Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272387 
Year of Publication: 
2022
Series/Report no.: 
IZA Discussion Papers No. 15760
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Does higher import competition increase formalization and aggregate productivity? Exploiting plausibly exogenous variation from Chinese imports, we provide empirical causal evidence that higher imports increases the share of formal manufacturing enterprise employment in India. This formal share increase is both due to the rise in formal-enterprise employment driven by the high productivity firms, and a fall in informal-enterprise employment. The labor reallocation is enabled by the formal firms' hiring of contract workers, who do not carry stringent string costs. Overall, Chinese import competition increased formal sector employment share by 3.7 percentage points, and aggregate labor productivity by 2.87%, between 2000-2001 and 2005-2006.
Subjects: 
import competition
formal sector employment
informality
contract workers
Chinese imports
reallocation
misallocation
JEL: 
F14
F16
O17
O47
F66
Document Type: 
Working Paper

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