Trade Shock and Structural Transformation: Evidence From the Phase‐Out of Multifiber Arrangement

ABSTRACT I study the effect of the phase‐out of MFA quota on textile and clothing trade on local economic growth and structural change in China. Leveraging data on spatial variation in the degree of specialization of counties in textile and clothing industries, I find that the MFA quota removal contributed significantly to local economic growth and structural change using both official statistics and night‐time light as measures. Output and employment expanded in the secondary and tertiary sectors and shrank in the primary sector in textile counties, relative to nontextile counties.