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The Impacts of Trade on Labor Markets

Abstract

I develop and analyze three models which examine how labor markets are impacted by trade. The first model explores the effects of tariff reductions in a setting where multinational firms must choose not only where to sell their products but also where to locate their production. The second model introduces a new theory of offshoring in which production tasks are offshored due to differences in factor endowments between countries rather than differences in productivity. The third model explores the phenomenon of job polarization in which the share of high-skilled and low-skilled jobs increase at the expense of the share of medium-skilled jobs. I demonstrate that job polarization can be caused by complementarities between worker skill and more sophisticated production technologies and I analyze how this effect varies systematically with reductions in trade costs.

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