Tariff reductions and labor demand elasticities : evidence from Chinese firm-level data
AbstractInternational production fragmentation has been a global trend for decades, becoming especially important in Asia where the manufacturing process is fragmented into stages and dispersed around the region. This paper examines the effects of input and output tariff reductions on labor demand elasticities at the firm level. For this purpose, we consider a simple heterogenous firm model in which firms are allowed to export their products and to use imported intermediate inputs. The model predicts that only productive firms can use imported intermediate inputs (outsourcing) and tend to have larger constant-output labor demand elasticities. Input tariff reductions would lower the factor shares of labor for these productive firms and raise conditional labor demand elasticities further. We test these empirical predictions, constructing Chinese firm-level panel data over the 2000--2006 period. Controlling for potential tariff endogeneity by instruments, our empirical studies generally support these predictions.
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Bibliographic InfoPaper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 463.
Date of creation: Mar 2014
Date of revision:
Publication status: Published in IDE Discussion Paper. No. 463. 2014.3
Postal: Publication Office, IDE 3-2-2 Wakaba, Mihama-ku, Chiba-shi, Chiba 261-8545 JAPAN
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-18 (All new papers)
- NEP-BEC-2014-04-18 (Business Economics)
- NEP-INT-2014-04-18 (International Trade)
- NEP-LAB-2014-04-18 (Labour Economics)
- NEP-TRA-2014-04-18 (Transition Economics)
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