Presenter: Nina Pavcnik, Dartmouth College, BREAD, CEPR, and NBER
(joint with Brian McCaig, Australian National University)
Abstract: Labor mobility plays a key role in how international trade affects worker earnings and for understanding the distributional impacts of international trade. We study labor reallocation in response to new export opportunities in a poor country, where a majority of workers work in small, often household-owned businesses rather than in larger, more formal firms. We examine the effects of the 2001 U.S.-Vietnam Bilateral Trade Agreement (BTA) on the allocation of employment across industries and across employers in Vietnam. Changes in the structure of net employment across industries are related to the changes in export opportunities, especially in the sectors with a comparative advantage and among the formal firms. We find that following the BTA, Vietnam experienced a large decline in employment in small, household businesses, as workers reallocated toward larger firms. The probability of working in household businesses declined most in industries that faced the largest U.S. tariff cuts. These findings are consistent with models of trade with heterogeneous firms which predict that workers will reallocate from small, less productive firms to larger, more formal firms with new exporting opportunities.
Paper: available at seminar only