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

Mi Dai, Wei Huang () and Yifan Zhang

Journal of Development Economics, 2021, vol. 150, issue C

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.

Keywords: Household adjustments; Trade liberalization; WTO; China (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jdeveco.2021.102628

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