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

Author

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  • McCaig, Brian
  • Pavcnik, Nina
  • Wong, Woan Foong

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

  • McCaig, Brian & Pavcnik, Nina & Wong, Woan Foong, 2025. "Foreign and Domestic Firms: Long Run Employment Effects of Export Opportunities," CEPR Discussion Papers 19903, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19903
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    File URL: https://cepr.org/publications/DP19903
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    Keywords

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    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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