Trade Liberalisation and Female Employment in Manufacturing: Evidence from India

Following the Indian trade reform in 1991, previously protected industries faced rapidly increasing import competition. This paper studies the effect of India’s trade liberalisation on female labour force participation in the manufacturing sector. The paper uses two rounds of the Indian Employment and Unemployment Survey to evaluate the effect of rising manufacturing imports over the time period 1987 - 2000 and exploits heterogeneous concentrations of industries across Indian states to construct a measure of import exposure. In addition to the OLS estimations, an instrumental variable approach is used to control for potential endogeneity of imports. The paper finds that import exposure is positively related to higher employment levels for women in the man¬ufacturing sector, especially in export-oriented industries which employ a large number of female workers. In the main specification, the average increase in import exposure over the time period corresponds to a 3 percentage point increase in female employment. The effect differs extensively depending on the level of education and is strongest for women with no or limited schooling. In the import competing manufacturing sectors, the effect of increased import competition is still positive, but smaller in magnitude and largest for women with secondary schooling or a graduate degree.