Andy Bernard, Emily Blanchard, Toni Braun, Albert Carreras, Thomas Chaney, K. Cosar, K. Desmet, C. Edmond, P. Fève, James D. Feyrer, S. Ganapati, C. Hellwig, Rob Johnson, B. Kovak, T. Lee, T. Mayer, Rory McGee, Martí Mestieri, Nina Pavcnik, F. Portier, B. Ravikumar, Vincent Rebeyrol, J. Rubio-Ramirez, Mohammed Saleh, Chris Snyder, F. D. Soyres, Bob Staiger, R. Ulbricht, Nikolaus Wolf, S. Fuchs
{"title":"Spoils of War: Trade Shocks and Segmented Labor Markets in Spain during WWI","authors":"Andy Bernard, Emily Blanchard, Toni Braun, Albert Carreras, Thomas Chaney, K. Cosar, K. Desmet, C. Edmond, P. Fève, James D. Feyrer, S. Ganapati, C. Hellwig, Rob Johnson, B. Kovak, T. Lee, T. Mayer, Rory McGee, Martí Mestieri, Nina Pavcnik, F. Portier, B. Ravikumar, Vincent Rebeyrol, J. Rubio-Ramirez, Mohammed Saleh, Chris Snyder, F. D. Soyres, Bob Staiger, R. Ulbricht, Nikolaus Wolf, S. Fuchs","doi":"10.29338/WP2021-14","DOIUrl":null,"url":null,"abstract":"How does intranational factor mobility shape the welfare effects of a trade shock? I provide evidence that during WWI, a demand shock emanated from belligerent countries and affected neutral Spain. Within Spain, labor predominantly reallocated locally, while the most affected provinces experienced drastic increases in wages and consumer prices. Embedding imperfect labor mobility in an economic geography model, I show that external demand shocks can improve allocative efficiency, but asymmetric shocks cause localized increases in wages and consumer prices instead of reallocation. Adjusting an aggregate gains of trade formula to take domestic reallocation into account more than triples the estimated welfare effects. JEL classification: D5, F11, F12, F15, F16, N9, N14, R12, R13","PeriodicalId":296984,"journal":{"name":"Federal Reserve Bank of Atlanta, Working Papers","volume":"32 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2021-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Federal Reserve Bank of Atlanta, Working Papers","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.29338/WP2021-14","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
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Abstract
How does intranational factor mobility shape the welfare effects of a trade shock? I provide evidence that during WWI, a demand shock emanated from belligerent countries and affected neutral Spain. Within Spain, labor predominantly reallocated locally, while the most affected provinces experienced drastic increases in wages and consumer prices. Embedding imperfect labor mobility in an economic geography model, I show that external demand shocks can improve allocative efficiency, but asymmetric shocks cause localized increases in wages and consumer prices instead of reallocation. Adjusting an aggregate gains of trade formula to take domestic reallocation into account more than triples the estimated welfare effects. JEL classification: D5, F11, F12, F15, F16, N9, N14, R12, R13
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