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Trade, Firms, and Wages: Theory and Evidence

  • Mary Amiti
  • Donald R. Davis

How does trade liberalization affect wages? This is the first paper to consider in theory and data how the impact of final and intermediate input tariff cuts on workers' wages varies with the global engagement of their firm. Our model predicts that a fall in output tariffs lowers wages at import-competing firms but boosts wages at exporting firms. Similarly, a fall in input tariffs raises wages at import-using firms relative to those at firms that only source inputs locally. Using highly detailed Indonesian manufacturing census data for the period 1991--2000, we find considerable support for the model's predictions. Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/restud/rdr016
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Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 79 (2012)
Issue (Month): 1 ()
Pages: 1-36

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Handle: RePEc:oup:restud:v:79:y:2012:i:1:p:1-36
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