International Finance Discussion Papers (IFDP)
August 2024
The Effect of Export Market Access on Labor Market Power: Firm-level Evidence from Vietnam
Trang Hoang, Devashish Mitra, and Hoang Pham
Abstract:
We examine the impact of an export market expansion created by the US-Vietnam Bilateral Trade Agreement (BTA) on labor market competition among Vietnamese manufacturing firms. We measure distortionary wedges between equilibrium marginal revenue products of labor (MRPL) and wages nonparametrically and find that the median firm pays workers 59% of their MRPL. The BTA permanently decreases labor market distortion in manufacturing by 3.4%, mainly for domestic private firms. The median distortion is 26% higher for women than men, and the decline in distortion for women drives the overall distortion reduction. We shed some light on the mechanisms for these results.
Keywords: International Trade, Export Market Access, Labor Market Distortion, Misallocation, Income Distribution, Labor Share, Gender Inequality, Monopsony, Oligopsony
DOI: https://doi.org/10.17016/IFDP.2024.1394
PDF: Full Paper
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