Labor Market Effects of Global Supply Chain Disruptions
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World Bank, Washington, DC
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This paper examines the labor market
consequences of recent global supply chain disruptions
induced by COVID-19. Specifically, it considers a temporary
increase in international trade costs similar to the one
observed during the pandemic and analyzes its effects on
labor market outcomes using a quantitative trade model with
downward nominal wage rigidities. Even omitting any
health-related impacts of the pandemic, the increase in
trade costs leads to a temporary but prolonged decline in
U.S. labor force participation. However, there is a
temporary increase in manufacturing employment as the United
States is a net importer of manufactured goods, which become
costlier to obtain from abroad. By contrast, service and
agricultural employment experience temporary declines.
Nominal frictions lead to temporary unemployment when the
shock dissipates, but this depends on the degree of monetary
accommodation. Overall, the shock results in a 0.14 percent
welfare loss for the United States. The impact on labor
force participation and welfare across countries varies
depending on the initial degree of openness and sectoral deficits.
Palabras clave
SUPPLY CHAIN DISRUPTION, TRADE COST, DOWNWARD NOMINAL WAGE RIGIDITY, COVID IMPACT ON LABOR MARKET, US LABOR FORCE PARTICIPATION DECLINE, PANDEMIC LABOR MARKET IMPACT