Essays on international trade and labour economics

Adem, Anwar and Navarro Paniagua, Maria and Zanardi, Maurizio (2020) Essays on international trade and labour economics. PhD thesis, Lancaster University.

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Abstract

The importance of location in shaping the economic outcomes of different people is well documented. Thus, it lays in the intersection between different areas of research. More importantly, the empirical findings will have major policy implications, since the resilience or sensitivity of local labour markets to changes in economic fundamental is a function of their location and characteristics. And understanding this can be considered as the first step to remedy local economic problems. In the first chapter, I investigate the causal effect of import shocks at local labour markets on the wage distribution using individual-level data from Great Britain in the period 1997-2010. In the analysis, I exploit regional variation in initial industrial structure and its concentration for identification, and apply a group IV quantile approach to estimate the effect of import shocks on workers at different points of the wage distribution. First, I find that the effect of an import shock generated by the increased imports from China is concentrated on the middle of the wage distribution. While the import shock negatively and significantly affects workers at the lower-middle range of the wage distribution, its effect on the very lower and upper part of the wage groups is positive but insignificant. Second, in trying to uncover the mechanism behind these results, I find that the labour adjustment process takes place through a reduction in the hourly wage rather than a decline in hours worked. The second chapter aims at identifying the gains from imported inputs and foreign presence and to verify whether productivity gains from the two are either substitutes or complements. Understanding the relationship between these sources is crucial to evaluate the welfare implications of FDI promotion and trade liberalisation policies, which are particularly important for developing countries. To this end, I rely on a firm-level data-set from Ethiopia for identification. After isolating the productivity gains from the numbers of inputs a firm chooses to import, I assess the role of FDI spillovers. I find evidence of positive gains from imported inputs for both domestic and foreign-owned firms with the magnitude being larger for the latter. I also find limited evidence on the substitutability or complementarity between the gains from imported inputs and FDI spillovers indicating that the productivity gains from the two sources are different in nature and do not interact. The third chapter examines the effect of commuting on residential-mobility preference using data from the UK household longitudinal study. Together with preference to move, I also assess the impact of commuting on expectation to move. For identification strategy, I use a change in commuting time for those individuals who stay with the same employer and remain in the same place of residence. I find that commuting increases the individuals intent to relocate. The paper also finds commuting increases, besides preference to relocate, the expectation to move. The results contribute to the literature on the effect of commuting on residential choice which is crucial for labour market outcomes. Moreover, understanding the impact of commuting on individuals’ preference to relocate have great policy implications, since the commuting and the corresponding decision surrounding it are considered the remedy to local economic problems.