Labor Market Effects of Global Supply Chain Disruptions
This paper examines the labor market consequences of recent global supply chain disruptions induced by COVID-19. Specifically, it considers a temporary increase in international trade costs similar to the one observed during the pandemic and analyzes its effects on labor market outcomes using a quantitative trade model with downward nominal wage rigidities. Even omitting any health-related impacts of the pandemic, the increase in trade costs leads to a temporary but prolonged decline in U.S. labor force participation. However, there is a temporary increase in manufacturing employment as the United States is a net importer of manufactured goods, which become costlier to obtain from abroad. By contrast, service and agricultural employment experience temporary declines. Nominal frictions lead to temporary unemployment when the shock dissipates, but this depends on the degree of monetary accommodation. Overall, the shock results in a 0.14 percent welfare loss for the United States. The impact on labor force participation and welfare across countries varies depending on the initial degree of openness and sectoral deficits.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2023-05-08
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| Subjects: | SUPPLY CHAIN DISRUPTION, TRADE COST, DOWNWARD NOMINAL WAGE RIGIDITY, COVID IMPACT ON LABOR MARKET, US LABOR FORCE PARTICIPATION DECLINE, PANDEMIC LABOR MARKET IMPACT, |
| Online Access: | http://documents.worldbank.org/curated/en/099742505022340571/IDU0776102410a010044910917405a6c7fe5fb87 https://openknowledge.worldbank.org/handle/10986/39789 |
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