Trade liberalization and labor monopsony: Evidence from Chinese firms

Illenin O. Kondo, Yao Amber Li and Wei Qian

Journal of International Economics, 2024, vol. 152, issue C

Abstract: We document that larger input tariff reductions were associated with lower labor markdowns in China, especially for skill-intensive firms. Guided by a stylized model of equilibrium labor market power, we leverage differences in the aggregate labor supply dynamics across labor markets – such as regional variations in China’s contemporaneous college expansion reforms – to that show trade-induced labor markdown decreased more in labor markets with more labor supply growth. Our estimates suggest that lower labor markdowns due to input trade liberalization offset China’s aggregate labor share decline by almost one-half percentage point in the early 2000s.

Keywords: Input trade liberalization; Labor market power; Skill intensity; China (search for similar items in EconPapers)
JEL-codes: E2 F1 J2 J3 J42 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:152:y:2024:i:c:s0022199624001338

DOI: 10.1016/j.jinteco.2024.104006

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