Export Markets and Labor Allocation in a Low-income Country

We study the effects of an export shock on labor allocation across household businesses and employers in the formal enterprise sector in a low-income country, Vietnam. We find that workers reallocate from household businesses to employers in the formal enterprise sector, with greater reallocation in industries that experience larger declines in U.S. tariffs on Vietnamese exports due to the United States-Vietnam Bilateral Trade Agreement. The reallocation is greater for workers in more internationally integrated provinces and in younger cohorts. Labor productivity of household businesses is relatively low, so our findings suggest this reallocation increases aggregate labor productivity.