Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Labor Market Responses to Tariffs: Frictions, Dynamics, and Policy Responses
Journal of Economic Perspectives
(pp. 73–100)
(Complimentary)
Abstract
This article introduces the evidence and associated modeling frameworks contemporary economists use to understand the effects of trade and trade policy on labor markets, with a particular emphasis on labor-market frictions and adjustment dynamics. The effects of trade shocks differ across industries, regions, and occupations, implying the presence of important adjustment frictions in labor markets, and these effects evolve slowly over time, implying the need for dynamic frameworks rationalizing slow transitions. After reviewing the key insights from this literature, we discuss policies aimed at mitigating costs to workers and ensuring that the gains from trade are shared more equitably.Citation
Dix-Carneiro, Rafael, and Brian K. Kovak. 2026. "Labor Market Responses to Tariffs: Frictions, Dynamics, and Policy Responses." Journal of Economic Perspectives 40 (3): 73–100. DOI: 10.1257/jep.20251489Additional Materials
JEL Classification
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- F13 Trade Policy; International Trade Organizations
- F14 Empirical Studies of Trade
- F16 Trade and Labor Market Interactions
- F66 Economic Impacts of Globalization: Labor
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics