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

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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 for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11428
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    References listed on IDEAS

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    More about this item

    Keywords

    household adjustments; trade liberalization; WTO;

    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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