Trade liberalization and labor market adjustments: Does rent sharing matter

Using a firm-level dataset, this article investigates the impact of trade liberalization on employment and wages in Vietnamese manufacturing during 2003–2008. Different from the previous researches, we consider indirect effects of trade liberalization via real output for the employment and via rent sharing for the wage adjustments. Overall, we find empirical evidence that trade liberalization has a negative, statistically significant, but minor in magnitude effect on employment and wage. The rent-sharing approach allows a further investigation of heterogeneity in bargaining power across firms by gender and skill composition for the wage response. There exist differences in gender and skill earnings gaps but trade liberalization can moderate these gaps.

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