Export Markets and Labor Allocation in a Low-Income Country

87 Pages Posted: 8 Sep 2014

See all articles by Brian McCaig

Brian McCaig

Wilfrid Laurier University - School of Business & Economics

Nina Pavcnik

Dartmouth College - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: September 2014

Abstract

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 U.S.-Vietnam Bilateral Trade Agreement led to large reductions in U.S. 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 U.S. 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.

Suggested Citation

McCaig, Brian and Pavcnik, Nina, Export Markets and Labor Allocation in a Low-Income Country (September 2014). NBER Working Paper No. w20455. Available at SSRN: https://ssrn.com/abstract=2492966

Brian McCaig (Contact Author)

Wilfrid Laurier University - School of Business & Economics

Waterloo, Ontario N2L 3C5
Canada

Nina Pavcnik

Dartmouth College - Department of Economics ( email )

6106 Rockefeller Hall
Hanover, NH 03755
United States
603-646-2537 (Phone)
603-646-2122 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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