Events

Economics Seminar

Author:

• Brian McCaig
  Wilfrid Laurier University
   

Most workers in low-income countries work for a household business or a farm. We examine how export opportunities induced by the 2001 U.S.-Vietnam Bilateral Trade Agreement affect performance  of  non-farm  household  businesses  in  Vietnam.  Household  businesses  in industries with greater declines in U.S. tariffs on Vietnamese exports expand revenue and are more likely to hire non-household members as workers. Moreover, the responses to tariff cuts differ  with  initial  size  of  a  household  business.  Initially  small  household  businesses experience a contraction of revenue and are less likely to hold a business license in response to tariff cuts, while initially larger businesses account for the observed expansion of revenue within  an  industry  in  response  to  export  opportunities. Our  results,  combined with  the findings in McCaig and Pavcnik (2014), suggest that new export opportunities induced a reallocation of workers from informal household businesses to employers in the formal enterprise sector by the relative expansion of employment of firms in the formal sector.