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Trade Liberalization And Labor Market Dynamics

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Executive Summary

This paper studies trade-induced transitional dynamics by estimating a structural dynamic equilibrium model of the labor market. The model features a multi-sector economy with overlapping generations, heterogeneous workers, endogenous accumulation of sector-specific experience and costly switching of sectors. The estimation employs a large panel of workers constructed from Brazilian matched employer-employee data. The model's estimates yield high average costs of mobility that are very dispersed across the population. In addition, sector-specific experience is imperfectly transferable across sectors, leading to additional barriers to mobility.

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