International Trade and the Labor Market Power of Firms: Theory and Evidence (Job Market Paper)
How does trade policy affect competition in the domestic labor market? In a heterogeneous firm model with oligopsonistic local labor markets, this paper shows that opening up to trade can affect distortions in such markets. These distortions arise because firms are large and able to exercise market power over their local workers. Using a panel dataset of Chinese manufacturing firms from 1998-2007, I measure firm-level labor market distortion, captured by the ratio between marginal revenue product of labor and wage, and examine its evolution following China's trade policy reform in 2001. The baseline measure of the overall distortion implies a 53% pass-through rate of an idiosyncratic productivity shock to wage. The component of this distortion that arises purely from labor market power accounts for almost 80% of the overall distortion. I find that China's trade policy reforms have led to a substantial net reduction in the labor market power distortion, with large effects working through the liberalization of input tariffs.
Work in Progress
This paper investigates the impact of a large export shock on intergenerational mobility in Vietnam. We use ten rounds of Vietnam Household Living Standards Surveys spanning over the period from 1993-2016 to measure intergenerational mobility based on skills and education levels of fathers and sons within households. Exploiting the US-Vietnam Bilateral Trade Agreement (BTA) in 2001 as a plausibly exogenous export shock and a difference-in-difference research design, our analysis suggests that the BTA shock has led to substantial upward occupational mobility, accounting for at least one-third of the overall mobility in Vietnam during the sample period. Furthermore, we show that this effect partly works through the upward educational mobility channel. The results also reveal that both increases in export quantity and improvements in export quality have contributed to the upward mobility.
This paper studies two novel productivity effects of foreign ownership and foreign acquisitions on Chinese high-tech manufacturing firms: the dynamic and the non-(Hicks)-neutral effects. The dynamic productivity effect of foreign ownership arises because adoption of foreign technology and management practices often takes time to fully realize. On the other hand, since advanced production technologies tend to have non-neutral productivity implications in developed countries, meaning that they could be capital- or labor-augmenting, such technology, transferred through foreign investment, can have similar effects in developing countries. We propose an econometric framework to estimate both effects. Our framework extends a recent nonparametric productivity framework developed by Gandhi, Navarro, and Rivers (2017), in which identification is achieved by firm’s first-order condition and timing assumptions. We find strong evidence of both effects due to foreign ownership.
The Influence of US Dollar Funding Conditions on Asian Financial Markets (with Junkyu Lee and Peter Rosenkranz)
Policy brief in special topics of Asian Development Outlook 2019 (p.35-42), Asian Development Bank