Trade Shocks and Local Labor Markets' Linkages: Theory and Evidence

In the past few years, there has been a concern among economists and policy makers that increased openness to international trade affects some regions in a country more than others. Recent research has found that local labor markets more exposed to import competition through their initial employment composition experience worse outcomes in several dimensions such as, employment, wages, and poverty. Although there is evidence that regions within a country exhibit variation in the intensity with which they trade with each other and with other countries, trade linkages have been ignored in empirical analyses of the regional effects of trade, which focus on differences in employment composition. In this dissertation, I investigate how local labor markets' trade linkages shape the response of wages to international trade shocks. In the second chapter, I lay out a standard multi-sector general equilibrium model of trade, where domestic regions trade with each other and with the rest of the world. Using this benchmark, I decompose a region's wage change resulting from a national import cost shock into a direct effect on prices, holding other endogenous variables constant, and a series of general equilibrium effects. I argue the direct effect provides a natural measure of exposure to import competition within the model since it summarizes the effect of the shock on a region's wage as a function of initial conditions given by its trade linkages. I call my proposed measure linkage exposure while I refer to the measures used in previous studies as employment exposure. My theoretical analysis also shows that the assumptions previous studies make on trade linkages are not consistent with the standard trade model. In the third chapter, I calibrate the model to the Brazilian economy in 1991--at the beginning of a period of trade liberalization--to perform a series of experiments. In each of them, I reduce the Brazilian import cost by 1 percent in a single sector and I calculate how much of the cross-regional variation in counterfactual wage changes is explained by exposure measures. Over this set of experiments, employment exposure explains, for the median sector, 2 percent of the variation in counterfactual wage changes while linkage exposure explains 44 percent. In addition, I propose an estimation strategy that incorporates trade linkages in the analysis of the effects of trade on observed wages. In the model, changes in wages are completely determined by changes in market access, an endogenous variable that summarizes the real demand faced by a region. I show that a linkage measure of exposure is a valid instrument for changes in market access within Brazil. By using observed wage changes in Brazil between 1991-2000, my estimates imply that a region at the 25th percentile of the change in domestic market access induced by trade liberalization, experiences a 0.6 log points larger wage decline (or smaller wage increase) than a region at the 75th percentile. The estimates from a regression of wages changes on exposure imply that a region at the 25th percentile of exposure experiences a 3 log points larger wage decline (or smaller wage increase) than a region at the 75th percentile. I conclude that estimates based on exposure overstate the negative impact of trade liberalization on wages in Brazil. In the fourth chapter, I extend the standard model to allow for two types of workers according to their education levels: skilled and unskilled. I show that there is substantial variation across Brazilian regions in the skill premium. I use the exogenous variation provided by tariff changes to estimate the impact of market access on the skill premium. I find that decreased domestic market access resulting from trade liberalization resulted in a higher skill premium. I propose a mechanism to explain this result: that the manufacturing sector is relatively more intensive in unskilled labor and I show empirical evidence that supports this hypothesis.

Geography and Genetics of Ecological Speciation in Pea Aphids

During ecological speciation, divergent natural selection drives evolution of ecological specialization and genetic differentiation of populations on alternate environments. Populations diverging onto the same alternate environments may be geographically widespread, so that divergence may occur at an array of locations simultaneously. Spatial variation in the process of divergence may produce a pattern of differences in divergence among locations called the Geographic Mosaic of Divergence. Diverging populations may vary in their degree of genetic differentiation and ecological specialization among locations. My dissertation examines the pattern and evolutionary processes of divergence in pea aphids (Acyrthosiphon pisum) on alfalfa (Medicago sativa) and clover (Trifolium pretense). In Chapter One, I examined differences among North American aphid populations in genetic differentiation at nuclear, sequence-based markers and in ecological specialization, measured as aphid fecundity on each host plant. In the East, aphids showed high host-plant associated ecological specialization and high genetic differentiation. In the West, aphids from clover were genetically indistinguishable from aphids on alfalfa, and aphids from clover were less specialized. Thus, the pattern of divergence differed among locations, suggesting a Geographic Mosaic of Divergence. In Chapter Two, I examined genomic heterogeneity in divergence in aphids on alfalfa and clover across North America using amplified fragment length polymorphisms (AFLPs). The degree of genetic differentiation varied greatly among markers, suggesting that divergent natural selection drives aphid divergence in all geographic locations. Three of the same genetic markers were identified as evolving under divergent selection in the eastern and western regions, and additional divergent markers were identified in the East. In Chapter Three, I investigated population structure of aphids in North America, France, and Sweden using AFLPs. Aphids on the same host plant were genetically similar across many parts of their range, so the evolution of host plant specialization does not appear to have occurred independently in every location. While aphids on alfalfa and clover were genetically differentiated in most locations, aphids from alfalfa and clover were genetically similar in both western North America and Sweden. High gene flow from alfalfa onto clover may constrain divergence in these locations.

Agronomic and economic viability of Miscanthus x giganteus as a novel biofuel in the Maryland climate

Gemstone Team Biofuels