As part of the Brown Bag Lunch series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Agustín Velásquez, PhD student in International Economics.

Agustín will present his research work entitled The Leisure Gains from International Trade.

Abstract: The number of hours worked has been declining in many countries since 1950. In this paper, I show that trade has contributed to this trend by raising workers' income and leisure time. Building on a multi-country Ricardian trade model, I develop a structural relationship between the equilibrium number of hours worked and the domestic trade share. Lower trade barriers reduce domestic consumption prices through cheaper imports, generating positive income effects. In turn, households react to this increase in income by substituting a small share of consumption to enjoy more leisure time. The number of leisure hours generated by trade depends only on the domestic trade share and three parameters: the elasticity of hours worked to real wages, the capital share, and the trade elasticity. I estimate these parameters in a country-year panel. For identification, I use the development of air transportation technology as an exogenous shifter of trade costs. Across countries, I estimate that trade is providing workers between 16 and 160 leisure hours per year. On average, the increase in trade openness explains 13% of the total decline in hours worked between 1950 and 2010.