Export Markets and Labor Allocation in a Low-income Country
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.
We thank Hanh Nyugen and Truong Thi Thu Trang for excellent research assistance and Eric Edmonds, Teresa Fort, Doug Irwin, Amit Khandelwal, discussants and seminar participants at several universities and conferences for comments. We thank the International Food Policy Research Institute (IFPRI) and the World Bank for financial support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
The research in this paper was in part financially supported by the World Bank and the International Food Policy Research Institute (IFPRI).Nina Pavcnik
The research was supported by funding from the World Bank.