We develop a theory and an empirical strategy to estimate the welfare gains from trade in economies with frictional local labor markets. We obtain a welfare formula that nests several standard market structures and features an additional adjustment margin, via the employment rate. To obtain...

We develop a theory and an empirical strategy to estimate the welfare gains from trade in economies with frictional local labor markets. We obtain a welfare formula that nests previous results and features an additional adjustment margin, via the employment rate. To obtain causal estimates of...