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Imported Intermediate Inputs and Workforce Composition: Evidence from India's Tariff Liberalization

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  • Shruti Sharma

    (University of California, Santa Cruz)

Abstract

This paper extends the literature on trade liberalization and labour by investigating the relationship between imports of intermediate inputs and plant-level workforce composition during India’s tariff liberalization. Using detailed plant-level data from the Indian manufacturing sector, I first show that the increase in imports of intermediate inputs in response to input tariff liberalization has strong displacement effects on production workers employed by importing plants. Next, I decompose the impact of intermediate inputs on labour into “quality”, “variety”, and “scale” effects, based on the availability and prices of domestically-produced inputs. I find that the displacement of production workers is driven by lower-priced imported intermediate inputs, the “scale” effect. Finally, I examine the differential effect of tariff liberalization based on whether plants experience import competition or not. This analysis reveals that domestic plants facing import competition experience a displacement of both skilled and unskilled workers in response to tariff liberalization. Plants that switch from in-house production to importing some intermediate inputs however only displace production workers while retaining skilled workers. This suggests that skilled workers are indispensable to plants switching to importing as a productivity enhancing strategy.

Suggested Citation

  • Shruti Sharma, 2013. "Imported Intermediate Inputs and Workforce Composition: Evidence from India's Tariff Liberalization," Economics Program Working Papers 13-03, The Conference Board, Economics Program.
  • Handle: RePEc:cnf:wpaper:1303
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    Cited by:

    1. Nihar Shembavnekar, 2019. "Economic Reforms, Labour Markets and Formal Sector Employment: Evidence from India," Economies, MDPI, vol. 7(2), pages 1-42, April.
    2. Nihar Shembavnekar, 2018. "Did India’s economic reforms generate jobs? Essays on economic liberalisation, labour market flexibility and employment in the Indian manufacturing sector (1990-2006)," Economics PhD Theses 0917, Department of Economics, University of Sussex Business School.
    3. Huang, Bihong & Yu, Eden S. H. (ed.), 2020. "Ways to Achieve Green Asia," ADBI Books, Asian Development Bank Institute, number 11, Décembre.
    4. Nihar Shembavnekar, 2015. "Tariff Liberalisation, Labour Market Flexibility and Employment: Evidence from India," Working Paper Series 8115, Department of Economics, University of Sussex Business School.
    5. Christian Darko & Giovanni Occhiali & Enrico Vanino, 2021. "The Chinese are Here: Import Penetration and Firm Productivity in Sub-Saharan Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 57(12), pages 2112-2135, December.
    6. Matthew Embrey & Guillaume R. Frechette & Sevgi Yuksel, 2016. "Cooperation in the Finitely Repeated Prisoner's Dilemma," Working Paper Series 8616, Department of Economics, University of Sussex.

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