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We challenge the common practice of estimating gravity equations with interval or averaged data in order to capture dynamic‐adjustment effects to trade‐policy changes. Instead, we point to a series of advantages of using consecutive‐year data recognizing dynamic‐adjustment effects. Our analysis reveals that, relative to interval or averaged data, the use of consecutive‐year data avoids downward‐biased effect estimates due to the distribution of trade‐policy events during an event window as well as due to anticipation (pre‐interval) and delayed (post‐interval) effects, and it improves the efficiency of effect estimates due to the use of more data.

This paper examines the effects of globalization on the distribution of worker-specific labor taxes using a unique set of tax calculators. We find a differential effect of higher trade and factor mobility on relative tax burdens in 1980–1993 versus 1994–2007 in the OECD. Prior to 1994, greater openness meant that higher income earners were taxed progressively more. However, after 1994, we document a globalization-induced rise in the labor income tax burden of the middle class, while the top 1 percent of workers and employees faced a reduction in their tax burden of 0.59–1.45 percentage points. (JEL D31, F16, F61, H22, H24)