Exporting Out of Agriculture: The Impact of WTO Accession on Structural Transformation in China

Abstract

This paper analyzes the effect of China's accession to the World Trade Organization in 2001 on structural transformation at the local level, exploiting cross-sectional variation in tariff uncertainty faced by county economies pre-2001. Using a new panel of 1,800 Chinese counties from 1996 to 2013, we find that counties more exposed to the reduction in tariff uncertainty post-accession are characterized by increased exports and foreign direct investment, shrinking agricultural sectors, expanding secondary sectors, and higher total and per capita GDP. In addition, when labor substitutes from nonagricultural to agricultural production in counties exposed to positive trade shocks, agricultural output declines.

Short and Long-Run Labor Market Effects of Developing Country Exports: Evidence from Bangladesh

“…These impacts vary depending on the type of shock being considered. On one hand, evidence shows that rising exports to industrial countries reduced poverty and spurred reallocation of labor from informal to formal jobs in several developing countries like India, Vietnam, and China (McCaig, 2011;McCaig and Pavcnik, 2018;Artuc et al, 2019;and Erten and Leight, 2017). On the other hand, trade liberalization measures slowed the pace of poverty reduction and triggered a persistent declining trend in wages and employment in few developing countries like India and Brazil (Topalova, 2010;Dix-Carneiro, 2017;and Artuc et al, 2019).…”

Impact of US market access on local labour markets in Vietnam

“…Others have studied various impacts of exports, but not so much on the labour market transformation. 4 Our paper is most closely related to Erten and Leight (2018). Using a panel of Chinese counties from 1996 to 2013, they find that the counties more exposed to the reduction in tariff post-WTO accession witnessed increased exports and foreign direct investment, shrinking agricultural sectors, expanding secondary sectors, and higher GDP.…”

“…This, combined with higher manufacturing employment, implies labour reallocation away from agricultural sectors. Hoang, Pham, and Ulubaşoğlu () find that an increase in non‐farm participation decreases labour involvement in agricultural sectors in rural Vietnam during the period 2002–2008. We hypothesize that the BTA decreases agricultural employment, as agricultural labourers move into manufacturing and service industries.…”

Trade and Inclusive Growth

“…Other studies corroborate the positive relative impact for export-exposed regions. Brazilian locations benefiting from rising Chinese commodity demand observed faster wage growth than other locations (Costa, Garred, and Pessoa, 2016), as did Mexican regions exposed to NAFTA (Chiquiar, 2008) and Chinese regions most exposed to export opportunities following China's WTO accession (Erten and Leight, 2017). In addition, while tariff reductions on final goods have adverse effects on import-competing firms, tariff cuts on intermediate goods lead to substantial increases in wages for workers in importing firms (Amiti and Davis, 2012).…”