Spoils of War: Trade Shocks and Segmented Labor Markets in Spain during WWI

Federal Reserve Bank of Atlanta, Working Papers Pub Date : 2021-05-28 DOI:10.29338/WP2021-14

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

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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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战争的战利品:一战期间西班牙的贸易冲击和分割的劳动力市场

国内要素流动如何塑造贸易冲击的福利效应?我提供的证据表明，在第一次世界大战期间，来自交战国的需求冲击影响了中立的西班牙。在西班牙，劳动力主要重新分配到当地，而受影响最严重的省份经历了工资和消费价格的大幅上涨。在经济地理模型中嵌入不完全劳动力流动，我表明外部需求冲击可以提高配置效率，但不对称冲击导致局部工资和消费价格的增长，而不是再配置。调整贸易总收益公式，将国内再分配考虑在内，使估计的福利效应增加三倍以上。JEL分类:D5、F11、F12、F15、F16、N9、N14、R12、R13

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Federal Reserve Bank of Atlanta, Working Papers

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