Seminar 281, International Trade and Finance: The Distributional Effects of Trade: Theory and Evidence from the United States

Seminar | October 8 | 4-5:30 p.m. | 597 Evans Hall

 Kirill Borusyak, Assistant Professor, University College of London

 Department of Economics

We quantify the distributional effects of trade shocks in the U.S. through consumer prices (expenditure channel) and wages (earnings channel). A quantitative trade model links these channels to compositional differences in expenditures and earnings across household groups. New data reveal that spending shares on imports are similar across education and income groups, implying a neutral
expenditure channel. Estimated differences in workers’ exposure to import competition, exporting, and income effects indicate that the earnings channel favors college graduates. Overall, a uniform trade
cost reduction generates welfare gains that are 25% larger for college graduates. Similar results apply to trade with China.