Input-trade Liberalization and the Demand for Managers:Evidence from India

Chakraborty, Pavel and Raveh, Ohad (2018) Input-trade Liberalization and the Demand for Managers:Evidence from India. Journal of International Economics, 111. pp. 159-176. ISSN 0022-1996

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Can input-trade liberalization increase the demand for managers? Imported inputs are an important source of technology ináows. Previous research on the implications of imported inputs overlooked their potential e§ect on the demand for managing the new incoming knowledge. Adopting the case of India, this paper presents a Örst empirical attempt to Öll this gap. Using detailed Örm-level data that uniquely distinguishes between the compensations of managers and non-managers, and exploiting the exogenous nature of Indiaís Eight-Plan trade reform, we investigate the potential causal link between input-trade liberalization and the demand for managers relative to non-managers. We Önd that a decrease in input tari§s increases the relative demand for managers, primarily in domestic Örms that use the imported inputs to produce intermediate goods. SpeciÖcally, a 10% drop in input tari§s induces, on average, a 1-1.5% increase in the compensation share of managers, manifested via increases in both their number as well as average wages and bonuses. These patterns are: (i) observed across the Örmsí size distribution; (ii) applicable for both exporting and non-exporting Örms; (iii) stronger in familyrun Örms that operate under áexible labor market regulations; (iv) relatively more dominant in the short-run. In addition, we show that unlike changes in input tari§s, import competition does not a§ect the relative demand for managers.

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Journal Article
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Journal of International Economics
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This is the author’s version of a work that was accepted for publication in Journal of International Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Economics, 111, 2018 DOI: 10.1016/j.jinteco.2018.01.003
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11 Jan 2018 14:28
Last Modified:
19 Sep 2023 01:50