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How do households adjust to tariff liberalization? Evidence from China's WTO accession

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  • Dai, Mi
  • Huang, Wei
  • Zhang, Yifan

Abstract

This paper investigates how households adjust to local labor market shocks caused by import tariff liberalization in China. Exploiting regional variation in the exposure to tariff cuts resulting from the WTO accession, we find that regions that initially specialized in industries facing larger tariff cuts experienced relatively larger wage declines. Households responded to the shock in several ways, including more female and old household members working, more young adults co-residing with parents, and households saving less. These findings suggest an insurance role of households against trade-induced labor market shocks. JEL: F14, F16, J20, R23.

Suggested Citation

  • Dai, Mi & Huang, Wei & Zhang, Yifan, 2021. "How do households adjust to tariff liberalization? Evidence from China's WTO accession," Journal of Development Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:deveco:v:150:y:2021:i:c:s0304387821000055
    DOI: 10.1016/j.jdeveco.2021.102628
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    More about this item

    Keywords

    Household adjustments; Trade liberalization; WTO; China;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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