Export Markets and Labor Allocation in a Low-Income Country

By B. McCaig, Nina Pavcnik. The American Economic Review, 2018

271 citations recorded by the source corpus.

We study the effects of a positive export shock on labor allocation between the informal, microenterprise sector and the formal firm sector in a low-income country. The United States-Vietnam Bilateral Trade Agreement led to large reductions in US tariffs on Vietnamese exports. We find that the share of manufacturing workers in Vietnam in the formal sector increased by 5 percentage points in response to the US tariff reductions. The reallocation was greater for workers in more internationally integrated provinces and for younger cohorts. We estimate the gap in labor productivity within manufacturing across the informal and formal sectors. This gap and the aggregate labor productivity gain from the export-induced reallocation of workers across the two sectors are reduced when we account for worker heterogeneity, measurement error, and differences in labor intensity of production. (JEL F16, J24, O14, O17, O19, P23, P33)

Subfields: Economics and Econometrics

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Citations in the corpus

Margins of labor market adjustment to trade (2019, background): “Our findings more closely par- allel those of McCaig and Pavcnik (2014), who find substantial shifts from household (informal) to enterprise (formal) employment in Vietnam in response to the U.S.-Vietnam Bilateral Trade Agreement.34 To complete the picture of liberalization’s effects on regional…”
On the Relationship between Quality and Productivity: Evidence from China's Accession to the WTO (2017, result): “This problem is not unique to our data: in developing countries and low-income countries a large proportion of firms may not be part of conventionally available datasets (see McCaig and Pavcnik (2014, 2015) for related evidence in Vietnam).”