This dissertation consists of three self-contained chapters. The first two are empirical papers on the labor market outcomes of international trade, using data from the administrative records of Statistics Denmark. The final chapter contributes to the theoretical literature on the impact of trade liberalization on competition when firms are imperfectly competitive.
Chapter 1, “A Dynamic Analysis of Globalization and Unemployment, aims to estimate the mobility costs involved when workers change from one sector to another, for example due to globalization. Developed countries have experienced increasing foreign competition, particularly from low wage countries, since the early 1990s. This has been coupled with a shift in production away from the manufacturing sector towards non-traded goods and services. In so far as this reallocation is costly for workers, estimating the mobility costs is important in understanding how the labor market adjusts to increased foreign competition. The mobility costs are estimated in a structural model of the Danish labor market, and found to be in the range of 1.2 to 2.4 average annual wages for the median worker, thus comprising a significant barrier to intersectoral mobility.
Chapter 2, “The Impact of Chinese Import Penetration on Danish Firms and Workers” (joint with Jakob Munch and Daniel Nguyen), uses the recent surge in imports from China as a natural experiment to investigate how low wage country imports affect domestic firms and workers. Since the 1980s several developed economies have experienced contemporaneous increases in imports and in the wage gap between high- and low- skilled workers. The paper measures Chinese import penetration at the firm level, and finds that greater exposure to Chinese imports corresponds to a negative firm-level demand shock, which is biased towards low-skill intensive products. Consistent with this, an increase in Chinese import penetration results in lower wages for low-skilled workers.
Finally, Chapter 3, “Trade Liberalization and the Degree of Competition in International Duopoly” (joint with Per Svejstrup Hansen and Jonas Worm Hansen), build a theoretical model to analyze how a reduction in trade costs influences the possibility for firms to engage in international cartels, and hence how trade liberalization affects the degree of competition. By amending the ‘reciprocal dumping’ model of Brander and Krugman (1983) to allow for differentiated products, the paper finds that trade liberalization may have an anti-competitive effect, though there is no monotone relation between reducing trade costs and the degree of competition.