Trade-Displaced or Trade-Stuck? Self-Employed Workers and Adaptation to Trade Shocks in Low-Income Countries

Abstract

The self-employed do not adapt to trade shocks like the salaried, making the most documented responses - unemployment, informality - not automatic in regions with prevalent self-employment. To study this, I use a used clothing import protection policy implemented by Rwanda which hit a self-employed retailers labor market. I provide evidence of this, put forward self-employment-specific adaptation strategies, formalize them through a time allocation framework and test the model’s predictions that workers with lower quality of outside options adapt less. I uncover sizeable heterogeneity in women’s time allocation responses relative to men, suggesting gendered effects of gender-neutral trade policy.

Romaine Loubes

PhD candidate in Economics

Romaine Loubes is a doctoral candidate in economics at the Paris School of Economics, working in trade, labor and development.