Trade liberalization and the great labor reallocation
Abstract
I examine how migration frictions shape the effects of trade policy by analyzing the impact of tariff reductions on labor allocation in China and the role of hukou-based migration frictions. Trade liberalization induces significant labor reallocation, greater in regions with lower hukou frictions. Quantitatively, trade liberalization increases China's welfare by 0.72%. Abolishing the hukou system directly improves welfare by 1.75% but reduces gains from tariff reductions by 18% and amplifies negative distributional effects. In the process, I develop a novel measure of hukou-related migration frictions.
Fields of Study & Subjects
Global trade and economics
Economic Growth and Productivity
Global Financial Crisis and Policies
Publication details
- Journal / source
- Graduate Institute Geneva Institutional Repository (Graduate Institute of International and Development Studies)
- Publisher
- Wiley
- Volume
- 66
- Issue
- 2
- Pages
- 933-963
- Publication date
- 4 August 2026