The Effect of Trade Liberalization on Regional Employment Adjustment: Evidence from China

Abstract

Based on the exogenous event of China's accession to the World Trade Organization, using the data of tariff and employment in 2000 and 2010, this paper divides employment into formal and informal employment and studies the impact of lower tariff of final and intermediate goods on the employment change of China's labor market at the city level. It can be seen from the empirical results that the more the tariff of the main industries in a region falls, the greater the growth of total employment and informal employment in the region. The temporary nature of informal employment makes it more responsive to shocks of liberalization at first, while the formal may lag. The eastern coastal areas of China have more developed economy and its industrial emphasis facing larger tariff cuts, while the western areas are relatively less developed and its industrial emphasis facing smaller tariff cuts. Correspondingly, the employment situation in the eastern areas is relatively prosperous, absorbing a large number of informal employments.