The Impact of Tariff Liberalization on the Labor Share in India’s Manufacturing Industry

India opened its domestic market to international trade in the early 1990s. The decision had profound implications on the development trajectory of the country. Trade opening allowed the country’s firms to source inputs more cheaply and increase their competitiveness. At the same time, it meant that firms in India were exposed to increased competition from abroad, while consumers enjoyed lower prices for final goods. While the trade opening helped boost economic growth, it required an adjustment of capital and labor within and across sectors.