How does import expansion affect migrant labor wages: Evidence from China

The impact of import expansion on local labor markets in developing countries remains controversial. Migrant labor is pervasive in the labor markets of developing economies and is particularly vulnerable to import expansion shocks. This paper employs a shift-share instrumental variable strategy to identify the causal effect of import expansion on the wage of migrant labor and the wage gap between migrant and local workers, using individual data from the China Migrants Dynamic Survey (CMDS) spanning from 2011 to 2018. The results indicate that import expansion has a significant negative impact on the wages of migrant labor. Specifically, considering the city with median import exposure per worker in 2017 as an example, a 100-yuan increase in import exposure per worker reduces the average hourly wage by 0.0712 to 0.291 yuan. Import expansion exerts a greater impact on the wages of low-skilled migrant labor and manufacturing labor, whereas positive wage effects for those employed in tradable sectors. Furthermore, import expansion widens the wage gap between migrant and local labor, while the skill premium is insignificant. Finally, mechanism analysis reveals that import expansion decreases total wage bills, total sales, the number of employees, and the number of firms, leading to lower wages for unstable migrant labor.