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Trade Liberalization, Firm Performance and Labour Market Outcomes in the Developing World: What Can We Learn from Micro-LevelData?

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  • Paolo Epifani

    (University of Parma; CESPRI-Bocconi University)

Abstract

We review the micro-level evidence on the effects of trade and investment liberalization in the developing world. We focus, in particular, on the effects of the 1991 trade reform in India, since it provides an excellent controlled experiment in which the effects of a drastic trade regime change can be measured. The main findings can be summarized as follows. 1) There is evidence of trade-induced productivity gains (in this respect, however, India is something of an exception); 2) These gains mainly stem from the intra-industry reallocation of resources among firms with different productivity levels and: 3) they are larger in import competing sectors; 4) There is no evidence of significant scale efficiency gains. Indeed, unilateral trade liberalization is often associated with a reduced scale efficiency; 5) There is evidence of a pro-competitive effect of trade liberalization; 6) There is no evidence either of learning-by-exporting effects or of beneficial spillover effects from foreign owned to local firms; 7) There is evidence of skill upgrading induced either by technology imports, or by trade-induced reallocations of market shares in favor of plants with higher skill-intensity; 8) There is no evidence of trade-induced increases in labor demand elasticities. Direct evidence suggests, however, that trade exposure raises wage volatility; 9) There is no evidence of substantial employment contraction in import competing sectors.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 172.

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Date of creation: 01 Dec 2002
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Handle: RePEc:csl:devewp:172

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Keywords: Plant-level evidence; Firm heterogeneity; Productivity growth; Scale efficiency; Technology transfer; Wage inequality; Wage volatility; Labor demand elasticity; India;

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Citations

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Cited by:
  1. Elena Meschi & Erol Taymaz & Marco Vivarelli, 2009. "Trade, Technology and Skills: Evidence from Turkish Microdata," Jena Economic Research Papers 2009-097, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Pierre, Gaelle & Scarpetta, Stefano, 2007. "How labor market policies can combine workers'protection with job creation : a partial review of some key issues and policy options," Social Protection Discussion Papers 41439, The World Bank.
  3. Pierre, Gaëlle & Scarpetta, Stefano, 2004. "Employment Regulations through the Eyes of Employers: Do They Matter and How Do Firms Respond to Them?," IZA Discussion Papers 1424, Institute for the Study of Labor (IZA).
  4. Puja Vasudeva Dutta, 2007. "Trade Protection and Inter-Industry Wages in India," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(2), pages 268-286, January.
  5. Jagadeesh Sivadasan & Joel Slemrod, 2006. "Tax Law Changes, Income Shifting and Measured Wage Inequality: Evidence from India," NBER Working Papers 12240, National Bureau of Economic Research, Inc.
  6. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, vol. 37(2), pages 287-302, February.
  7. Gunjan Sharma, 2006. "Competing or Collaborating Siblings? Industrial and Trade Policies in India," Working Papers 0610, Department of Economics, University of Missouri.
  8. Kamil Yılmaz & Şule Özler, 2007. "Productivity response to reduction in trade barriers: Evidence from Turkish manufacturing plants," Koç University-TUSIAD Economic Research Forum Working Papers 0704, Koc University-TUSIAD Economic Research Forum.
  9. Petia Topalova, 2004. "Trade Liberalization and Firm Productivity," IMF Working Papers 04/28, International Monetary Fund.
  10. Aldaba, Rafaelita M., 2010. "Does Trade Protection Improve Firm Productivity? Evidence from Philippine Micro Data," Discussion Papers DP 2010-32, Philippine Institute for Development Studies.
  11. Gibson, Bill, 2005. "The transition to a globalized economy: Poverty, human capital and the informal sector in a structuralist CGE model," Journal of Development Economics, Elsevier, vol. 78(1), pages 60-94, October.
  12. Boubakri, Narjess & Cosset, Jean-Claude & Guedhami, Omrane, 2005. "Liberalization, corporate governance and the performance of privatized firms in developing countries," Journal of Corporate Finance, Elsevier, vol. 11(5), pages 767-790, October.
  13. Meschi, Elena & Vivarelli, Marco, 2007. "Globalization and Income Inequality," IZA Discussion Papers 2958, Institute for the Study of Labor (IZA).

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