Abstract
In this article we investigate the impact of trade openness on labor force participation rate. We use tariff rate as the main indicator of trade openness and we employ the number of regional trade agreements and the average tariff rate in the neighbors' countries as instrumental variables to diminish the endogeneity problem of the tariff rate. We find that trade openness increases the participation rate which is economically and statistically significant. The results show that this correlation is robust under controlling for different variables and using various specifications. We find that 10 percentage point increase in tariff rate lowers the participation rate by 4-6 percentage point and this relationship is more severe in the long-run.
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