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Essays on Trade and Welfare

  • Author(s): Tian, Yuan
  • Advisor(s): Lleras-Muney, Adriana
  • et al.
Abstract

My dissertation contributes towards our understanding of effects of trade liberalization on institutional, economic and environmental outcomes. It consists of three chapters. The first, ``International Trade Liberalization and Domestic Institutional Reform: Effects of WTO Accession on Chinese Internal Migration Policy" studies the effect of trade liberalization on migration regulations. I study how trade affects labor institutions in the context of China?s Hukou system that regulates internal migration. Chinese local governments were allowed to relax internal migration restrictions after China entered the WTO in 2001. I collect a new dataset on Chinese prefecture-level migration regulations that shows each region?s friendliness to migrant workers. Using these data, I document an increase in pro-migrant regulation around the time of WTO entry. I then consider the role of international trade in triggering this increase by estimating the impact of prefecture-level export and import shocks on migration regulations across 250 Chinese prefectures from 2001 to 2007. I find a positive and significant impact of export shocks on regulations that encourage in-migration. 17% of the impact of export shocks on migration and 9%-15% of their impact on growth operated through changes in regulation.

In my second chapter, ``Was Entry into the WTO Worth it: Environmental Consequences of Trade Liberalization'', I document that despite the enormous economic benefits from China's accession to the WTO in 2001, the overall welfare gains from trade liberalization may be compromised since pollution from production has also increased. Using plausibly exogenous tariff reductions on Chinese goods caused by the WTO accession, variation in industry composition across cities and variation in pollution intensity levels across industries, I study the effect of trade liberalization on income, pollution, and health in China from 2000 to 2005. Using regional tariff shocks as instruments for changes in income and pollution levels, I show that cities which faced a 10% larger GDP per capita increase experienced a 6%-7% larger total mortality rate decline, and regions that faced a 10% larger increase in air pollution levels experienced a 4%-13% larger total mortality rate increase. Overall, if all exports were generated from non-polluting industries, the total mortality rate would have declined by 3.6% more. However, in terms of overall welfare, the gains from income growth outweigh losses from increases in pollution levels.

In the third and last chapter, ``Hukou and Labor Misallocation in China", I propose to quantify the changes in misallocation cost due to the Hukou reform. The Hukou system impedes labor mobility across regions, and the marginal productivity of labor may not be equalized spatially. Following Hsieh and Moretti (2017), I plan to use a general equilibrium Rosen-Roback model to measure the effect of Hukou regulations on aggregate growth.

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