The Impact of Tariff Liberalization on Wage at Individual Level: Empirical Evidence from China

Since globalization and the development of China's reform and opening up, China has implemented large-scale tariff liberalization, exerting a significant impact on the domestic labor market. This paper investigates the effects of tariff liberalization on wage at the individual level by utilizing the data from the CHNS database for the period 2000–2011. The findings indicate that the reduction in China's tariffs significantly raises workers' income. The decrease in tariffs exacerbates the wage disparity between formal and informal employment sectors. Heterogeneity analysis reveals variation in the wage effects of tariff reduction. The decline in tariff significantly increases wages for workers in China's eastern provinces and for female employees, whereas the impact remains negligible for rural workers. The mechanism is related to improved market access raising wages via export expansion, foreign investment inflows, and human capital accumulation. Our conclusions remain robust under different identification schemes and indicators.