Trade Development and Political Economy present: Jennifer P. Poole

Trade Development and Political Economy Present: Jennifer P. Poole
Trade and Labor Reallocation with Heterogeneous Enforcement of Labor Regulations

Authors: Rita K. Almeida and Jennifer P. Poole

Speaker: Jennifer P. Poole (University of California, Santa Cruz)

Abstract: This paper revisits the question of how trade openness affects labor market outcomes in a developing country setting. The authors explore the fact that plants face varying degrees of exposure to global markets and to the enforcement of labor market regulations, and rely on Brazil’s currency crisis in 1999 as an exogenous source of variation in industry-specific real exchange rates and hence, access to foreign markets. Using administrative data on employers matched to their employees and on the enforcement of labor regulations at the city level over Brazil’s main crisis period, the authors document that the way trade openness affects labor market outcomes for plants and workers depends on the stringency of de facto labor market regulations. In particular, the authors  show that after a trade shock plants facing stricter enforcement of the labor law decrease job creation and increase job destruction by more than plants facing looser enforcement. Consistent with their predictions, this effect is strongest among small, labor-intensive, non-exporting plants, for which labor regulations are most binding. The authors also note a stronger impact of enforcement on younger workers. Finally, their findings are consistent with the hypothesis that increased regulatory enforcement limits the plant-level productivity gains associated with trade openness. The latter implies that increasing the flexibility of de jure regulations will allow for broader access to the gains from trade.

Short Bio: Jennifer Poole is an Assistant Professor of Economics at the University of California, Santa Cruz.  Her research interests include international trade, applied microeconomics, and Latin American development. Her work has been published in the Review of Economics and Statistics and in World Development.