The Effects of Trade Participation on Labor Productivity, Wages and Female Employment: Evidence from Egyptian Manufacturing Firms

This study examines the effects of firm trade participation on labor productivity, wages, and female employment using recent manufacturing enterprise survey data for Egypt. It finds the labor productivity premium to be positive for both exporting and importing firms; it is the highest for small-sized exporting firms, reflecting their greater benefits from learning by exporting. Importing intermediate inputs enhances productivity the most for firms in medium-high and high technology-intensive sectors. Moreover, both exporting and importing firms pay higher average wages than non-exporters and non-importers, where economies of scale and the higher productivity of trading firms – rather than the skill characteristics or composition of the labor force – work as the explanatory channels. Also, firm trade participation enhances gender labor outcomes by reducing the gender wage gap and employing a higher share of female workers, especially in low-technology export sectors. To translate these favorable impacts into economy-wide labor market improvements in Egypt, more efforts should be made to reform the business environment to enable the greater participation of small firms in export markets and the easier access of firms – especially those operating in technologically advanced sectors – to essential imported inputs that embody advanced foreign knowledge and/or are of higher quality than domestic alternatives.