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- Regional consumption-weighted tariff We capture the expenditure channel of tariff cuts by the regional consumption-weighted tariff. We construct the consumption-weighted tariff in each prefecture and year as follows: ConsumTarif fct = ∑ g sgc,2002τgt Where g is a good in the UHS data, c is city, t is year. sgc,2002 is the expenditure share of good g is prefecture c’s good consumption in year 2002.15 The UHS reports the consumption of 74 tradable goods, including food, clothing, furniture, home appliances, telecommunication equipment, etc. We manually map these goods to HS 8-digit codes. Then we calculate the tariff of each good as the simple average of the tariff of all HS codes within this good. We have also experimented with including services into total consumption, and set the tariff changes of the service sector to 0. The results are qualitatively similar for the alternative consumption tariff measures.
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- Regional exports We construct a regional export measure for each city and year, following Autor et al. (2013). Specifically, the regional export measure (RegExpct) is a employment-weighted averages of exports per worker in each industry. In equations: RegExpct = ∑i Lic0 Lc0 ∗
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- Regional tariff uncertainty The recent literature finds that tariff uncertainty reduction resulting from the US granting permanent normal trade relations (PNTR) to China after China’s WTO entry has substantially increased Chinese exports (Handely and Limao, 2017; Pierce and Schott, 2016). Therefore, we construct regional level tariff uncertainty measures to capture the export effects.
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Revenga, Ana, “Employment and wage effects of trade liberalization: the case of Mexican manufacturing, †Journal of labor Economics, 1997, 15 (S3), S20–S43.
- scg,2000GAPg This regional GAP variable captures the degree of tariff uncertainty of each city in the PreWTO year. We interact this variable with a post-WTO dummy (Post −WTO) which equals 1 for years later than (including) 2002. Theoretically, cities facing larger tariff uncertainty pre-WTO will experience larger reductions in tariff uncertainty after China’s WTO entry. Therefore, we expect exports to growth faster in these regions in the Post-WTO years.
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Topalova, Petia, “Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India,†American Economic Journal: Applied Economics, 2010, 2 (4), 1–41.
Utar, Hale, “Workers beneath the Floodgates: Impacts of Low-Wage Import Competition and Workers’ Adjustment,†Browser Download This Paper, 2014.
- We construct regional tariff uncertainty measures as follows. First, following Handely and Limao (2017) and Pierce and Schott (2016), we define tariff uncertainty for each HS 8-digit product as the difference between the MFN tariff and the US “Column 2†tariff in year 2000. We call this tariff uncertainty measure “GAPâ€: GAPg = Tarif fcolumn2,g −Tarif fMFN,g Second, we map HS 8-digit goods to 4-digit CIC industry, and calculate the CIC industry level GAP as the simple average of the GAP for all HS products within this industry. Third, we calculate the GAP for each city as the weighted average of GAP across all industries in the city, where we use the share of an industry’s export value in the city’s total export value in 2000 as weights.14 GAPc = ∑ g
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Yu, Miaojie, “Processing trade, tariff reductions and firm productivity: evidence from Chinese firms,†The Economic Journal, 2015, 125 (585), 943–988. Online Appendix A1 The impact of tariff reduction on firm-level outcomes In this appendix section we investigate how tariff reduction affect firm performance, using Chinese firm-level data. The purpose of doing this is two folded. First, we can check whether the wage effects we found using household data are also present in the firm-level data. If so, they provide cross-validation for the wage results presented in the main text. Second, we can explore how other firm performance, such as investment, sales, and profit, are affected by tariff change, and whether such changes are consistent with the wage effects. In other words, examining the response of these firm performance variables are useful in revealing the mechanism underlying the impact of tariff on wages.