specifically gains from trade, who loses, and measure the relationships between people with different skill levels and different types of occupations when there is a change in trading practices. The estimated model is used to evaluate the effectiveness of counterfactual policies in alleviating the negative impact from trade shocks