Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266017 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9982
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We present a dynamic quantitative trade and migration model that incorporates downward nominal wage rigidities and show how this framework can generate changes in unemployment and labor participation that match those uncovered by the empirical literature studying the "China shock." We find that the China shock leads to average welfare increases in most U.S. states, including many that experience unemployment during the transition. However, nominal rigidities reduce the overall U.S. gains by around one fourth. In addition, there are seven states that experience welfare losses in the presence of downward nominal wage rigidity that would have experienced gains without it.
Subjects: 
trade
unemployment
China shock
downward nominal wage rigidity
JEL: 
F10
J20
Document Type: 
Working Paper
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