Rafael Dix-Carneiro

Trade Liberalization and Labor Market Dynamics

This paper studies trade-induced transitional dynamics by estimating a structural dynamic equilibrium model of the labor market. The model features a multi-sector economy with overlapping generations, heterogeneous workers, endogenous accumulation of sector-specific experience and costly switching of sectors. The estimation employs a large panel of workers constructed from Brazilian matched employer-employee data. The model?s estimates yield high average costs of mobility that are very dispersed across the population. In addition, sector-specific experience is imperfectly transferable across sectors, leading to additional barriers to mobility. Using the estimated model as a laboratory for counterfactual experiments, this paper finds that: (1) there is a large labor market response following trade liberalization but the transition may take several years; (2) potential aggregate welfare gains are significantly mitigated due to the slow adjustment; (3) trade-induced welfare effects are very heterogeneous across the population; (4) retraining workers initially employed in the adversely affected sector may reduce losses incurred by these workers and increase aggregate welfare; (5) a moving subsidy that covers costs of mobility is more promising for compensating losers, although at the expense of higher welfare adjustment costs. The experiments also highlight the sensitivity of the transitional dynamics with respect to assumptions regarding the mobility of physical capital.

Multi-Product Firms and Exchange Rate Fluctuations

This paper studies the effect of exchange rate shocks on export behavior of multi-product firms. We provide a theoretical framework illustrating how firms adjust their prices, quantities, product scope, and sales distribution across products in the event of exchange rate fluctuations. In response to a real exchange rate depreciation, firms increase markups for all products, but markup increases decline with firm-product-specific marginal costs of production. We find robust evidence for our theoretical predictions using Brazilian customs data containing destination-specific and product-specific export sales and quantities. The sample period covers the years 1997-2006, during which Brazil experienced a series of drastic currency fluctuations. (JEL F14, F31, F33, O19, O24)

Economic Shocks and Crime: Evidence from the Brazilian Trade Liberalization

This paper studies the effect of changes in economic conditions on crime. We exploit the 1990s trade liberalization in Brazil as a natural experiment generating exogenous shocks to local economies. We document that regions exposed to larger tariff reductions experienced a temporary increase in crime following liberalization. Next, we investigate through what channels the trade-induced economic shocks may have affected crime. We show that the shocks had significant effects on potential determinants of crime, such as labor market conditions, public goods provision, and income inequality. We propose a novel framework exploiting the distinct dynamic responses of these variables to obtain bounds on the effect of labor market conditions on crime. Our results indicate that this channel accounts for 75 to 93 percent of the effect of the trade-induced shocks on crime.