Trade Liberalization and Intra‐Household Resource Allocation: Evidence From the United States–Vietnam Bilateral Trade Agreement

ABSTRACT This article explores the impact of tariff reductions on exports under the 2001 US–Vietnam Bilateral Trade Agreement (BTA) on intra‐household resource allocations through the channels of labor hours supplied, expenditure, and child human capital investment. The central hypothesis is that trade liberalization, by expanding labor market opportunities, would increase adult market work hours, raise household consumption, but may simultaneously reduce investments in children's schooling due to the higher opportunity costs of education. Utilizing panel data from nationally representative surveys between 2002 and 2004, and dealing with potential omitted variable biases, the findings confirm the hypothesis that workers in regions more exposed to trade experienced an increase in market work hours but a decline in domestic labor hours, driven by occupational reallocation effects. Additionally, households in these regions exhibited prolonged increases in consumption, while the likelihood of children dropping out of school also increased, suggesting that opportunities created by the BTA are not merely limited to traded industries. These results remain robust across specifications that include and exclude tradable and non‐tradable sectors, as well as alternative regional measures of tariff reductions in a panel data framework. By contributing to the literature on trade shocks and household behavior, this study underscores the need for policies that support trade‐displaced workers, mitigate risks of child labor, and improve educational access.