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How Do Households Adjust to Trade Liberalization? Evidence from China's WTO Accession

Author

Listed:
  • Dai, Mi

    (Beijing Normal University)

  • Huang, Wei

    (National University of Singapore)

  • Zhang, Yifan

    (Chinese University of Hong Kong)

Abstract

We investigate the impacts of trade liberalization on household behaviors and outcomes in urban China, exploiting regional variation in the exposure to tariff cuts resulting from WTO entry. Regions that initially specialized in industries facing larger tariff cuts experienced relative declines in wages. Households responded to this income shock in several ways. First, household members worked more, especially in the non-tradable sector. Second, more young adults co-resided with their parents, and thus household size increased. Third, households saved less. These behaviors significantly buffered the negative wage shock induced by trade liberalization.

Suggested Citation

  • Dai, Mi & Huang, Wei & Zhang, Yifan, 2018. "How Do Households Adjust to Trade Liberalization? Evidence from China's WTO Accession," IZA Discussion Papers 11428, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11428
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    References listed on IDEAS

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    Cited by:

    1. Wang, Feicheng & Kis-Katos, Krisztina & Zhou, Minghai, 2020. "Trade Liberalization and the Gender Employment Gap in China," IZA Discussion Papers 13626, Institute of Labor Economics (IZA).
    2. Anders C. Johansson & Dan Liu, 2020. "Foreign direct investment and inequality: Evidence from China's policy change," The World Economy, Wiley Blackwell, vol. 43(6), pages 1647-1664, June.
    3. Wolfgang Keller & Hale Utar, 2022. "Globalization, Gender, and the Family [Trade Shocks and Labor Adjustment: A Structural Empirical Approach]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 3381-3409.
    4. Zhenshan Yang & Yinghao Pan & Dongqi Sun & Li Ma, 2022. "Human Capital and International Capital Flows: Evidence from China," International Regional Science Review, , vol. 45(1), pages 74-107, January.
    5. Zhang, Yun & Liu, Yun & Zhang, Yifei & Chen, Xin, 2022. "Globalization blueprint and households’ fintech debt: Evidence from China’s One Belt One Road initiative," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 38-55.

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    More about this item

    Keywords

    trade liberalization; household adjustments; WTO;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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