The impact of real exchange rate shocks on manufacturing workers: An autopsy from the MORG |
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| Institution: | 1. New Economic School, Russia;2. University of Hawaii, Manoa, United States;1. Swiss National Bank, Börsenstrasse 15, 8001 Zurich, Switzerland;2. University of St. Gallen, Unterer Graben 21, 9000 St. Gallen, Switzerland;1. ISEG-UL – Universidade de Lisboa, REM – Research in Economics and Mathematics, UECE – Research Unit on Complexity and Economics, Portugal;2. Cardiff Business School, Cardiff University, Colum Drive, Cardiff CF10 3EU, United Kingdom;3. Department of Applied Economics, University of Zaragoza, Gran Via, 4, 50005 Zaragoza, Spain;4. Essex Business School, University of Essex, Colchester Campus, Wivenhoe Park, Colchester CO4 3SQ, United Kingdom;1. Bentley University, Waltham, MA, USA;2. The University of Sydney, Camperdown, NSW, Australia |
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| Abstract: | We study the impact of large real exchange rate shocks on workers in sectors initially more exposed to international trade using the Current Population Survey’s (CPS) Merged Outgoing Rotation Group (MORG) from 1979 to 2010 combined with new annual measures of imported inputs, a proxy for offshoring. We find that in periods when US relative prices are high, and imports surge relative to exports, workers in sectors with greater initial exposure to international trade were more likely to be unemployed or exit the labor force a year later, but did not experience significant declines in wages conditional on being employed. Contrary to the usual narrative, we find negative wage effects for higher-wage, but not lower-wage workers, particularly for those who are less-educated. |
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| Keywords: | Real exchange rates Labor market impact of trade shocks Inequality American manufacturing |
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