IDEAS home Printed from https://ideas.repec.org/a/wly/iecrev/v66y2025i2p933-963.html
   My bibliography  Save this article

Trade Liberalization And The Great Labor Reallocation

Author

Listed:
  • Yuan Zi

Abstract

I examine how migration frictions shape the effects of trade policy by analyzing the impact of tariff reductions on labor allocation in China and the role of hukou‐based migration frictions. Trade liberalization induces significant labor reallocation, greater in regions with lower hukou frictions. Quantitatively, trade liberalization increases China's welfare by 0.72%. Abolishing the hukou system directly improves welfare by 1.75% but reduces gains from tariff reductions by 18% and amplifies negative distributional effects. In the process, I develop a novel measure of hukou‐related migration frictions.

Suggested Citation

  • Yuan Zi, 2025. "Trade Liberalization And The Great Labor Reallocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(2), pages 933-963, May.
    • Handle: RePEc:wly:iecrev:v:66:y:2025:i:2:p:933-963
    DOI: 10.1111/iere.12751
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/iere.12751
    Download Restriction: no
    File URL: https://libkey.io/10.1111/iere.12751?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Petia Topalova, 2010. "Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 1-41, October.
    2. Enghin Atalay, 2017. "How Important Are Sectoral Shocks?," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(4), pages 254-280, October.
    3. Trevor Tombe & Xiaodong Zhu, 2019. "Trade, Migration, and Productivity: A Quantitative Analysis of China," American Economic Review, American Economic Association, vol. 109(5), pages 1843-1872, May.
    4. Redding, Stephen J., 2016. "Goods trade, factor mobility and welfare," Journal of International Economics, Elsevier, vol. 101(C), pages 148-167.
    5. Rafael Dix‐Carneiro, 2014. "Trade Liberalization and Labor Market Dynamics," Econometrica, Econometric Society, vol. 82(3), pages 825-885, May.
    6. John McLaren, 2017. "Globalization and Labor Market Dynamics," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 177-200, September.
    7. Hao, Tongtong & Sun, Ruiqi & Tombe, Trevor & Zhu, Xiaodong, 2020. "The effect of migration policy on growth, structural change, and regional inequality in China," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 112-134.
    8. Wing Thye Woo, 2001. "Recent Claims of China's Economic Exceptionalism: Reflections Inspired by WTO Accession," CID Working Papers 70A, Center for International Development at Harvard University.
    9. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2005. "Trade, wages, and the political economy of trade protection: evidence from the Colombian trade reforms," Journal of International Economics, Elsevier, vol. 66(1), pages 75-105, May.
    10. Erhan Artuç & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-1045, June.
    11. Pablo Fajgelbaum & Stephen J. Redding, 2014. "External Integration, Structural Transformation and Economic Development: Evidence From Argentina," CEP Discussion Papers dp1273, Centre for Economic Performance, LSE.
    12. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
    13. Gueorgui Kambourov, 2009. "Labour Market Regulations and the Sectoral Reallocation of Workers: The Case of Trade Reforms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(4), pages 1321-1358.
    14. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    15. Albert Park & Yaowu Wu & Yang Du, 2012. "Informal Employment in Urban China," World Bank Publications - Reports 27218, The World Bank Group.
    16. Rafael Dix-Carneiro & Brian K. Kovak, 2017. "Trade Liberalization and Regional Dynamics," American Economic Review, American Economic Association, vol. 107(10), pages 2908-2946, October.
    17. Jingting Fan, 2019. "Internal Geography, Labor Mobility, and the Distributional Impacts of Trade," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(3), pages 252-288, July.
    18. Brian K. Kovak, 2013. "Regional Effects of Trade Reform: What Is the Correct Measure of Liberalization?," American Economic Review, American Economic Association, vol. 103(5), pages 1960-1976, August.
    19. Berthold Herrendorf & Richard Rogerson & ?kos Valentinyi, 2013. "Two Perspectives on Preferences and Structural Transformation," American Economic Review, American Economic Association, vol. 103(7), pages 2752-2789, December.
    20. Cynthia Kinnan & Shing-Yi Wang & Yongxiang Wang, 2018. "Access to Migration for Rural Households," American Economic Journal: Applied Economics, American Economic Association, vol. 10(4), pages 79-119, October.
    21. Woo, Wing Thye, 2001. "Recent claims of China's economic exceptionalism: Reflections inspired by WTO accession," China Economic Review, Elsevier, vol. 12(2-3), pages 107-136.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zi, Yuan, 2020. "Trade Liberalization and the Great Labor Reallocation," CEPR Discussion Papers 14490, C.E.P.R. Discussion Papers.
    2. Yuan Zi, 2016. "Trade Liberalization and the Great Labor Reallocation," IHEID Working Papers 18-2016, Economics Section, The Graduate Institute of International Studies.
    3. Simon Fuchs, 2021. "Spoils of War: Trade Shocks and Segmented Labor Markets in Spain during WWI," FRB Atlanta Working Paper 2021-14, Federal Reserve Bank of Atlanta.
    4. Rafael Dix-Carneiro & Brian K. Kovak, 2017. "Trade Liberalization and Regional Dynamics," American Economic Review, American Economic Association, vol. 107(10), pages 2908-2946, October.
    5. Lorenzo Caliendo & Luca David Opromolla & Fernando Parro & Alessandro Sforza, 2021. "Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement," Journal of Political Economy, University of Chicago Press, vol. 129(12), pages 3491-3545.
    6. David Rezza Baqaee & Emmanuel Farhi, 2024. "Networks, Barriers, and Trade," Econometrica, Econometric Society, vol. 92(2), pages 505-541, March.
    7. Pinelopi K. Goldberg & Nina Pavcnik, 2016. "The Effects of Trade Policy," NBER Working Papers 21957, National Bureau of Economic Research, Inc.
    8. Rodrigo Adão & Costas Arkolakis & Federico Esposito, 2019. "General Equilibrium Effects in Space: Theory and Measurement," NBER Working Papers 25544, National Bureau of Economic Research, Inc.
    9. Galle, Simon & Lorentzen, Linnea, 2024. "The unequal effects of trade and automation across local labor markets," Journal of International Economics, Elsevier, vol. 150(C).
    10. Liu, Chen & Ma, Xiao, 2023. "Migration, tariffs, and China's export surge," Journal of International Economics, Elsevier, vol. 140(C).
    11. Rodrigo Ad'o & Costas Arkolakis & Federico Esp'sito, 2019. "Spatial Linkages, Global Shocks, and Local Labor Markets: Theory and Evidence," Cowles Foundation Discussion Papers 2163, Cowles Foundation for Research in Economics, Yale University.
    12. Kondo, Illenin O. & Li, Yao Amber & Qian, Wei, 2024. "Trade liberalization and labor monopsony: Evidence from Chinese firms," Journal of International Economics, Elsevier, vol. 152(C).
    13. Facchini, Giovanni & Liu, Maggie Y. & Mayda, Anna Maria & Zhou, Minghai, 2019. "China's “Great Migration”: The impact of the reduction in trade policy uncertainty," Journal of International Economics, Elsevier, vol. 120(C), pages 126-144.
    14. Pan, Xiameng & Sun, Chang, 2024. "Internal migration, remittances and economic development," Journal of International Economics, Elsevier, vol. 147(C).
    15. Dix-Carneiro, Rafael & Kovak, Brian K., 2023. "Globalization and Inequality in Latin America," IZA Discussion Papers 16363, Institute of Labor Economics (IZA).
    16. Hoyos, Mateo & Coronado, José Alejandro & Martins, Guilherme Klein, 2024. "Local and Spillover Effects of Trade on Structural Transformation: Evidence from Brazil," SocArXiv rfqvt, Center for Open Science.
    17. Basu, Arnab K. & Chau, Nancy H. & Lin, Gary C., 2022. "Migration Gravity, Networks, and Unemployment," IZA Discussion Papers 15808, Institute of Labor Economics (IZA).
    18. Esposito, Federico & Hassan, Fadi, 2023. "Import Competition, Trade Credit, and Financial Frictions in General Equilibrium," CEPR Discussion Papers 17926, C.E.P.R. Discussion Papers.
    19. Dix-Carneiro, Rafael & Kovak, Brian K., 2019. "Margins of labor market adjustment to trade," Journal of International Economics, Elsevier, vol. 117(C), pages 125-142.
    20. David Autor & David Dorn & Gordon Hanson & Maggie R. Jones & Bradley Setzler, 2024. "Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization," Working Papers 24-78, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:iecrev:v:66:y:2025:i:2:p:933-963. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.