"All-Around Trade Liberalization and Firm-Level Employment: Theory and Evidence from China"
Presenter: Miaojie Yu, Professor, China Center for Economic Research (CCER), Peking University
Abstract: Chinese firms faced an all ‐ around trade liberalization process during the early 2000s: lower trade barriers from other countries on Chinese final goods, and lower Chinese barriers on other countries' final goods and inputs. Using novel firm ‐ level tariff data for trading Chinese manufacturing firms from 2000 to 2006, this paper disentangles the effects of each type of trade liberalization on Chinese firm ‐ level employment. The exercise distinguishes firms by type ‐‐‐ pure processing firm, ordinary non ‐ importing exporter, or ordinary importing exporter ‐‐‐ and productivity. For all types of firms, reductions in Chinese and foreign final ‐ good tariffs are associated with job destruction in low ‐ productivity firms and job creation in high ‐ productivity firms. In contrast, the net effect of a reduction in Chinese input tariffs is limited to job destruction in low ‐ productivity ordinary exporters. To guide the interpretation of the results, we develop a heterogeneous ‐ firm model with trade in both tasks and final goods that identifies the different forces through which each type of trade liberalization affects employment in each type of firm
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