The Long Run Effects of Trade Liberalization
on Income Risk and Occupational Mobility

Abstract

This paper studies the long run effects of trade liberalizations on income volatility and occupational mobility. In order to so, first we estimate time-varying measures of regional income volatility using longitudinal data for workers' earnings. Second, we use the Brazilian occupation's classification system (coupled with machine learning text analysis) to create an aggregate measure of regional occupational mobility. The latter not only measures the extensive margin (% of workers switching occupation) but also takes into account the skill distance between occupation switches. Due to its unique set of features, we focus our attention on the Brazilian trade liberalization of the beginning of the 1990s. We use data on regional tariffs reductions to study the long terms effects of a greater exposure to the trade shock on regional income volatility and occupational mobility.