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Trade liberalisation and labour shares in China

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  • Fariha Kamal
  • Mary E. Lovely
  • Devashish Mitra

Abstract

We estimate the extent to which firms responded to tariff reductions associated with China's WTO entry by altering labour's share of value. Firm‐level regressions indicate that firms in industries subject to tariff cuts raised labour's share relative to economy‐wide trends, both through input choices and rent sharing. Our estimates suggest that, on average, an industry that experienced no reductions in output or input tariffs would have a 15.7% lower labour share of value in 2007 than it actually did, assuming the same economy‐wide trends. There is significant variation across firms: the impact attenuates with geographic remoteness and union presence and strengthens with foreign ownership.

Suggested Citation

  • Fariha Kamal & Mary E. Lovely & Devashish Mitra, 2019. "Trade liberalisation and labour shares in China," The World Economy, Wiley Blackwell, vol. 42(12), pages 3588-3618, December.
    • Handle: RePEc:bla:worlde:v:42:y:2019:i:12:p:3588-3618
    DOI: 10.1111/twec.12857
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    Cited by:

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    3. Mitra, Devashish, 2019. "Responses to Trade Opening: Evidence and Lessons from Asia," ADBI Working Papers 913, Asian Development Bank Institute.
    4. Benjamin Bridgman & Ryan Greenaway‐McGrevy, 2022. "Public enterprise and the rise and fall of labor share," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 320-350, January.
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    6. Dobbelaere, Sabien & Wiersma, Quint, 2020. "The Impact of Trade Liberalization on Firms' Product and Labor Market Power," IZA Discussion Papers 12951, Institute of Labor Economics (IZA).
    7. Riandy Laksono & Arianto A. Patunru, 2024. "The dynamics of labor share decline in manufacturing: Evidence from Indonesia," Departmental Working Papers 2024-3, The Australian National University, Arndt-Corden Department of Economics.
    8. Leblebicioğlu, Asli & Weinberger, Ariel, 2021. "Openness and factor shares: Is globalization always bad for labor?," Journal of International Economics, Elsevier, vol. 128(C).
    9. Bridgman, Benjamin, 2018. "Is Labor'S Loss Capital'S Gain? Gross Versus Net Labor Shares," Macroeconomic Dynamics, Cambridge University Press, vol. 22(8), pages 2070-2087, December.
    10. González-Rozada, Martín & Ruffo, Hernán, 2024. "Do trade agreements contribute to the decline in labor share? Evidence from Latin American countries," World Development, Elsevier, vol. 177(C).
    11. Aneli Bongers, 2021. "Economic growth and the functional distribution of income: A labor share Kuznets curve," Economics Bulletin, AccessEcon, vol. 41(1), pages 192-200.
    12. Junhong Du & Chuanyue Zhao & Yingying Hu & Xiaohong Chen, 2024. "Impact of Industrial Robots on Labor Income Share: Empirical Evidence from Chinese A-Listed Companies," Sustainability, MDPI, vol. 16(16), pages 1-21, August.
    13. Kacou, Kacou Yves Thierry & Kassouri, Yacouba & Evrard, Talnan Hongwopena & Altuntaş, Mehmet, 2022. "Trade openness, export structure, and labor productivity in developing countries: Evidence from panel VAR approach," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 194-205.
    14. Chen, Bo & Xu, Huange & Li, Guangchen, 2023. "Entry deregulation and labor share: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PD).
    15. Quint Wiersma, 2019. "The impact of WTO accession on Chinese firms' product and labor market power," Tinbergen Institute Discussion Papers 19-037/V, Tinbergen Institute.
    16. Tao, Jin & Ho, Chun-Yu & Luo, Shougui & Sheng, Yue, 2019. "Agglomeration economies in creative industries," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 141-154.

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