Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy

• DOI: 10.1257/aer.20110457
• Publication Date: 2016-02-29T14:21:36Z
• Authors: A. Kerem Coşar; Nezih Guner; James Tybout
• Keywords: inequality; international trade, firm dynamics, size distribution, labor market frictions, inequality; ddc:330; F16; international trade; 05 social sciences; L11; labor market frictions; jel:J64; firm dynamics; firm dynamics; inequality; International trade; labor market frictions; size distribution; jel:E24; jel:F12; jel:J63; jel:L11; jel:F16; size distribution; 8. Economic growth; 0502 economics and business; international trade, firm dynamics, size distribution, Labor market frictions, Inequality; F12; E24; J64

This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows and wages. Counterfactual experiments imply that Colombia's integration with global product markets increased its national income at the expense of higher unemployment, greater wage inequality, and increased firm-level volatility. In contrast, contemporaneous labor market reforms dampened the increase in unemployment and aggregate job turnover. The results speak more generally to the effects of globalization on labor markets. (JEL F13, F16, F66, J31, J63, O15, O19)