Trade and labor market : what do we know?

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CEPII Policy Brief, Issue: 2017, Page: 1-15

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CROZET, Matthieu Daniel; OREFICE, Gianluca
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There is a large consensus in the economic literature suggesting the positive impact of globalization on the aggregate well-being of a country. However, a clear-cut conclusion has not been reached on winners and losers from globalization. For this reason, international trade is often accused of increasing wage inequality in both developing and developed countries. A first stream of literature focused on workers characteristics to identify winners and losers from globalization. Workers with characteristics (e.g., education levels) intensively used in import-competing sectors are likely to suffer from international trade; while workers having characteristics intensively needed in exporting sectors will gain. This is a clear-cut explanation but it does not fit the data as the reality is much more complex. Labor market shocks caused by trade openness are diffuse, and it is difficult to group those who suffer/gain into well-identified categories. The firm and the type of task in which workers are employed definitely contribute to identify winners and losers from globalization. Recent CEPII research outputs, based on detailed French firm and worker-level data, confirm that identifying who lost and who gained with globalization is a very difficult task.