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Foreign and Domestic Firms: Long Run Employment Effects of Export Opportunities

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  • Brian McCaig
  • Nina Pavcnik
  • Woan Foong Wong

Abstract

We investigate a low-income country’s long run employment response to new export opportunities. The U.S.–Vietnam Bilateral Trade Agreement reduced U.S. import tariffs on exports from Vietnam. Employment grew faster in the industries most exposed to the U.S. tariff reductions and this was driven by foreign affiliates of multinationals entering Vietnam. Foreign entrants continue to expand employment long after entry–even after 16 years. Most foreign entrants are exporters and from East Asia, highlighting that opportunities created by bilateral agreements are not just limited to signing parties. Vietnam’s subsequent capacity growth allows it to export to other markets over time.

Suggested Citation

  • Brian McCaig & Nina Pavcnik & Woan Foong Wong, 2022. "Foreign and Domestic Firms: Long Run Employment Effects of Export Opportunities," CESifo Working Paper Series 10168, CESifo.
    • Handle: RePEc:ces:ceswps:_10168
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    3. Karin Mayr-Dorn & Gaia Narciso & Duc Anh Dang & Hien Phan, 2023. "Trade diversion and labor market adjustment: Vietnam and the U.S.-China trade war," Economics working papers 2023-04, Department of Economics, Johannes Kepler University Linz, Austria.

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    More about this item

    Keywords

    trade liberalization; employment; foreign direct investment; exporting; firm dynamics; Vietnam;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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