Working Paper: CEPR ID: DP6872
Authors: Mary Amiti; Donald R. Davis
Abstract: How does trade liberalization affect wages? This is the first paper to consider in theory and data how the impact of final and intermediate input tariff cuts on workers? wages varies with the global engagement of their firm. Our model predicts that a fall in output tariffs lowers wages at import-competing firms, but boosts wages at exporting firms. Similarly, a fall in input tariffs raises wages at import-using firms relative to those at firms that only source locally. Using highly detailed Indonesian manufacturing census data for the period 1991 to 2000, we find considerable support for the model?s predictions.
Keywords: firm heterogeneity; input tariffs; output tariffs; trade liberalization; wages
JEL Codes: F10; F12; F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in output tariffs (F14) | Decrease in wages at domestic-only firms (J39) |
| Decline in output tariffs (F14) | Increase in wages at exporting firms (F16) |
| Decline in input tariffs (F14) | Increase in wages at firms utilizing imported inputs (J39) |
| Decline in input tariffs (F14) | Insignificant effect on wages at firms that do not import inputs (F66) |