Trade and labour income risk in the US: Evidence from longitudinal data

Pravin Krishna, Mine Zeynap Senses, 19 December 2009

Public concerns regarding globalisation remain as economists still do not agree on trade’s effect on the labour market. This column focuses on the effect of increased trade on permanent income shocks experienced by workers in the US. It suggests that increased import penetration is associated with increased risk to worker incomes.

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The severe recession has intensified the political pressure on governments to safeguard jobs at home. As has been argued on this site before, protectionism is the wrong response because import protection stifles access to a greater variety of goods, raises prices and hinders the efficient allocation of resources.

Topics: International trade, Labour markets
Tags: protectionism, trade and unemployment, US trade policy

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