Input-Trade Liberalization and the Demand for Managers: Evidence from India

68 Pages Posted: 14 Jul 2015 Last revised: 10 Jan 2018

See all articles by Pavel Chakraborty

Pavel Chakraborty

Lancaster University

Ohad Raveh

Hebrew University of Jerusalem

Date Written: January 10, 2018


Can input-trade liberalization increase the demand for managers? Imported inputs are an important source of technology inflows. Previous research on the implications of imported inputs overlooked their potential effect on the demand for managing the new incoming knowledge. Adopting the case of India, this paper presents a first empirical attempt to fill this gap. Using detailed firm-level data that uniquely distinguishes between the compensations of managers and non-managers, and exploiting the exogenous nature of India’s Eight-Plan trade reform, we investigate the potential causal link between input-trade liberalization and the demand for managers relative to non-managers. We find that a decrease in input tariffs increases the relative demand for managers, primarily in domestic firms that use the imported inputs to produce intermediate goods. Specifically, a 10% drop in input tariffs induces, on average, a 1-1.5% increase in the compensation share of managers, manifested via increases in both their number as well as average wages and bonuses. These patterns are: (i) observed across the firms’ size distribution; (ii) applicable for both exporting and non-exporting firms; (iii) stronger in family-run firms that operate under flexible labor market regulations; (iv) relatively more dominant in the short-run. In addition, we show that unlike changes in input tariffs, import competition does not affect the relative demand for managers.

Keywords: Input-trade liberalization, input tariffs, demand for managers, firm organization

JEL Classification: F66, F14, M12

Suggested Citation

Chakraborty, Pavel and Raveh, Ohad, Input-Trade Liberalization and the Demand for Managers: Evidence from India (January 10, 2018). Journal of International Economics, Forthcoming. Available at SSRN: or

Pavel Chakraborty

Lancaster University ( email )

Department of Economics
Management School
Lancaster, LA1 4YX
United Kingdom

Ohad Raveh (Contact Author)

Hebrew University of Jerusalem ( email )

Mount Scopus
Jerusalem, 91905

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