Trade, Human Capital, and Income Risk

The Moynihan Institute’s Trade, Development and Political Economy Series presents, Mine Z. Senses, Associate Professor of International Economics, Johns Hopkins School of Advanced International Studies. In this paper, we empirically assess the causal links between trade and individual income risk and study the role that human capital plays in this relationship using a rich, worker-level, longitudinal data set from Germany spanning 1976 to 2012. Our estimates suggest substantial heterogeneity in labor income risk across workers in different entry cohorts and across workers with different levels of industry- and occupation-specific human capital. Our findings suggest that within-industry changes in imports and exports are causally related to income risk: Imports increase risk and exports decrease risk, and they do so in an economically significant manner. Importantly, we find there to be a complex interplay between human capital and the linkage between trade and risk: While, on average, individuals with higher levels of industry- or occupation-specific human capital experience lower income risk, a given increase in net-imports exposure in an industry increases risk for workers with higher levels of industry tenure more than it does for workers with lower levels of industry tenure. 

Mine Z. Senses is an Associate Professor of International Economics in the School of Advanced International Studies (SAIS) at Johns Hopkins University. Her current research focuses on the consequences of globalization on the labor market, with emphasis on quantifying the heterogeneous costs and benefits experienced by different segments of the population. Her research has been published in numerous journals including the Review of Economic Studies, Journal of International Economics, American Economic Review and the Canadian Journal of Economics. She hold a BA from the Middle East Technical University and a PhD from the University of Michigan.