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The Effect and Mechanism of Trade Liberalization on Wage

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  • Xiaofang Zhang
  • Fei Yang

Abstract

This research discussed the relationship and mechanism between trade liberalization and the wage level of enterprises. Using the firm-level data from Annual Survey of Industrial Firms(ASIF) database and tariff data from World Bank, we find that, the final goods trade liberalization will reduce the wage, while the intermediate goods trade liberalization will improve the level of enterprises' wages. And that trade liberalization affects wages through firm performance. The reduction of input tariff reduces firm’s input cost, and increases firm’s sales and profit, then the firm has more ability to provide higher wages. While the decline of output tariff damages firm’s performance, which leads enterprises to transfer the loss by reducing wages.

Suggested Citation

  • Xiaofang Zhang & Fei Yang, 2021. "The Effect and Mechanism of Trade Liberalization on Wage," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(5), pages 184-184, July.
    • Handle: RePEc:ibn:ijbmjn:v:15:y:2021:i:5:p:184
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    References listed on IDEAS

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    1. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 489-530.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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