Labor Market Effects Of Technology Shocks Biased Toward The Traded Sector

[en] Our VAR evidence for OECD countries reveals that the non-traded sector alone drives the increase in hours worked following a technology shock that increases permanently traded relative to non-traded TFP. The shock generates a reallocation of labor toward the non-traded sector which contributes to 35% of the rise in non-traded hours worked. Both labor reallocation and variations in labor income shares are found empirically connected with factor-biased technological change. Our quantitative analysis shows that a two-sector open economy model with flexible prices can reproduce the labor market effects we document empirically once we allow for imperfect mobility of labor, a demand for home-produced traded goods which is elastic enough w.r.t. the terms of trade, and factor-biased technological change. When calibrating the model to country-specific data, its ability to account for the cross-country reallocation and redistributive effects we estimate increases once we let factor-biased technological change vary between sectors and countries.

Disciplines :

Quantitative methods in economics & management

Author, co-author :

Bertinelli, Luisito ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Economics and Management (DEM)

Cardi, Olivier

Restout, Romain

External co-authors :

yes

Language :

English

Title :

Labor Market Effects Of Technology Shocks Biased Toward The Traded Sector

Publication date :

2022

Journal title :

Journal of International Economics

ISSN :

0022-1996

Pages :

103645

Peer reviewed :

Peer reviewed

Additional URL :

https://www.sciencedirect.com/science/article/pii/S0022199622000770

Available on ORBilu :

since 14 November 2022

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