Export markets, household businesses, and formal jobs: Evidence from the US-Vietnam Bilateral Trade Agreement

Type Working Paper
Title Export markets, household businesses, and formal jobs: Evidence from the US-Vietnam Bilateral Trade Agreement
Author(s)
Publication (Day/Month/Year) 2011
URL http://www.econ.yale.edu/conference/neudc11/papers/paper_217.pdf
Abstract
This paper examines the effects of the U.S.-V ietnam Bilateral Trade Agreement (BTA) on the performance of household businesses and the a llocation of employment across firms within an industry in Vietnam. We find that declines in U.S. tariffs on Vietnamese goods are on average not associated with differential changes in performance such as the probability of survival and revenue of Vietnamese household businesses. However, declines in U.S. tariffs on Vietnamese goods are associated with a relative increase in revenues of larger household businesses in an industry and an increased propensity for these businesses to hire wage labor, suggesting that initially more successful household businesses expanded relative to initially less successful ones. We find that the probability of working informally declined most in industries that faced the largest U.S. tariff cuts. This evidence suggests that the BTA contributed toward the within- industry reallocation of employment from house hold businesses toward larger, more formal firms. This latter finding confirms the predictions of Melitz-style models which suggest that new export opportunities should lead to expansion of larger, usually more "formal" firms.

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