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The Effect of Export Market Access on Labor Market Power: Firm-level Evidence from Vietnam

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Abstract

We examine the impact of an export market expansion created by the US-Vietnam Bilateral Trade Agreement (BTA) on labor market competition among Vietnamese manufacturing firms. We measure distortionary wedges between equilibrium marginal revenue products of labor (MRPL) and wages nonparametrically and find that the median firm pays workers 59% of their MRPL. The BTA permanently decreases labor market distortion in manufacturing by 3.4%, mainly for domestic private firms. The median distortion is 26% higher for women than men, and the decline in distortion for women drives the overall distortion reduction. We shed some light on the mechanisms for these results.

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  • Trang T. Hoang & Devashish Mitra & Hoang Pham, 2024. "The Effect of Export Market Access on Labor Market Power: Firm-level Evidence from Vietnam," International Finance Discussion Papers 1394, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1394
    DOI: 10.17016/IFDP.2024.1394
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    Keywords

    International Trade; Export Market Access; Labor Market Distortion; Misallocation; Income Distribution; Labor Share; Gender Inequality; Monopsony; Oligopsony;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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