Trade reform, oligopsony, and labor market distortion: Theory and evidence

Hoang Pham

Journal of International Economics, 2023, vol. 144, issue C

Abstract: In a heterogeneous-firm model with oligopsonistic local labor markets, this paper shows that opening up to trade can affect distortion in such markets. The distortion arises because firms are large and able to exercise market power over their local workers. Using a panel dataset of Chinese manufacturing firms from 1998 to 2007, I measure firm-level labor market distortion and examine their evolution following China's trade policy reform in 2001. I find that labor market distortion is pervasive and the trade policy reform has led to a net reduction of the distortion in China's manufacturing sector, with a larger and significant effect working through the liberalization of input tariffs.

Keywords: International trade; Labor market; Oligopsony; Productivity (search for similar items in EconPapers)
JEL-codes: D43 F12 F14 F16 F61 J42 L13 L22 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:144:y:2023:i:c:s0022199623000739

DOI: 10.1016/j.jinteco.2023.103787

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