2007年-世界发展银行全球_Human_Capital_Trade_Liberalization_and_Income_Risk_28页_339kb

Summary of "Human Capital, Trade Liberalization and Income Risk"

Core Content

This paper investigates the empirical relationship between trade policy changes and individual income risk in Mexico, focusing on how different levels of human capital (education) affect this relationship. The study uses longitudinal income data from 1987 to 1998, a period marked by significant trade policy reforms in Mexico, to estimate time-varying income risk parameters across manufacturing sectors. The analysis explores the welfare implications of income risk and how trade liberalization interacts with human capital levels.

Main Findings

• Overall Relationship: The level of economic openness is not found to be related to income risk for workers of any type.
• Trade Policy Changes: Reforms in trade policy do not affect income risk for workers with either low or high levels of human capital.
• Intermediate Human Capital: Workers with intermediate levels of education experience a statistically and economically significant increase in income risk immediately after trade liberalization.
• Non-Monotonicity: The interaction between trade policy, human capital, and income risk is non-monotonic, with intermediate human capital workers being most affected.
• Welfare Costs: The welfare costs of increased income risk following trade policy reforms are substantial, reducing permanent income by 1% to 2%.

Key Information

Data and Methodology

• Data Source: The National Urban Employment Survey (ENEU) provides longitudinal income data for workers in Mexican manufacturing sectors from 1987 to 1998.
• Sample Size: Approximately 100,000 individuals are surveyed each year.
• Estimation Approach: The paper uses a method similar to Carroll and Samwick (1997), Meghir and Pistaferri (2004), and Storesletten, Telmer, and Yaron (2004) to estimate time-varying income risk parameters.
• Income Risk Components: The paper distinguishes between transitory and persistent income shocks. Persistent shocks are of greater welfare importance due to their long-term impact on future earnings and consumption.
• Estimation Technique: Generalized Method of Moments (GMM) is used to estimate the parameters of income risk, accounting for heteroscedasticity and potential correlation across sectors and time.

Theoretical Framework

• The paper uses a dynamic model with incomplete markets to link income risk to welfare, drawing on the work of Constantinides and Duffie (1996) and Krebs (2004).
• The model assumes:
  • Households face uninsurable permanent income shocks.
  • They cannot borrow but can save at a common risk-free rate.
  • Preferences are time-additive expected utility with a constant degree of relative risk aversion, $\gamma$.
• The model allows for closed-form solutions for consumption and welfare, facilitating the analysis of how trade policy changes affect welfare outcomes.

Trade Reform and Income Risk

• The paper estimates the relationship between income risk and trade policy using the following specification:
  $$
  \sigma_{\varepsilon j t}^{2} = \alpha_{0} + \alpha_{1 j} + \alpha_{2 t} + \alpha_{\tau} \tau_{j t} + \alpha_{\delta} \Delta \tau_{j t} + v_{j t}
  $$
• $\alpha_{\tau}$ measures the effect of openness on income risk.
• $\alpha_{\delta}$ captures the effect of trade policy changes.
• The paper notes that trade barriers in Mexico exhibit substantial cross-sectional variation, which aids in identifying the relationship between trade policy and income risk.

Structure of the Paper

• Section II: Focuses on estimating individual income risk using longitudinal data.
• Section III: Examines the relationship between trade policy and income risk using the estimated parameters.
• Section IV: Analyzes the welfare implications of income risk using a dynamic model.
• Section V: Presents the empirical results.
• Section VI: Concludes with the implications of the findings.

Conclusion

The study reveals that trade liberalization leads to an increase in income risk for workers with intermediate levels of human capital, while having no significant effect on low or high human capital workers. This non-monotonic relationship suggests that trade policy reforms may have unequal impacts on different segments of the labor market, raising important questions for public policy and welfare analysis.