TY - JOUR
T1 - Trade liberalization and labor's slice of the pie
T2 - Evidence from Indian firms
AU - Ahsan, Reshad N.
AU - Mitra, Devashish
N1 - Funding Information:
Up to this point we have assumed that the output tariffs included in our regressions are exogenous. This assumption is supported by the fact that the Indian trade reform of 1991 was conducted under pressure from the International Monetary Fund (IMF) and was quite unexpected. Thus, this reform can be considered exogenous to the firms in our sample. While this assumption is reasonable during the initial years after the trade reform of 1991, it is potentially problematic during the latter years of the sample when the external pressure imposed by the IMF had abated ( Topalova and Khandelwal, 2011 ). 36 36
Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.
PY - 2014/5
Y1 - 2014/5
N2 - We examine the impact of trade reforms initiated in 1991 on labor's share in revenue among a sample of Indian firms. Theoretically, trade reforms will affect this share by reducing firm-level price-cost markups as well as the bargaining power of workers. A simple model suggests that these changes can have ambiguous effects on firm-level labor share and that the net effect of trade reforms will depend on the labor intensity of production. Using firm-level data from India, our empirical results suggest that trade liberalization led to an increase in labor's share in revenue for small, labor-intensive firms but a reduction in this share in the case of larger, less labor-intensive firms. These results are robust to controlling for alternative sources of heterogeneity and to the use of long-lagged tariffs as instruments. We also find that trade liberalization, on average, led to a decline in the bargaining power of workers.
AB - We examine the impact of trade reforms initiated in 1991 on labor's share in revenue among a sample of Indian firms. Theoretically, trade reforms will affect this share by reducing firm-level price-cost markups as well as the bargaining power of workers. A simple model suggests that these changes can have ambiguous effects on firm-level labor share and that the net effect of trade reforms will depend on the labor intensity of production. Using firm-level data from India, our empirical results suggest that trade liberalization led to an increase in labor's share in revenue for small, labor-intensive firms but a reduction in this share in the case of larger, less labor-intensive firms. These results are robust to controlling for alternative sources of heterogeneity and to the use of long-lagged tariffs as instruments. We also find that trade liberalization, on average, led to a decline in the bargaining power of workers.
KW - Bargaining power of workers
KW - Firm-level data
KW - India
KW - Labor share
KW - Markups
KW - Trade reforms
UR - http://www.scopus.com/inward/record.url?scp=84893386870&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84893386870&partnerID=8YFLogxK
U2 - 10.1016/j.jdeveco.2013.12.011
DO - 10.1016/j.jdeveco.2013.12.011
M3 - Article
AN - SCOPUS:84893386870
SN - 0304-3878
VL - 108
SP - 1
EP - 16
JO - Journal of Development Economics
JF - Journal of Development Economics
ER -