TY - JOUR

T1 - Input-trade Liberalization and the Demand for Managers

T2 - Evidence from India

AU - Chakraborty, Pavel

AU - Raveh, Ohad

N1 - 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

PY - 2018/3

Y1 - 2018/3

N2 - Can input-trade liberalization increase the demand for managers? Imported inputs are animportant source of technology ináows. Previous research on the implications of imported inputsoverlooked 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. Usingdetailed Örm-level data that uniquely distinguishes between the compensations of managersand 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 formanagers relative to non-managers. We Önd that a decrease in input tari§s increases the relativedemand for managers, primarily in domestic Örms that use the imported inputs to produceintermediate 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 numberas well as average wages and bonuses. These patterns are: (i) observed across the Örmsí sizedistribution; (ii) applicable for both exporting and non-exporting Örms; (iii) stronger in familyrunÖrms that operate under áexible labor market regulations; (iv) relatively more dominantin the short-run. In addition, we show that unlike changes in input tari§s, import competitiondoes not a§ect the relative demand for managers.

AB - Can input-trade liberalization increase the demand for managers? Imported inputs are animportant source of technology ináows. Previous research on the implications of imported inputsoverlooked 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. Usingdetailed Örm-level data that uniquely distinguishes between the compensations of managersand 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 formanagers relative to non-managers. We Önd that a decrease in input tari§s increases the relativedemand for managers, primarily in domestic Örms that use the imported inputs to produceintermediate 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 numberas well as average wages and bonuses. These patterns are: (i) observed across the Örmsí sizedistribution; (ii) applicable for both exporting and non-exporting Örms; (iii) stronger in familyrunÖrms that operate under áexible labor market regulations; (iv) relatively more dominantin the short-run. In addition, we show that unlike changes in input tari§s, import competitiondoes not a§ect the relative demand for managers.

KW - Input-trade liberalization

KW - input tariffs

KW - demand for managers

KW - firm organization

U2 - 10.1016/j.jinteco.2018.01.003

DO - 10.1016/j.jinteco.2018.01.003

M3 - Journal article

VL - 111

SP - 159

EP - 176

JO - Journal of International Economics

JF - Journal of International Economics

SN - 0022-1996

ER -