Date of Award

May 2020

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

Advisor(s)

Devashish Mitra

Second Advisor

Mary E. Lovely

Keywords

Globalization, Intergenerational Mobility, International Trade, Labor Market, Oligopsony, Productivity

Subject Categories

Social and Behavioral Sciences

Abstract

This dissertation studies issues at the intersection of globalization, labor market, and productivity in developing countries. It is composed of three chapters.

Chapter 1 studies how a country's trade policy affects competition in its domestic labor market. In a heterogeneous-firm model with oligopsonistic local labor markets, this chapter demonstrates that opening up to trade can affect distortions in such markets. These distortions arise because firms are large and able to exercise market power over their local workers. Using a panel dataset of Chinese manufacturing firms from 1998-2007, I measure firm-level labor market distortion, captured by the ratio between marginal revenue product of labor and wage, and examine its evolution following China's trade policy reform in 2001. The baseline measure of the overall distortion implies a 53% pass-through rate of an idiosyncratic productivity shock to wage. The component of this distortion that arises purely from labor market power accounts for almost 80% of the overall distortion. I find that China's trade policy reforms have led to a substantial net reduction in the labor market power distortion, with large effects working through the liberalization of input tariffs. These findings suggest novel effects of trade policy that deviate from the conventional trade models featuring perfect competition in the labor market.

Chapter 2 investigates the impact of a large export shock on intergenerational mobility in Vietnam. We use eight rounds of Vietnam Household Living Standards Surveys (VHLSSs) spanning over almost two decades to measure intergenerational mobility based on education levels of fathers and sons within households. Exploiting the US-Vietnam Bilateral Trade Agreement (BTA) in 2001 as an export shock and a difference-in-difference research design, our analysis suggests that the BTA shock has led to substantial upward occupational mobility, accounting for one-third of overall increase in mobility in Vietnam during our sample period. We also show that this effect potentially works through improvements in educational attainment. The results further reveal that both increases in exports overall and export unit-value in particular have contributed to the upward mobility. Our results highlight that international trade as an external shock can break down the persistence of socioeconomic status across generations in Vietnam.

Chapter 3 examines two novel productivity effects of foreign ownership and foreign acquisitions on Chinese high-tech manufacturing firms: the dynamic and the non-(Hicks)-neutral effects. The dynamic productivity effect of foreign ownership arises because adoption of foreign technology and management practices often takes time to fully realize. On the other hand, since advanced production technologies tend to have non-neutral productivity implications in developed countries, meaning that they could be capital- or labor-augmenting, such technology, transferred through foreign investment, can have similar effects in developing countries. We propose an econometric framework to estimate both effects. Our framework extends a recent nonparametric productivity framework developed by Gandhi, Navarro, and Rivers (2017), in which identification is achieved by firm's first-order condition and timing assumptions. We find strong evidence of both effects due to foreign ownership. These effects provide a more comprehensive perspective on the impact of foreign investment on firms' productivity in developing countries.

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