TRADE LIBERALIZATION AND THE GREAT LABOR REALLOCATION

Yuan Zi

41 citations0/0 files storedInternational Economic Review

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Global trade and economics China's Socioeconomic Reforms and Governance Migration and Labor Dynamics

Abstract

Abstract I examine how migration frictions shape the effects of trade policy by analyzing the impact of tariff reductions on labor allocation in China and the role of hukou‐based migration frictions. Trade liberalization induces significant labor reallocation, greater in regions with lower hukou frictions. Quantitatively, trade liberalization increases China's welfare by 0.72%. Abolishing the hukou system directly improves welfare by 1.75% but reduces gains from tariff reductions by 18% and amplifies negative distributional effects. In the process, I develop a novel measure of hukou‐related migration frictions.

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References

2002Technology, Geography, and Trade 2013The China Syndrome: Local Labor Market Effects of Import Competition in the United States 2014Estimates of the Trade and Welfare Effects of NAFTA 20061 Distributional Effects of Globalization in Developing Countries*2016The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade 2001Increasing Returns Versus National Product Differentiation as an Explanation for the Pattern of U.S.–Canada Trade 2010Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India 2017Trade Liberalization and Regional Dynamics

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