Final published version
Licence: CC BY: Creative Commons Attribution 4.0 International License
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Labor Market Effects of Technology Shocks biased toward the Traded Sector
AU - Bertinelli, Luisito
AU - Cardi, Olivier
AU - Restout, Romain
PY - 2022/9/30
Y1 - 2022/9/30
N2 - 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.
AB - 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.
KW - Sector-biased technology shocks
KW - Factor-augmenting efficiency
KW - Open economy
KW - Labor reallocation
KW - CES production function
KW - Labor income share
U2 - 10.1016/j.jinteco.2022.103645
DO - 10.1016/j.jinteco.2022.103645
M3 - Journal article
VL - 138
JO - Journal of International Economics
JF - Journal of International Economics
SN - 0022-1996
M1 - 103645
ER -