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Trade Liberalization, Labor Markets and Imperfect Competition

  • Devashish Mitra

    (Economics, Florida International University)

This paper looks at the recent empirical literature on the effects of trade reforms on firm level wages, employment and labor demand elasticities in import-competing sectors. The focus is empirical investigations using frameworks that allow for imperfect competition. Imperfect competition is product markets allows for changes in elsesticities and markups through trade reforms and thus brings about additional effects on firm-level employment and wages. Further, there is the theoretical possibility of this change in product demand elasticity. These issues are investigated in Kambhapati, Krishna and Mitra (1997) and Kishna, Mitra and Chinoy (forthcoming). In this paper, I discuss the theory, methodologies and results of both of these papers. Further, I investigate the benefits of bringing in imperfect competition in the labor market into the analysis of the labor market impact of trade reforms and in that context discuss some of the recent literature.

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Paper provided by East-West Center, Economics Study Area in its series Economics Study Area Working Papers with number 29.

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Length: 25 pages
Date of creation: Jul 2001
Date of revision:
Handle: RePEc:ewc:wpaper:wp29
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  1. Currie, Janet & Harrison, Ann E, 1997. "Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S44-71, July.
  2. Matthew J. Slaughter, 1997. "International Trade and Labor-Demand Elasticities," NBER Working Papers 6262, National Bureau of Economic Research, Inc.
  3. Uma Karmbhampati & Pravin Krishna & Devashish Mitra, 1997. "The effect of trade policy reforms on labour markets: evidence from India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 6(2), pages 287-297.
  4. 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.
  5. Anne O. Krueger, 1974. "Foreign Trade Regimes and Economic Development: Turkey," NBER Books, National Bureau of Economic Research, Inc, number krue74-1, September.
  6. James Levinsohn, 1991. "Testing the Imports-as-Market-Discipline Hypothesis," NBER Working Papers 3657, National Bureau of Economic Research, Inc.
  7. Nickell, Stephen J & Symons, James, 1990. "The Real Wage-Employment Relationship in the United States," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 1-15, January.
  8. Anne O. Krueger, 1974. "Appendices and Index to "Foreign Trade Regimes and Economic Development: Turkey"," NBER Chapters, in: Foreign Trade Regimes and Economic Development: Turkey, pages 271-339 National Bureau of Economic Research, Inc.
  9. Ana L. Revenga, 1992. "Exporting Jobs?The Impact of Import Competition on Employment and Wages in U. S. Manufacturing," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 255-284.
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