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Pennsylvania Convention Center, 102-A
Hosted By:
Chinese Economists Society
of reallocating resources. However, we know little about the role of domestic frictions in shaping
the effects of trade policy. I address this question by analyzing the impact of tariff reductions on
the spatial allocation of labor in China, and how this impact depends on migration frictions that
stem from China’s household registration system (hukou). I first provide reduced-form evidence
that input trade liberalization has induced significant spatial labor reallocation in China, with a
stronger effect in regions with less hukou frictions. Then, I construct and estimate a quantitative
spatial model with input-output linkages and hukou frictions to examine the general equilibrium
effects of tariff reductions and perform counterfactuals. The quantitative exercise shows that trade
liberalization increases China’s welfare by 0.71%. Abolishing the hukou system leads to a direct
welfare improvement of 1.56%, but it also leads to welfare losses to hukou holders from certain
regions. Additionally, it increases gains from tariff reductions by 2% and alleviates its distributional
consequences. In this process, I develop a novel measure of migration frictions associated with the
hukou system.
Trade, Technology, and the Local Economy in China
Paper Session
Saturday, Jan. 6, 2018 2:30 PM - 4:30 PM
- Chair: Loren Brandt, University of Toronto
Trade Liberalization, Labor Market and Household Responses: Evidence From China’s WTO Accession
Abstract
Using a comprehensive household survey, we investigate the impacts of import tariff reduction after the entry into WTO on local labor market outcomes and household behaviors in urban China. Our identification strategy exploits the variation in the degree of tariff reduction across industries and the variation in the pre-WTO industry composition of local employment across Chinese prefecture level cities. Regional tariff cut lowered individual wage and household income per capita, and also lowered household consumption per capita, but to a lesser degree. More specifically, in the regions exposed to more tariff cut, people were more likely to work in non-tradable sectors, spent less in social security insurance, and lowered the saving rate. In addition, older people received less transfer income. Therefore, we conclude that household serves as a“buffer”to the negative income shock induced by trade liberalization.Trade Liberalization and the Great Labor Reallocation
Abstract
The extent to which a country can benefit from trade openness crucially depends on its easeof reallocating resources. However, we know little about the role of domestic frictions in shaping
the effects of trade policy. I address this question by analyzing the impact of tariff reductions on
the spatial allocation of labor in China, and how this impact depends on migration frictions that
stem from China’s household registration system (hukou). I first provide reduced-form evidence
that input trade liberalization has induced significant spatial labor reallocation in China, with a
stronger effect in regions with less hukou frictions. Then, I construct and estimate a quantitative
spatial model with input-output linkages and hukou frictions to examine the general equilibrium
effects of tariff reductions and perform counterfactuals. The quantitative exercise shows that trade
liberalization increases China’s welfare by 0.71%. Abolishing the hukou system leads to a direct
welfare improvement of 1.56%, but it also leads to welfare losses to hukou holders from certain
regions. Additionally, it increases gains from tariff reductions by 2% and alleviates its distributional
consequences. In this process, I develop a novel measure of migration frictions associated with the
hukou system.
Exporting out of Agriculture: The Impact of WTO Accession on Structural Transformation in China
Abstract
The rapid expansion of manufacturing exports from China has dramatically reshaped the economies of the U.S. and Europe over the last twenty years. However, there is still relatively little evidence regarding the effect of this export expansion on structural transformation in China itself. Utilizing a newly assembled panel including approximately 2,000 counties between 1996 and 2013, this paper provides new evidence of the effect of positive shocks to the export sector generated by China's accession to the World Trade Organization (WTO) in 2001 on employment, output, and value added in agriculture, manufacturing, and services at the county level. The identification strategy exploits county-level variation in the tariff uncertainty faced by local industries prior to 2001. Following China's accession to the WTO, this uncertainty was considerably reduced when China was permanently granted normal trade relations (NTR) status in the U.S, generating a positive shock to export industries that also varied cross-sectionally. The results suggest that counties exposed to greater tariff uncertainty prior to WTO accession are characterized by shrinking agricultural sectors and expanding secondary sectors post--2001, as well as significant increases in per capita GDP. Further exploration of the relevant channels suggests that these effects are primarily driven by increases in exports and foreign direct investment.Discussant(s)
Suqin Ge
,
Virginia Tech
Jessica Leight
,
American University
Xiaobo Zhang
,
International Food Policy Research Institute and Peking University
Albert Park
,
Hong Kong University of Science and Technology
JEL Classifications
- O1 - Economic Development