Unravelling the nexus: the role of labour mobility in the relationship between international trade and income inequality, an instrumental variable approach
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2023-08-03
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en
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International trade can act as an economic shock that affects some people’s economic prospects positively but those of others negatively. However, the size of the gains and losses depends on the extent to which labour can move from industries hurt by trade to industries that have benefited from shocks in trade. Although this argument has been widely accepted, extant empirical work has struggled to provide an appropriate, non-endogenous measure of inter-sectoral labour mobility that enables proper testing of this argument. This thesis introduces a novel way of dealing with this issue, using inter-sectoral skill similarities, geographical barriers, and labour force attitudes to explain the variations in inter-sectoral labour mobility exogenously. Using this strategy, this thesis examines the impact of trade shocks on intra-regional income inequality and evaluates the importance of inter-sectoral labour mobility in influencing these adverse effects in a set of economies. This examination is performed by matching the industrial composition of each region’s economy to national shocks in trade, creating a treatment which is used to explain income inequality. This study finds that shocks in trade lead to increased levels of income inequality and that higher levels of labour mobility help absorb the impact of trade on the income distribution within each region.
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Faculteit der Managementwetenschappen