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Import protection, exports and labor-demand elasticities: Evidence from Korea


  • Mitra, Devashish
  • Shin, Jeongeun


We empirically examine the impact of trade on labor demand elasticities using Korean firm-level data. In our analysis, in addition to looking at the impact of liberalizing import restrictions, we take into account the fact that greater trade integration also leads to better and greater export possibilities. While we find that Korea's own tariffs do not have any statistically significant effects on labor-demand elasticities at the firm level, we find some evidence for the impact of imports on labor-demand elasticities when we replace tariffs with import penetration ratios. We also find a fair amount of evidence that exports increase labor-demand elasticites (in absolute value). While we find fairly strong evidence that tariff reductions in China have led to an increase in Korean firm-level labor-demand elasticities, there is no conclusive evidence showing the effect of tariff reductions by Korea's other major trade partners, namely the EU, US and Japan.

Suggested Citation

  • Mitra, Devashish & Shin, Jeongeun, 2012. "Import protection, exports and labor-demand elasticities: Evidence from Korea," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 91-109.
  • Handle: RePEc:eee:reveco:v:23:y:2012:i:c:p:91-109
    DOI: 10.1016/j.iref.2011.10.008

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    References listed on IDEAS

    1. Krishna, Pravin & Mitra, Devashish & Chinoy, Sajjid, 2001. "Trade liberalization and labor demand elasticities: evidence from Turkey," Journal of International Economics, Elsevier, vol. 55(2), pages 391-409, December.
    2. Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August.
    3. Slaughter, Matthew J., 2001. "International trade and labor-demand elasticities," Journal of International Economics, Elsevier, vol. 54(1), pages 27-56, June.
    4. Gorg, Holger & Hanley, Aoife, 2005. "Labour demand effects of international outsourcing: Evidence from plant-level data," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 365-376.
    5. Joseph Francois & Hanna Norberg & Martin Thelle, 2007. "Economic Impact of a Potential Free Trade Agreement (FTA) Between the European Union and South Korea," IIDE Discussion Papers 20070301, Institue for International and Development Economics.
    6. Rana Hasan & Devashish Mitra & K.V. Ramaswamy, 2007. "Trade Reforms, Labor Regulations, and Labor-Demand Elasticities: Empirical Evidence from India," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 466-481, August.
    7. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
    8. Ethier, Wilfred J., 2005. "Globalization, globalisation: Trade, technology, and wages," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 237-258.
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    Cited by:

    1. Barua, Alokesh & Pant, Manoj, 2014. "Trade and wage inequality: A specific factor model with intermediate goods," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 172-185.
    2. Njikam, Ousmanou, 2016. "Trade liberalization, labor market regulations and labor demand in Cameroon," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 525-541.

    More about this item


    Trade liberalization; Imperfect competition; Factor demand elasticities; Labor market; Korea;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions


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