Trade Liberalization and Labor Market Adjustments: Does Rent Sharing Matter?

Authors: Pham Dinh Long, Pham Thi Bich Ngoc and Holger Görg (Forthcoming, Emerging Markets Finance and Trade)

Using a firm level data set, this paper investigates the impact of trade liberalization on employment and wages in Vietnamese manufacturing during 2003 – 2008. Different from the previous researches, we consider indirect effects of trade liberalization via real output for the employment and via rent sharing for the wage adjustments. Overall, we find empirical evidence that trade liberalization has a significantly negative effect on employment and wage but with a minor magnitude. This research approach allows a further investigation for the role of gender and skill earning gaps, and trade union for the wage response. There exist differences in gender and skill earnings gaps but trade liberalization can moderate these gaps.

Keywords: trade Liberalization, labor market adjustments, rent sharing, manufacturing

JEL: F16, O12

DOI: https://doi.org/10.1080/1540496X.2019.1643316 (published online)