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From Farms to Factories: The Divergent Impact of Agriculture Import Growth on Labour Costs

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  • Jie Li
  • Shi Jin

Abstract

This paper studies the differential effect of agriculture trade liberalisation on labor costs for high- vs. low-skilled industries in the manufacturing sector. With data from China, we employ a first-difference regression specification and exploit the fact that labour outflows from the agriculture sector are largely unskilled. We show that increases in agriculture imports are associated with declines in labour cost in the low-skilled manufacturing sector. Further analysis suggests that agricultural imports reallocate labour from the agricultural sector and into the manufacturing sector. Moreover, we observe an increased proportion of local rural workers in low-skill industries following agricultural import growth. At the extensive margin, we identify greater entries of firms in low-skilled industries. Findings in this paper offer evidence on the labour reallocation effect induced by agriculture trade liberalisation.

Suggested Citation

  • Jie Li & Shi Jin, 2025. "From Farms to Factories: The Divergent Impact of Agriculture Import Growth on Labour Costs," Journal of Development Studies, Taylor & Francis Journals, vol. 61(12), pages 1968-1988, December.
    • Handle: RePEc:taf:jdevst:v:61:y:2025:i:12:p:1968-1988
    DOI: 10.1080/00220388.2025.2493808
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