Regional exposure to trade shocks : reconciling theory and evidence
Date
2019-08
Authors
Rodríguez Chatruc, Marisol
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Brahmachari, Meghna
Journal Title
Journal ISSN
Volume Title
Publisher
Universidad de San Andrés. Departamento de Economía
Abstract
A growing literature shows that shocks to international trade can have heterogenous effects across regions within a country. This literature takes two broad approaches. The first approach is reduced-form and consists of regressing changes in regional outcomes on measures of regional exposure to trade. The variation in these measures of regional exposure is primarily driven by variation in sectoral employment shares across regions. The second approach estimates structural general equilibrium models and quantifies the changes in regional outcomes in response to a trade shock through counterfactual
exercises. We show that the reduced-form measures of regional exposure cannot be derived from a general equilibrium model even when only considering the partial equilibrium effect. Using Brazilian data on sub-country trade flows, we show that
these analytical differences between the reduced form and theoretical measures of exposure translate into quantitative differences in the measures. We also show that the rank correlation between the different measures of regional exposure is sensitive to the source country of the import cost shock. The results presented caution against relying too heavily on reduced-form exposure measures to recover partial elasticities
of regional wages to an international trade shock.
Description
Fil: Rodríguez Chatruc, Marisol. Universidad de San Andrés. Departamento de Economía; Argentina.
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Citation
Rodríguez Chatruc, M. (2019). Regional exposure to trade shocks : reconciling theory and evidence. [Tesis de maestría, Universidad de San Andrés. Departamento de Economía]. Repositorio Digital San Andrés. http://hdl.handle.net/10908/19289