This dissertation contains essays that study questions regarding how international trade shocks affect labor market outcomes and how exchange rate fluctuations affect firm-level markups.
The first chapter provides evidence on the short-run and long-run distributional effects of tariff shocks on employment in the United States. Using monthly data on tariffs and employment, I find that in the period of January 2017 to March 2019, commuting zones more exposed to Chinese retaliatory tariffs experienced a decline in employment growth, whereas U.S. import tariffs had no immediate effect on employment growth. I also study the employment effects of a hypothetical trade war between the United States and China by calculating counterfactual employment changes under three different retaliation scenarios and find that had the U.S. imposed tariffs in the 1991-2007 period on all products, the large job-destroying effect of the 'China shock' would not have occurred, irrespective of the retaliation strategy pursued by China. However in the post-recession period of 2010-2016, the 'China shock' no longer exists and therefore U.S. import tariffs would not have had a job-creating effect. This result corroborates the findings of the short-run analysis.
The second chapter is co-authored with Antonio Rodriguez-Lopez and Marco Del Angel, and published in the book World Trade Evolution: Growth, Productivity and Employment. It studies the heterogeneous impacts of import competition across occupations. Using data on occupational employment from 2002 to 2014, we find that Chinese import competition reduces employment in low wage, low education and highly routine occupations. At the local level, the employment reduction in the lowest tertile of occupations occurs in Chinese-trade exposed and as well unexposed sectors, which suggests the existence of local labor market effects in the presence of a strong regional concentration of lower-indexed occupations.
The third chapter uses firm-level data for U.S. manufacturing firms from 1964-2011 to test important empirical predictions from international trade models linking trade behavior and firms' markups. I find that firms of higher productivity have lower rates of exchange rate pass-through to export prices, i.e., they adjust their markups by a higher magnitude. However, firms of higher productivity also have less volatile markups, i.e, they adjust their markups less frequently than do firms of lower productivity. This result provides an insight to the "Exchange rate disconnect puzzle'", i.e., the lack of response of aggregate prices to exchange rate movements.