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Import Competition in the Manufacturing Sector in Peru: Its Impact on Informality and Wages

Author

Listed:
  • Fernando Morales

    (World Bank)

  • Martha Denisse Pierola

    (World Bank)

  • Dennis Sanchez-Navarro

    (World Bank)

Abstract

This paper studies the impact of import competition from China on labor outcomes in the Peruvian manufacturing sector in 2001–2010. Using data from the Peruvian Household Survey, we use atwo-step procedure to evaluate the impact of the surge in imports from China on the likelihood ofhaving an informal job and on wages in both the formal and informal sectors. On the first step,the results suggest that greater import competition increased—albeit weakly—the likelihood ofhaving an informal job for workers with elementary education. On the second step, we find thatthe surge in imports from China was detrimental to wages of the least educated individuals withinformal jobs—with no education and elementary education—, although we also find that thisresult is mostly driven by the presence of self-employed among informal workers. We also observea wage increase among workers with formal jobs and elementary and high school education. Theseresults are robust to the inclusion of different exclusion restrictions and even after accounting forindustry-level growth which was strong during the period studied

Suggested Citation

  • Fernando Morales & Martha Denisse Pierola & Dennis Sanchez-Navarro, 2021. "Import Competition in the Manufacturing Sector in Peru: Its Impact on Informality and Wages," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 44(88), pages 45-75.
    • Handle: RePEc:pcp:pucrev:y:2021:i:88:p:45-75
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    File URL: https://revistas.pucp.edu.pe/index.php/economia/article/view/22007/23419
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    Keywords

    Import competition; Informality; Wages;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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