Applied Economics Lunch Seminar

Du 28/11/2023 de 12:30 à 13:30

Salle R2.21

LOUBES Romaine (PSE)

Trade-displaced or trade-stuck? Self-employed workers and adaptation to trade shocks in low-income countries

This paper studies the impact of trade shocks on self-employed workers in low-income countries. Using establishment-level census data and job spell-level survey data, I study an import tariff shock affecting self-employed retailers in Rwanda and show that the characteristics of self-employment work in low-income countries imply specific adjustment patterns to trade shocks. The informality and unemployment channels, often put forward in studies of richer countries, are not at play here. Rather, the self-employed have specific margins in the face of a negative earnings shock, such as pass-through of the policy to customers, and reallocation of hours across multiple jobs. I summarize these novel results into a simple framework of time allocation with multiple job holdings. The model predicts heterogeneity in adjustment strategies depending on the quality of outside options. Given that women experience worse outside options in the Rwandan labor market, I test the model by looking at gender-specific trajectories, after giving suggestive descriptive evidence. I produce evidence of sizeable heterogeneity in adaptation strategy: in particular, while men shift hours away from affected retail jobs toward other paid occupations, women abandon their other jobs and increase hours worked in retail, even though hourly wages are decreasing in that occupation. The effects are still visible 15 months after the shock. My results stress the need for research on trade shocks and the self-employed, in particular as their increased risk of being stuck in decreasingly lucrative occupations makes targeted trade adjustment assistance policies crucial.