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Essays in trade and labour markets

Pessoa, Joao (2015) Essays in trade and labour markets. PhD thesis, London School of Economics and Political Science.

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My thesis studies aspects related to international trade, labour markets and productivity. The first chapter analyses how countries adjust to the rise of China considering that labour markets are imperfect. I provide a theoretical framework to structurally quantify the impact of trade shocks and I find that China’s integration generates overall gains worldwide. However, in low-tech manufacturing industries in the UK and in the US, which face severe import competition from China, workers’ real wages fall and unemployment rises. The second chapter studies the recent boom in commodities-for-manufactures trade between China and other developing countries. Brazilian census data show that local labour markets more affected by Chinese import competition experienced slower growth in manufacturing wages and in-migration rates between 2000 and 2010. However, locations benefiting from rising Chinese demand experienced higher wage growth and positive effects on job quality. The third chapter suggests a possible explanation for poor productivity after the “Great Recession” in the UK: Low growth in the effective capital-labour ratio. This is likely to have occurred because there has been a fall in real wages and increases in the cost of capital due to the financial crisis. After accounting for (simulated) changes in the capital-labour ratio, the evolution of total factor productivity appears much more similar to earlier severe recessions and possibly related to underutilised resources. The last chapter shows that there is almost no “net decoupling” (the difference in growth of GDP per hour and average compensation, both deflated by the GDP deflator) over the past 40 years in the UK, although there is evidence of “gross decoupling” (the difference in growth of GDP per hour deflated by the GDP deflator and median wages deflated by a measure of consumer price inflation) in the US and, to a lesser extent, in the UK.

Item Type: Thesis (PhD)
Additional Information: © 2015 Joao Paulo Cordeiro de Noronha Pessoa
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Supervisor: Van Reenen, John

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