Working Paper: NBER ID: w14106
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: trade liberalization; wages; firm heterogeneity; tariff cuts; Indonesia
JEL Codes: F1; F12; F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| output tariffs (F19) | wages (J31) |
| input tariffs (F14) | wages (J31) |
| tariff reductions (F13) | wages (J31) |