How does an industrial policy war affect worker inequa lity? How does this effect change over time? We develop a model to study h ow industrial policy affects the dynamics of the joint distribution of fir ms and workers\, in the open economy. The model features two skill classes of workers\, in addition to multiple sectors with varying skill intensiti es in production. Heterogeneous firms make decisions to offshore their pro duction of inputs\, in addition to export participation. Different industr ial policy shocks generate alternative transmission channels in the model\ ; after interacting with the dynamic decisions of firms and households\, t hey can alter a country’s comparative advantage over time. While most indu strial policies can serve to benefit the locally protected skill class of workers\, these effects may take time to eventuate. Similarly\, the costs these policy actions impose on the non-protected worker class may diminish over time.
Zinan Wang\, Tianjin University
Adam H. Spe ncer is an \;assistant professor in macroeconomics at University of Bonn (Germany) since 2024. Spencer was previously an assist ant professor at University of Nottingham (UK)\, having earned a Ph.D. in economics and finance at the University of Wisconsin-Madison (USA) in 2018 . \;