How Do Households Adjust to Trade Liberalization? Evidence from China's WTO Accession

60 Pages Posted: 12 Apr 2018

See all articles by Mi Dai

Mi Dai

Beijing Normal University (BNU)

Wei Huang

Harvard University - Department of Economics; NBER; IZA Institute of Labor Economics

Yifan Zhang

The Chinese University of Hong Kong (CUHK)

Abstract

We investigate the impacts of trade liberalization on household behaviors and outcomes in urban China, exploiting regional variation in the exposure to tariff cuts resulting from WTO entry. Regions that initially specialized in industries facing larger tariff cuts experienced relative declines in wages. Households responded to this income shock in several ways. First, household members worked more, especially in the non-tradable sector. Second, more young adults co-resided with their parents, and thus household size increased. Third, households saved less. These behaviors significantly buffered the negative wage shock induced by trade liberalization.

Keywords: household adjustments, trade liberalization, WTO

JEL Classification: F14, F16, J20, R23

Suggested Citation

Dai, Mi and Huang, Wei and Zhang, Yifan, How Do Households Adjust to Trade Liberalization? Evidence from China's WTO Accession. IZA Discussion Paper No. 11428, Available at SSRN: https://ssrn.com/abstract=3158113

Mi Dai (Contact Author)

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

Wei Huang

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Yifan Zhang

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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