Global supply chain disruptions due to the Covid-19 pandemic have increased the costs of trade between countries. Given the interconnectedness of the US economy with the rest of the world, higher trade costs can have important impacts on US labor markets. A model of the US economy that incorporates variation in industry concentrations across regions can help quantify these effects. The analysis suggests that recent global supply disruptions could cause a sizable and persistent reduction in labor force participation.

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19 January 2023

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FRBSF Economic Letter

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https://www.frbsf.org/economic-research/publications/economic-letter/2023/january/supply-chain-disruptions-trade-costs-and-labor-markets/

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