Linnea Lorentzen

Research:

The Unequal Effects of Trade and Automation across Local Labor Markets, with Simon Galle
Journal of International Economics (July, 2024)
Online Appendix, Replication Package

We quantify the joint impact of the China shock and automation of labor, across US commuting zones (CZs) in the period 2000-2007. To this end, we employ a multi-sector gravity model of trade with Roy-Fréchet worker heterogeneity across sectors, where labor input can be automated. Automation and increased import competition from China are both sector-specific; they lead to contractions in a sector's labor demand and a decline in relative income for CZs more specialized in that sector, amplified by a voluntary reduction in hours worked and an increase in frictional unemployment. The estimated model fits well with the aggregate performance of manufacturing subsectors and with the variation across CZs in changes in average income, the hourly wage, hours worked, the employment rate and employment in manufacturing. By itself, the China shock has stronger distributional effects than automation, but its impact on aggregate gains is less than a third of automation's impact.

Domino Effects: Understanding Sectoral Reallocation and its Wage Implications
Awarded the prize for the Best Paper at the 21st Annual GEP/CEPR Postgraduate Conference 

This paper studies the impact of the collapse in the price of Brent Crude Oil in 2014 on worker reallocation and earnings in Norway. Using Norwegian panel data, I document that workers in the destination sectors of moving oil workers experienced declines in earnings growth and increased worker mobility. To capture the complex worker transmission pathways following the shock, I estimate a multisector Roy model with sectoral skill correlations and mobility costs. Counterfactual simulations show substantial but varying wage declines across non-tradable sectors and highlight that reallocation between non-oil sectors accounted for 64% of the total worker reallocation in the median commuting zone following the shock.