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The effect of input-trade liberalization on nonfarm and farm labour participation in rural Vietnam

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  • Hoang Xuan Trung
  • Luca Tiberti

Abstract

This paper examines the impact of the trade liberalization of chemical fertilisers on the allocation of labour between nonfarm and farm sectors in rural Vietnam during the period 1993-1998. To do that, we use a panel dataset controlling for fixed effects and instrumenting the volume of chemical fertilisers and the exogenous change in fertilisers’ prices is exploited. The study shows that a higher volume of chemical fertilisers reduces the employment of rural households in the nonfarm sector and increases labour participation in farm activities. A larger use of chemical fertilisers would also generate other complementary effects such as a higher demand for organic fertilisers, increased on-farm hired labour, a bigger cultivated area with chemical fertilisers and a larger number of crops grown with chemical fertilisers. Also, we find that a larger use of chemical fertilisers creates larger incentives for on-farm family labour for small landholders compared to those with larger agricultural land, and that the magnitude of the effects is relatively larger for new farmers.

Suggested Citation

  • Hoang Xuan Trung & Luca Tiberti, 2016. "The effect of input-trade liberalization on nonfarm and farm labour participation in rural Vietnam," Working Papers PMMA 2016-11, PEP-PMMA.
  • Handle: RePEc:lvl:pmmacr:2016-11
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    File URL: https://portal.pep-net.org/documents/download/id/25828
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    Keywords

    instrumental variable; chemical fertiliser price; nonfarm activity; rural Vietnam.;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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