Adjusting to Globalization: Evidence from Heterogeneous Worker-Establishment Matches in Germany

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 12.11.2014, 12:15 - 13:30


Presentation by 

Jens Suedekum (Heinrich Heine University Düsseldorf)


In this paper, we address the causal effect of rising trade exposure on individual job stability, as captured by expected employment spells in heterogeneous worker establishment matches across various industries in Germany. The specific globalization episode we analyze is the unprecedented rise in German trade with Eastern Europe and China during the period 1988–2008. To account for unobservable shocks we use trade flows of other high-income countries as instruments for German sectoral trade exposure, and we adopt an identification approach based on “gravity residuals”. Our main finding is that higher import exposure of the industry where the respective worker is employed tends to reduce workers’ expected employment durations. By contrast, higher export exposure increases the expected duration, and this second effect tends to be quantitatively more important than the first one. In the aggregate, we therefore find that rising trade with "the East" has led to a stabilization of individual employment biographies. We then investigate how workers are affected differently, depending on their personal attributes and on the characteristics of their initial employer.

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